Health Law Daily Wrap Up, FALSE CLAIMS ACT—SETTLEMENT AGREEMENTS: Neurosurgeon, medical device distributor to pay $825K+ to settle FCA, AKS allegations, (Mar 23, 2023)

By Chelsea N. Simms, Esq.

A lawsuit alleging the solicitation and receipt of illegal kickbacks from implant companies resulted in an $825,000 settlement agreement.

A Missouri-based neurosurgeon, a medical device distributor, and their affiliate LLCs have agreed to pay $825,000, plus interest, as a civil settlement to resolve allegations brought under the False Claims Act (FCA) for violations of the Anti-Kickback Statute (AKS). The qui tam lawsuit, filed in 2012 by fellow neurosurgeons in Cape Girardeau, alleged violations of the False Claims Act for soliciting and receiving kickbacks from spinal implant companies (Settlement Agreement, March 15, 2023).

Allegations. The government alleged that from January 1, 2009, through March 31, 2012, Dr. Sonjay Fonn and Deborah Seeger, along with their companies Midwest Neurosurgeons LLC (MWN) and DS Medical LLC (DSM), solicited and received remuneration from spinal implant companies in return for arranging for the use of those companies’ products in Fonn’s surgeries.

In November 2017, a Medicare Unified Program Integrity Contractor (UPIC), opened a review of claims submitted by MWN to Medicare. That review concerned allegations and claims for payment that are outside of the scope of the Covered Conduct. In September 2022, the UPIC informed MWN that it determined MWN had been overpaid by $899,816 (CMS Overpayment).

CMS overpayment, settlement payment. In response to credible allegations of fraud, CMS suspended Dr. Fonn’s and MWN’s Medicare payments, effective December 1, 2017, and as of March 7, 2023, the government held a suspended payment amount of $410,987.78. Dr. Fonn and MWN denied the overpayment existed and filed an appeal and otherwise continue to pursue all administrative remedies.

Though the Agreement does not apply to or resolve the CMS Overpayment in any way, the Agreement dictates that the government will retain the suspended amount, which will be used to satisfy any future determinations regarding the CMS Overpayment. If any funds remain from the Suspended Amount thereafter, those funds will be used to pay the Settlement Agreement.

Settlement agreement. Under the settlement, the parties agreed to pay $825,000, of which $412,500 constitutes restitution. An initial payment of $39,012.22 ($450,000 less the Suspended Amount), plus interest on this amount accruing at a rate of 3.625 percent per annum from March 9, 2023, must be paid no later than seven days after the effective date of the Agreement. Use of any or all of the Suspended Amount to satisfy CMS Overpayment determinations will not result in any additional financial obligation of the parties.

Over a period of three years, the remaining balance of the Settlement Amount ($375,000), plus interest on the remaining balance of the Settlement Amount at a rate of 3.625 percent per annum from March 9, 2023, will be paid in three equal installment payments. Any default on payments, uncured within 10 days of notice, will result in any unpaid settlement amount immediately due with an interest rate of 12 percent per annum, compounded daily, and the parties may be excluded from participating in all Federal health care programs until outstanding debts are fully paid and reinstatement is requested.

Upon full receipt of the settlement amount plus interest, the U.S. will release the Dr. Fonn, Ms. Seeger and their respective companies, from any civil or administrative monetary claims the government has for the Covered Conduct under the False Claims Act, the Civil Monetary Penalties Law, the Program Fraud Civil Remedies Act, or the common law theories of payment by mistake, unjust enrichment, and/or fraud.

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