Home Health & Hospice Week

Federal agents pose as DME suppliers

A massive settlement based on misdeeds surrounding sales and marketing for enteral nutrition products is just the beginning on an industry-wide probe, the feds say.

Abbott Laboratories July 23 agreed to pay a whopping $600 million to settle claims arising from an elaborate sting operation undertaken by federal investigators. Federal agents created a durable medical equipment company in southern Illinois to get an inside track on snuffing out alleged misbehavior amongst distributors and others.

The probe centered on sales and marketing practices associated with enteral feeding supplies. Abbott's Ross Products Division sold bundled packages of pumps and plastic tubing to the feds' undercover company - Southern Medical Distributors - and others to make it difficult for Medicare to figure out the actual costs of the products, the feds maintain.

In addition, Ross offered up-front payments to customers as an incentive to encourage them to buy its products. Ross sales reps dubbed the payments signing or conversion bonuses, and told buyers they didn't have to report them to Medicare as a discount.

According to Deputy U.S. Attorney Richard Byrne, Abbott subsidiary CG Nutritionals Inc. pleaded guilty to obstruction charges and agreed to a sentencing recommendation of $200 million in criminal fines and five years' probation. Meanwhile, Ross agreed to a $400 million civil settlement.

As part of the settlement, CG will be permanently excluded from Medicare and Medicaid, while Abbott will enter into a five-year corporate integrity agreement with the HHS Office of Inspector General. The settlement has to be approved by a federal judge.

Ross says its sales tactics were common in the industry, but that it "began voluntarily changing its sales and marketing practices earlier this year to address government concerns."

Byrne says the criminal conviction is the first arising out of the ongoing probe, nicknamed "Operation Headwaters."

Editor's Note: Abbott's corporate integrity agreement with the OIG is at http://oig.hhs.gov/fraud/cia/agreements/Abbott%20Laboratories%2007%2022%202003.PDF.