Medtronic subsidiary pays $1.25 million to settle federal lawsuit

A Plymouth medical device company owned by Medtronic has agreed to pay $1.25 million to settle a federal lawsuit alleging that it wasted Medicare dollars.

The medical device company EV3 is settling a whistleblower's claims that in 2006 and 2007, a company it acquired improperly coached hospitals across the country on how to overbill Medicare for minimally invasive procedures to remove hardened plaque from patients' arteries using one of its devices, called the Silver Hawk.

Specifically, former sales representative Amanda Cashi alleged that the company told hospitals that 80 percent of their patients for the Silver Hawk procedure should stay overnight in the hospital following an atherectomy, leading to higher Medicare payments. The promises of higher reimbursement were intended to drive sales of Silver Hawk devices. Cashi and federal prosecutors who joined her lawsuit said most of the patients should have gotten lower-paying same-day procedures in an outpatient setting.

The legal headache has been shared by several companies over the years.

Medtronic bought EV3 last month as part of its $49.9 billion acquisition of surgical supplier Covidien. In 2010, Ireland-based Covidien paid $2.6 billion to buy EV3, and EV3 itself acquired the Silver Hawk machine as part of a $780 million acquisition of Fox Hollow Technologies in 2007.

Covidien, which negotiated the settlement agreement, is not admitting wrongdoing and specifically denies the allegations in the six-year-old lawsuit, the settlement agreement says.

"Medtronic is committed to the highest standards of ethical conduct, and we take responsibility for delivering outstanding results to our partners, patients and colleagues," a company statement said. "The case relates to historical conduct that took place under Fox Hollow. … We are pleased to have the matter resolved."

Prosecutors said schemes to drive up Medicare bills for unnecessary care drive up the cost of care for everyone.

"Charging the government for higher-cost inpatient services that patients do not need wastes the country's precious health care resources," Acting Assistant Attorney General Joyce Branda said in a statement about the EV3 case.

The long-running lawsuit was settled just before Medtronic acquired Covidien. Although the settlement was publicly announced Wednesday by the Justice Department, all of the signatures on the settlement paperwork provided to the Star Tribune are dated in December, one month before the Medtronic-Covidien deal closed.

It's common for companies in large transactions to try to resolve outstanding liabilities before a deal.

Cashi, the former Fox Hollow sales representative who first brought the allegations, will collect $250,000 of the settlement under the provisions of the False Claims Act that offer monetary rewards to whistleblowers who bring fraud against the government to light.

The original lawsuit against EV3 also named a host of hospitals that were alleged to have submitted the inflated bills. Spokespeople for Cashi's lawyer and the Justice Department said the settlement resolves the entire case and the hospitals named in the settlement — none of which were in Minnesota — will not be prosecuted for the alleged overbilling.

Joe Carlson • 612-673-4779

Twitter: @_JoeCarlson