On September 22, 2022, the United States Department of Justice (DOJ) announced a $1.2 million settlement with Philips RS North America LLC, formerly known as Respironics, Inc. (“Respironics”), over allegations that the company unlawfully induced referrals for its equipment. Respironics is a manufacturer of sleep and respiratory durable medical equipment.
The government alleged that from December 2015 to December 2016, Respironics helped a durable medical equipment supplier obtain a 12-month interest-free loan that was fully guaranteed by Respironics. Under the agreement, Respironics had full financial risk in the event that the durable medical equipment supplier defaulted on the loan. The United States contended that the arrangement violated both the Anti-Kickback Statute and the False Claims Act.
The case was initially brought by a whistleblower under the qui tam provisions of the False Claims Act and as such, the whistleblower will receive a portion of the settlement amount.
In addition to the $1,283,825.40 civil settlement, Respironics entered into a five-year Corporate Integrity Agreement (CIA) with the Department of Health and Human Services Office of Inspector General (HHS OIG). The CIA requires that Respironics implement and maintain a robust compliance program that includes review of arrangements with referral sources and monitoring of the company’s sales force. The CIA, as is often the case, also requires that Respironics retain an independent monitor (selected by HHS OIG) to evaluate the effectiveness of Respironics’ compliance systems.
“Illegal kickbacks in our federal healthcare system create an unfair marketplace and the potential for medical decisions to be made based on financial incentive rather than what’s best for the patient,” said U.S. Attorney Timothy Duax. “Our office is committed to the full and fair enforcement of the Anti-Kickback Statute and False Claims Act.”
Other Respironics Settlement
This is not Respironics’ only current/recent settlement. On September 1, 2022, the DOJ announced a $24 million settlement with the company over other False Claims Act allegations that the company misled Medicare, Medicaid, and TRICARE by paying kickbacks to durable medical equipment suppliers.
Under that settlement, the DOJ alleged that Respironics caused the suppliers to submit claims for ventilators, oxygen concentrators, CPAP and BiPAP machines, and other respiratory medical equipment to federal health care programs. Respironics allegedly gave illegal inducements to the suppliers, such as physician prescribing data (free of charge) that might help with the suppliers’ marketing efforts to physicians.
Respironics will pay $22.62 million to the United States and an additional $2.13 million to various states as part of this civil settlement. This settlement is also concurrent with a five-year Corporate Integrity Agreement with HHS OIG.
The settlement resolves a lawsuit originally brought by a Respironics’ employee under the qui tam or whistleblower provisions of the False Claims Act. The whistleblower will receive approximately $4.3 million of the federal settlement amount.
“Paying kickbacks to medical equipment providers is misaligned with patient care and corrupts our nation’s health care programs including TRICARE,” said Special Agent in Charge Christopher Dillard for the Department of Defense Office of Inspector General, Defense Criminal Investigative Service (DCIS), Mid-Atlantic Field Office. “Working closely with our law enforcement partners, DCIS will continue to investigate those who risk harming the welfare of our active-duty service members and seek to profit at the expense of the American taxpayer.”