Pricing structure costs Respironics $34.8M

Friday, March 25, 2016

MURRYSVILLE, Pa. – HME providers must now pay for automated resupply services from Respironics regardless of whether or not they buy the company’s products.

Respironics, one of the “big three” manufacturers of sleep therapy products, changed the pricing structure for medSage services to a per-patient, per-month fee for all providers, in the wake of a whistleblower lawsuit and investigation by the Department of Justice that has cost the company millions of dollars to settle.

“As the investigation was ongoing, Respironics made a business decision to restructure its pricing for medSage services so that the price paid for the services is no longer bundled in the price of the Respironics mask,” the company said in a statement to HME News.

The lawsuit and investigation alleged that from April 2012 to November 2015 Respironics provided medSage services for free to providers that bought its products, violating the Anti-Kickback Statute. The statute prohibits payment to induce the referral of services or items paid for by a federal health care program. Claims submitted to these programs in violation of the Anti-Kickback Statute are also false claims under the False Claims Act.

Despite the settlement, Respironics does not admit liability, citing the Discount Safe Harbor to the Anti-Kickback Statute, which exempts, among other things, a reduction in the amount a buyer is charged for an item or service based on an arm’s length transaction.

“Respironics continues to have a good faith belief that the Fit for Life program offered a permissible bundled discount of masks and resupply services under the appropriate discount safe harbors,” the company stated.

The lawsuit and investigation, and subsequent settlement, is representative of the DOJ’s expanding scrutiny of manufacturers and the increasing number of whistleblower lawsuits, says healthcare attorney Jeff Baird.

“The DOJ over the last decade has become increasingly aggressive with manufacturers,” said Baird, chairman of the Health Care Group at Brown & Fortunato. “Initially, the focus was against drug manufacturers who were giving freebies to doctors. Now they’re looking at other arrangements, particularly the types of arrangements medical equipment manufacturers have with DME companies.”

Provider Erik Parkhill says the arrangement raised a red flag with him, but he didn’t think much of it because he doesn’t use medSage resupply services, opting instead to use a service offered by Brightree.

“In the back of my mind, I definitely questioned it,” said Parkhill, who estimates he buys about 25% of his CPAP equipment and supplies from Respironics.

Provider John Eberhart says the case also may be representative of an HME industry that has been diminished by Medicare reimbursement cuts and other pressures.

“I think people are doing things that are pushing the limits of legality everywhere,” said Eberhart, president of Eberhart Home Health, who buys the majority of his CPAP equipment and supplies from ResMed and also uses a service offered by Brightree for resupplies. “I completely agree with the government that it’s wrong, but I hear a lot of these things.”

As part of the settlement, Respironics will pay about $34.4 million to the federal government and about $660,000 to various state goverments. Of the federal government’s share, $5.38 million will go Dr. Gibran Ameer, who has worked for various DME companies and who filed the lawsuit.

“Respironics believes this settlement is the right thing for the company, its customers and its employees,” the company stated. “It allows Respironics to move forward with heightened clarity and transparency with the regulators and with its customers.”