The Innovasis settlement is a significant legal resolution involving allegations that Innovasis Inc., a spinal implant device manufacturer, and two of its top executives engaged in illegal kickback schemes to incentivize surgeons to use their products in surgeries covered by Medicare. This settlement addresses claims of violations of the False Claims Act through improper financial inducements, including consulting fees, intellectual property payments, and lavish perks.
Background of the Innovasis Settlement
Between January 1, 2014, and December 31, 2022, Innovasis allegedly paid kickbacks to seventeen orthopedic surgeons and neurosurgeons to encourage the use of Innovasis spinal implants and related devices. The financial benefits included inflated consulting fees, payments for intellectual property with little or no value, registry fees, equity performance shares, and luxury trips and events for surgeons and their families.
These actions violated the federal Anti-Kickback Statute, which prohibits offering anything of value to influence referrals of services or items reimbursable by federal healthcare programs like Medicare. The U.S. Department of Justice (DOJ) filed a False Claims Act lawsuit based on whistleblower information.
Terms of the Innovasis Settlement
- Total Settlement Amount: Innovasis Inc., along with former executives Brent Felix (founder and president) and Garth Felix (Chief Financial Officer), agreed to pay $12 million to resolve the allegations.
- Restitution: $6 million of the settlement constitutes restitution to the government for the false claims submitted under influenced referrals.
- Whistleblower Award: The whistleblower, Robert Richardson, a former Regional Sales Director, will receive approximately $2.2 million under the qui tam provisions of the False Claims Act.
- Payment Schedule: The settlement payments are structured over multiple installments within one year of the agreement’s effective date.
- Compliance Requirements: Innovasis agreed to implement stringent compliance measures, including enhanced employee training and monitoring to prevent future violations.
Legal Framework Underpinning the Settlement
The settlement resolves allegations under the False Claims Act and the Anti-Kickback Statute, aiming to prevent manufacturers from influencing medical decisions through improper financial incentives. Offering kickbacks undermines fair medical judgment and can lead to unnecessary procedures billed to government healthcare programs.
The DOJ emphasized the importance of medical device choices being made solely based on quality of care and patient needs, not financial inducements.
Impact and Lessons from the Innovasis Settlement
- Industry Impact: The settlement highlights risks for medical device companies engaging in financial relationships with physicians, emphasizing the need for compliance with federal healthcare laws.
- Healthcare Integrity: Encourages ethical business practices ensuring patient care decisions remain free of improper financial influences.
- Whistleblower Incentives: Demonstrates the critical role whistleblowers play in uncovering healthcare fraud and the substantial rewards provided for such efforts.
- Corporate Compliance: Promotes the adoption of robust internal controls and transparency in physician relationships.
Claims Process and Settlement Administration
The settlement chiefly involves government restitution and whistleblower awards rather than direct consumer compensation. However, Innovasis must maintain compliance programs and report to regulatory authorities as part of the agreement.
Legal and corporate governance professionals use this case as a benchmark for assessing compliance risks and structuring ethical physician engagements in the medical device industry.
Conclusion
The Innovasis settlement resolves serious allegations of kickbacks that compromised medical decision-making and led to false Medicare claims. The $12 million settlement, coupled with robust compliance and whistleblower incentives, sets a strong example for healthcare manufacturers to adhere strictly to federal laws. This case underscores the ongoing governmental commitment to rooting out healthcare fraud and protecting the integrity of patient care.
