Precision Lens says it will fight federal allegations of using illegal incentives

Precision Lens, a Bloomington-based distributor of lenses used in cataract surgery, is vowing to fight a Justice Department lawsuit alleging the firm knowingly provided illegal incentives to eye surgeons like expensive hunting trips and vacations in order to increase sales.

The U.S. attorney's office for Minnesota announced two pieces of news about the case on Thursday.

First, the office has filed a lawsuit against Precision Lens and majority owner Paul Ehlen seeking to recover triple damages on potentially millions of dollars of illegally induced sales of lenses and supplies for Medicare surgeries.

The lawsuit is based on allegations from a company whistleblower who filed a broader lawsuit in 2013.

Also Thursday, the U.S. attorney announced that North Carolina ophthalmologist Dr. Jitendra Swarup has agreed to pay $2.9 million to settle allegations about participation in a related payment scheme.

According to the government, the settlement with Swarup contends that from 2006 to 2015, he received illegal payments from Precision Lens, Ehlen and a related business called Sightpath Medical.

A news release from Swarup said the allegations against him focused solely on Sightpath, which was paying Swarup under consulting agreements. Swarup did not admit any wrongdoing or liability as part of the settlement, and the claims do not allege that any of his surgeries were unneeded or resulted in patient harm.

"Dr. Swarup was forced to make a difficult business decision to avoid years of expensive and disruptive litigation, 1,300 miles away in Minnesota, and instead focus his attention on continuing to provide high-quality care to his patients, as he has done for more than 20 years," his attorney, Marc Raspanti of Philadelphia, said in the news release.

Last summer, Sightpath Medical and its former CEO, James Tiffany, agreed to pay $12 million to resolve similar allegations of illegally providing luxury trips and consulting agreements to induce the use of specific eye-surgery products in Medicare surgeries, in violation of the federal anti-kickback statute and False Claims Act.

Sightpath has said it cooperated with the government investigation and did not admit any wrongdoing as part of the settlement. The settlement resulted in a five-year corporate integrity agreement with Medicare's inspector general.

Precision Lens and Sightpath Medical were "corporate partners" at one time, according to the federal lawsuit, but they are legally separate entities.

On Friday, an attorney for Precision Lens said the company disputes the government's allegations.

Precision Lens "took care to follow all relevant laws and regulations regarding its interactions with health care professionals," Minneapolis attorney Thomas Beimers said in an e-mailed statement. "The allegations in the complaint are without merit, and Precision Lens looks forward to being vindicated through the courts."

Ehlen was not available for comment.

Among the numerous purported examples of illegal kickbacks outlined in the complaint, federal officials said a doctor (confirmed as Swarup) was taken on three luxury hunting trips in 2008 and 2012 that were paid for using a secret "slush fund" maintained by Precision Lens.

At the time in 2008, Swarup was Sightpath's largest customer, and Precision Lens and Sightpath were in discussions about how to increase his business with Precision Lens, the lawsuit said. The strategy included trips designed to "curry favor" with him and other doctors.

In some cases, Precision Lens generated invoices to Sightpath for the full or partial value of such trips, including an invoice for several thousand dollars related to a November 2008 excursion to an invitation-only upscale hunting and golf club in South Dakota called Sutton Bay.

In that case, the lawsuit said someone at Precision Lens later voided the invoice and wrote instead, "not paying invoice, taking out of slush fund instead." Swarup was not charged for that trip. The complaint notes that in some cases, doctors were billed for part of the cost of their trips, but not the true fair-market value.

It also said the company signed the 2009 AdvaMed Code of Ethics on Interactions with Health Care Professionals, which is a voluntary code that includes a blanket prohibition on companies paying for "entertainment and recreation" for doctors, including sporting events, golf, skiing, hunting and vacation trips.

The lawsuit claims that officials at Precision Lens in 2009 initially agreed to follow the marketing restrictions and cancel such trips, but the activities actually continued at least through 2014.

Joe Carlson • 612-673-4779