• Friday, January 17th, 2014

A Virginia podiatrist is convicted of lying to a grand jury about her involvement in a scheme to defraud Medicare by collecting reimbursement for procedures using Orthofix’s bone growth stimulator.

Virginia podiatrist Ilene Terrell was convicted today of lying in a federal probe of Orthofix International (NSDQ:OFIX) and its bone-growth stimulators. Terrell copped to 4 counts of making a false declaration to a grand jury, according to the office of the U.S. district attorney for Masschusetts.

Terrell faces up to 5 years in prison, 3 years of supervised release and a $250,000 fine for each count, according to a press release.

Federal investigators accused Terrell of falsifying patient medical records in order to justify Medicare reimbursement for procedures using the Orthofix stimulators. Terrell denied her involvement in or awareness of any tampering during her testimony before a grand jury, according to a statement from the office of the DA, Carmen Ortiz. 

Terrell’s case is part of a larger investigation into Orthofix and accusations of illegal marketing of its bone-growth products. The government alleges that Orthofix sales reps falsified the certificates of medical necessity required for Medicare reimbursement for its Spinal-Stim, Cervical-Stim and Physio-Stim bone-growth stimulators.

The company agreed to plead guilty to concealing the scheme during a 2008 Medicare audit. The settlement would have included a criminal fine of nearly $7.7 million and another $34.2 million plus interest, but no admission of wrongdoing in the civil portion of the case.

In February 2012 Texas-based Orthofix said it was close to a deal with the feds over the case. Two months later a former sales VP pleaded guilty to helping run a scheme to pay doctors to use the Spinal-Stim and Cervical-Stim devices. In June 2012 Orthofix and federal prosecutors brokered a deal which would have seen the company cop to a felony obstruction charge and fork over $42 million. Boston federal Judge William Young put the kibosh on that settlement, saying the agreement would limit his ability to impose further penalties. The judge spiked the deal again in December, saying the agreement isn’t in the public’s best interest. The case was finally settled in December 2012 with a $43 million fine when Young finally OK’d a deal that included 5 years of probation for Orthofix, $7.6 million in criminal penalties and $32.3 million plus interest to settle the civil portion of the case. CEO Robert Vaters said the company will still sell the bone growth stimulators at the heart of the accusations.

The U.S. attorney’s office has said the case also lobs charges against other Orthofix employees and contractors. A former regional sales director, Mitchell Salzman, pleaded guilty to making a false declaration to a federal grand jury in December 2011. Two territory managers, Derrick Field and Michael McKay, pleaded guilty to falsifying patients’ records, and a physician’s assistant named Michael Cobb copped guilty to accepting kickbacks for ordering the stimulators.


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