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Medical Device Company Agrees to Settle Lawsuit

According to the Department of Justice, ev3, Inc., formerly known as Fox Hollow Technologies, Inc., has agreed to settle a lawsuit alleging violations of the False Claims Act. The Justice Department announced that ev3 will pay $1.25 million to settle allegations that it caused hospitals to submit false claims to Medicare for inpatient admissions that should have been billed as outpatient treatments.

According to the ev3 website, Fox Hollow was a California corporation that developed and marketed minimally invasive medical devices used to remove plaque in the treatment of peripheral artery disease. Fox Hollow was acquired by ev3 in October 2007. In 2010, ev3 became a wholly-owned subsidiary of global medical device company Covidien PLC.

According to the Justice Department, the lawsuit involved Fox Hollow’s device called the SilverHawk Plaque Excision System (“SilverHawk”). The SilverHawk was approved by the Food and Drug Administration for use in atherectomies. An atherectomy is a minimally-invasive surgical procedure that uses a small cutting device attached to a catheter to remove atherosclerotic plaque from blood vessels in the body. According to the whistleblower’s complaint filed under the qui tam provisions of the False Claims Act, most atherectomies can safely be performed as outpatient procedures.

The whistleblower, Amanda Cashi, a former district sales manager for Fox Hollow in Louisiana, alleged that Fox Hollow encouraged current and prospective hospital customers to bill procedures using the SliverHawk as inpatient, rather than outpatient procedures, to increase the profitability of the procedure and presumably increase sales of the SilverHawk device. According to the complaint, Medicare reimbursement rates for a one-night inpatient admission is $10,000, but the reimbursement rate for an outpatient procedure is only $3,000. The complaint also alleged that, in order to persuade hospitals to bill federal health care programs at the higher-paying inpatient rate, Fox Hollow personnel provided hospitals with false and misleading “national benchmarks” indicating that SilverHawk procedures were classified as inpatient claims 80% of the time, when the actual percentage was much lower. The Justice Department claimed that Fox Hollow caused twelve hospitals in nine states to submit claims to Medicare for medically unnecessary inpatient admissions for procedures that should have been billed as lower-rate outpatient procedures.

The whistleblower will receive $250,000 of the settlement proceeds as her reward under the qui tam provision of the False Claims Act.

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