Medical Device Link.

GOVERNMENT & LEGAL AFFAIRS

Converging factors have created a perfect storm of increased scrutiny and enforcement risk for medical device companies. Following is a summary of some of the major factors involved.

• Provisions of the False Claims Act (FCA) allow whistle-blowers to recover as much as 30% of the funds judged stolen. Monetary penalties and settlements routinely run into the multimillions.
• Medicare, estimated to remain solvent until only 2018 according to the 2006 report of the trustees of the Medicare Trust Fund, receives the lion's share of funds recovered from successful prosecutions. In 2004, health-related civil fraud recoveries totaled $1.8 billion.
• The Deficit Reduction Act of 2005 added incentives for states to fight Medicaid fraud as a way of controlling costs to the federal and state governments. On September 19, 2006, Dennis G. Smith, director of the CMS Center for Medicaid and State Operations, wrote to state Medicaid directors about the act's incentives to encourage adoption of state false claims acts by "decreasing the federal medical assistance percentage by 10 percentage points for recoveries from legal actions brought pursuant to such laws." The law, effective January 1, 2007, "equally rewards those already in place that meet the specified requirements." Most states have responded by enacting new legislation or tightening existing requirements under their own false claims acts. The federal government will share 10% of its Medicaid recovery with states that have qualifying FCAs.
• According to Taxpayers against Fraud, the 2006 recovery on investment to the federal government from investigations and prosecution of healthcare-related fraud is 15:1. In 2002, the recovery ratio was $8 dollars for every $1 spent on investigating and prosecuting healthcare fraud.
• Numerous articles in major newspapers have fueled public concern about physician conflicts of interests. To counteract that concern, hospital organizations, including Stanford University Medical Center, Yale Medical Group, and the Cleveland Clinic, have developed strict policies prohibiting physicians from accepting any gifts from industry.