‘Free’ enteral pumps cost Abbott $600M

Sunday, August 31, 2003

ABBOTT PARK, Ill. - In one of the largest healthcare fraud settlements in U.S. History, Abbott Labs has agreed to pay as much as $622 million to resolve allegations that the company helped HME providers and other enteral nutrition suppliers bilk the Medicare program.

At issue is a marketing practice in which Abbott subsidiary, Ross Products, would give suppliers free feeding pumps but then support their efforts to bill Medicare and Medicaid for those pumps. The government declined to accept Abbott’s claim that the pumps weren’t free because providers later paid for the pumps when they purchased plastic tubing sets and enteral nutrition formula from Ross.

As part of its agreement with the government, Ross, which claims a 50% share of the enteral nutrition business in the United States, will change the way it markets pumps, sets and formula to suppliers.

“Customers will be billed separately for the pumps and pump sets, instead of paying for them together at one price,” said Melissa Brotz, an Abbott spokesperson. “The pumps will be billed, the sets will be billed, and invoices will be given in that manner.”

She said she didn’t think the overall costs to enteral nutrition suppliers for pumps, sets and formula would rise as a result of the new billing policy.

In 2002, Medicare paid $436 million to Part B suppliers for enteral pumps, sets and category 1 formula (B9002, B4150 and B4035). Home Care suppliers took in a third of that reimbursement.

Getting pumps at no up-front charge has been a routine part of doing business with Ross Products fort a long time, say HME providers that supply enteral nutrition. But enteral suppliers don’t believe the pumps are actually free.

“You pay for them one way or another,” said Bob Simmons, owner of Boston Home Infusion in Dedham, Mass. “Even though people think you’re getting it for free, it’s like no. The minute you stop buying the plastics from the [vendors], they want their pumps back.”

Feeding pumps typically cost between $300 and $1,000.

As part of its investigation, the government set up a sham durable medical equipment company in southern Illinois called Southern Medical Distributors. To win Southern’s business, Ross sales reps offered up-front payments, called a “signing bonus” or “conversion bonus” to the phony DME company and told the concealed investigators that the payment would not have to be reported to the government as a discount.