BOSTON – Byram Healthcare Centers Inc., a prominent supplier of medical products, is at the center of a significant healthcare fraud settlement, agreeing to pay $9.3 million to resolve allegations of engaging in an illegal kickback scheme. This settlement, announced by United States Attorney Carmen M. Ortiz, involves Hollister, Inc., a medical device manufacturer, which will pay $11.44 million, bringing the total settlement to over $20 million. The case highlights the government’s firm stance against commercial bribery within the healthcare industry, particularly concerning companies like Byram Healthcare.
“Kickbacks in healthcare erode patient trust and compromise the quality of medical care,” stated U.S. Attorney Ortiz. “These unlawful financial incentives not only undermine the integrity of our health care system but also misappropriate taxpayer funds from vital health care programs.” The settlement underscores the Justice Department’s commitment to preventing manufacturers and suppliers, such as Byram Healthcare, from participating in illicit financial arrangements.
Principal Deputy Assistant Attorney General Benjamin C. Mizer emphasized the Department of Justice’s dedication to this issue, stating, “We are resolute in our efforts to stop the payment or receipt of kickbacks by medical device manufacturers and suppliers who are part of federal health care programs.” He added, “Such illegal payments corrupt the decision-making processes intended to benefit patients within these crucial programs.”
Harold H. Shaw, Special Agent in Charge of the FBI Boston Field Division, reinforced this sentiment, asserting, “The FBI is committed to aggressively pursuing companies that engage in kickback schemes that harm both patients and taxpayers. We will ensure that those who attempt to exploit the nation’s health care system through bribery or other fraudulent activities are held accountable for their actions.”
Echoing this, Special Agent in Charge Phillip M. Coyne of the U.S. Department of Health and Human Services, Office of Inspector General, commented, “When health care manufacturers incentivize suppliers for patient referrals, it can improperly influence which products patients receive. Our investigations into these wasteful business arrangements will continue.”
The allegations against Hollister, resolved in this settlement, detail a scheme running from 2007 to 2014. Hollister allegedly provided kickbacks to Byram Healthcare in exchange for marketing promotions, patient conversion campaigns, and general referrals favoring Hollister’s ostomy and continence care products. Notably, on seven occasions between 2007 and 2012, Hollister reportedly covered Byram Healthcare’s bonus commissions for sales staff who secured new patient orders for Hollister products. Furthermore, from 2009 to 2014, Hollister allegedly paid Byram Healthcare $200,000 annually under the guise of “catalog funding,” specifically to incentivize Byram’s recommendation of Hollister products to patients. These actions are clear violations aimed at manipulating the market through financial incentives.
Byram Healthcare Centers Inc.’s settlement addresses allegations that in 2012 and 2013, the company accepted numerous kickbacks from Hollister and three other manufacturers of ostomy and continence care products: Coloplast Corp., Montreal Ostomy, and Safe N’ Simple. These kickbacks were allegedly provided to secure Byram Healthcare’s commitment to conduct promotional campaigns and preferentially refer patients to these manufacturers’ products. The settlement also resolves claims from the United States and the State of California concerning inflated claims submitted by Byram Healthcare to the California Medi-Cal program. Specifically, it’s alleged that Byram Healthcare violated state regulations by billing Medi-Cal for Coloplast urology products without accounting for substantial discounts they received, thereby overcharging the program.
In conjunction with the False Claims Act settlement, Byram Healthcare has agreed to pay $127,117 to the State of California and has entered into a corporate integrity agreement with the U.S. Department of Health and Human Services, Office of Inspector General. This agreement likely involves stringent monitoring and compliance measures to prevent future misconduct.
This settlement originated from a whistleblower lawsuit filed under the qui tam provisions of the False Claims Act by two former employees and one current employee of Coloplast. These provisions allow private individuals to sue on behalf of the government and receive a share of any recovered funds. While the whistleblowers’ share of this settlement is yet to be determined, their actions were instrumental in bringing these fraudulent activities to light. Previously, in December 2015, claims against Coloplast Corp. and Liberator Medical Supply, Inc., also defendants in the lawsuit, were resolved for $3.66 million. With the settlements announced today, the total recovery from this case reaches $24.6 million, demonstrating the significant financial repercussions for companies engaging in kickback schemes.
The investigation was a collaborative effort by the Federal Bureau of Investigation and the U.S. Department of Health and Human Services, Office of Inspector General. Assistant U.S. Attorneys George Henderson and Kriss Basil of the District of Massachusetts, along with the Justice Department’s Civil Division, handled the case.
It is important to note that the claims resolved by these settlements are allegations, and there has been no formal determination of liability. However, the substantial financial penalties and corporate integrity agreement imposed on Byram Healthcare and Hollister, Inc. serve as a strong deterrent against similar practices within the healthcare industry. This case underscores the government’s vigilance in safeguarding federal healthcare programs and ensuring fair practices in patient care and medical supply procurement.
