Orthofix Medicare Probe Settlement Wins U.S. Judge’s Approval

Orthofix International NV (OFIX) won court approval of a settlement of federal regulators’ claims that the maker of bone-repair products defrauded Medicare through a kickback scheme involving doctors, prosecutors said.

U.S. District Judge William G. Young in Boston yesterday accepted an Orthofix unit’s offer to plead guilty to a felony count of obstructing an audit and pay a $7.6 million criminal fine a day after the judge refused to give final approval to the deal, Christina DiIorio-Sterling, a spokeswoman for the U.S. Attorney’s Office in Boston, said in an e-mailed statement.

The judge, who originally said the plea deal improperly restricted his sentencing powers, assented to the agreement after Orthofix officials agreed to have a five-year probationary term added to it, DiIorio-Sterling said.

As part of the agreement, Orthofix also will pay $32.3 million plus interest to resolve civil claims first raised in a whistle-blower’s lawsuit that the company defrauded the federal Medicare program through payments to doctors who used its bone-growth stimulators, DiIorio-Sterling said in the statement.

Mark Quick, an Orthofix spokesman, didn’t immediately return a call for comment yesterday on Young’s decision to accept the agreement.

‘Remain Confident’

“The company and the government stand behind their agreements and continue to discuss a resolution of the matter that will be acceptable to the court,” Robert Vaters, Orthofix’s chief executive, said in a release yesterday before Young approved the settlement. “We remain confident that this matter will be resolved amicably and in a manner that is in the best interests of our shareholders.”

Five Orthofix employees have pleaded guilty in connection with the probe, the U.S. Justice Department said. Thomas Guerrieri, a company vice president, pleaded guilty to violating the federal anti-kickback statute by setting up fake consulting agreements for doctors who used the company’s products.

Orthofix, based in Curacao, in the Netherlands Antilles, said in February that it had reserved $43 million to settle the false-claims allegations.

The government joined a whistle-blower suit filed by Jeffrey Bierman, a Missouri businessman who learned about alleged Medicare fraud by Orthofix.

Patient Co-Payments

He alleged that company officials improperly waived patient co-payments, which wound up misstating the bone-stimulator’s true cost and generating Medicare overpayments, prosecutors said in June when they announced the accord with the company.

Bierman, owner of a company that provides billing services to doctors and hospitals, sued under the federal False Claims Act, which lets whistle-blowers file cases on behalf of the government and share in any recoveries. He is slated to receive $9.2 million of the civil settlement in the Orthofix case, according to the Justice Department.

The case is U.S. ex rel. Bierman v. Orthofix International NV, 05-10557, U.S. District Court, District of Massachusetts (Boston).

To contact the reporters on this story: Jef Feeley in Wilmington, Delaware, at jfeeley@bloomberg.net; Janelle Lawrence in Boston at jmlawrence@mac.com.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net