EndoGastric Can’t Take the HEAT, Pays $5.25MEndoGastric Can’t Take the HEAT, Pays $5.25M

EndoGastric Solutions, which makes a less invasive device for treating gastroesophageal reflux disease (GERD), is paying the U.S. government $5.25 million to resolve allegations that it misled health providers and paid kickbacks.The case was part of the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius. EndoGastric Solutions' EsophyX device is an alternative to a more invasive procedure that requires incisions in the abdomen. But federal prosecutors claim the Redmond, WA-based company knowingly caused health care providers to bill for the EsophyX procedure using codes applicable to the more invasive alternative, allowing for a higher level of reimbursement.EndoGastric Solutions also illegally paid certain physicians participating in patient seminars and co-marketing agreements in order to induce them to use EsophyX, prosecutors said last Wednesday as they announced the settlement.The company admits no wrongdoing as part of the settlement. "Health care providers that cause the government to pay more than it should for medical devices not only cost us money as taxpayers, they raise the cost of health care for everyone. Medical device manufacturers must deal fairly and honestly with federal health care programs if they want to participate in them," Stuart F. Delery, assistant attorney general for the U.S. Justice Department's Civil Division, said in a news release.EndoGastric Solutions' settlement includes the company entering into a corporate integrity agreement with the U.S. Department of Health and Human Services Office of Inspector General. The agreement establishes procedures and reviews to avoid similar conduct from the company in the future."EGS cooperated fully with this investigation, and was able to bring the matter to a quick resolution due to internal corrective actions and new policies that had been initiated long before we learned of the investigation," Michael Kleine, executive chairman of the company's board, said in a news release. "The settlement is consistent with the company's direction which values integrity and has demonstrated a commitment to compliance since I have become a part of the organization," Klein said.Glenn Schmasow, a former employee of EndoGastric Solutions, originally filed the civil lawsuit in the U.S. District Court of Montana, under the whistleblower provision of the False Claims Act,. The provision is meant to prevent companies from defrauding the government. Schmasow will receive up to $945,000 under the settlement.