On the heels of its recent $75 million settlement with Medtronic Spine to resolve allegations that Kyphon, acquired by Medtronic in 2007, "caused" providers to present false claims to Medicare, the U.S. Department of Justice ("DOJ") has sent letters to a number of hospitals seeking information about their billing practices for "kyphoplasty" procedures since January 2002. (Kyphoplasty is a spinal surgical procedure that is used in treating certain vertebral compression factures. The procedure restores the height and shape of the vertebral body by injecting bone cement to strengthen the vertebra.)

In 2005, two qui tam relators — one a Kyphon reimbursement manager, the other a Kyphon regional sales manager — filed an action in federal district court in Buffalo, NY, alleging that Kyphon illegally marketed kyphoplasty procedure kits to hospitals and physicians as a profitable inpatient procedure. Relators contended that the minimally invasive procedure is typically and appropriately considered an outpatient procedure. However, relators complained, driven by Kyphon's misleading marketing, the vast majority of kyphoplasty procedures were performed on a more costly inpatient basis.