The US Attorney’s Office for the District of New Jersey recently announced an agreement with BioTelemetry Inc. to settle allegations that its recently-acquired subsidiary, MedNet, Inc., violated the Anti-Kickback Statue and False Claims Act by improperly inducing health care providers to use the company’s cardiac monitoring services.

From 2006 to 2014, before BioTelemetry acquired MedNet, MedNet allegedly entered into agreements with hospitals and physician clinics (collectively, the “providers”), whereby MedNet charged the providers fees for cardiac monitoring services performed by MedNet. Under these arrangements, MedNet allowed the providers to bill Medicare directly, and retain the reimbursements, for the services provided not by the provider but by MedNet. The Medicare reimbursements paid to the providers exceeded the fees paid to MedNet, resulting in a net profit to the providers. This case, originally brought by a relator, alleged that MedNet entered the agreements and provided remuneration (i.e., the net profit from the Medicare reimbursement minus MedNet’s fees) to its hospital and physician clinic customers in order to induce referrals from the providers for MedNet’s services, and thereby caused false claims to be submitted to Medicare for its cardiac monitoring services. MedNet and BioTelemetry admitted no wrongdoing or liability under the settlement, but agreed to pay $1.35 million to settle the case.

Although the pharmaceutical industry has received most of the focus regarding Anti-Kickback/False Claims Act enforcement, this case should serve as a reminder that medical device companies should also be cognizant of potential liability under federal fraud and abuse statutes. Arent Fox’s Health Care and False Claims Act groups will continue to monitor relevant enforcement actions, court decisions, and regulatory action and guidance. If you have any questions or need assistance, please contact, Stephanie Trunk, Erin Atkins, Rachel Yount, or Emily Leongini in our Washington, DC office or the Arent Fox professional who handles your matters.