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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.