Federal Employment Lawyer

On February 28, 2023, a Minnesota federal jury delivered a $43 million verdict against ophthalmology distributor Precision Lens and its founder Paul Ehlen, which as an experienced federal employment lawyer explains – could trigger more than $485 million in False Claims Act (“FCA”) liability.

The FCA’s Anti-Kickback Statute (“AKS”) strictly prohibits the payments of “remuneration” or any form of compensation intended to generate referrals, services, or items that are payable by federal healthcare programs.

In 2013, relator Kipp Fesenmaier brought an FCA suit accusing Precision Lens of paying unlawful kickbacks to surgeons in the form of luxury trips, tickets to sporting events, high-end outdoor experiences, and more. The Department of Justice agreed to intervene in his suit five years ago. According to the DOJ, these kickbacks were intended to encourage healthcare providers to use the company’s ophthalmic supplies and equipment used in cataract-related surgeries covered by Medicare.

The Verdict

This verdict followed several days of jury deliberation following a trial that began in January 2023. The jury found that Precision Lens and its founder, Paul Ehlen owe more than $43 million for AKS violations and identified a total of 64,575 false claims.

Under the FCA, damages could be tripled to approximately $130 million, and during 2006-2015 (the time period of the case), each false claim can incur statutory penalties of between $5,500 to $11,000. This math works out to total damages and penalties in the range of $485 million to $840 million.

Because of these severe punishments, FCA cases rarely go to trial, as defendants would much rather settle claims outside of litigation to avoid the severe financial consequences. Two other defendants agreed to settle the kickback allegations against them for $15 million. The potential penalties and damages in this case illustrate the harsh potential consequences that can arise when defendants are found guilty of FCA violations and highlight why most defendants would much rather avoid it entirely.

Under the FCA, Fesenmaier can expect to receive 15% to 25% of the final recovery, considering that it is a DOJ-intervened case. For his contributions to the two previous settlements with the cases of other defendants, he received a relator’s award of 19.5%.

Takeaways

As made evident by the years of investigation and litigation that went into this case, it’s clear that the DOJ remains committed to addressing kickback schemes that cloud the judgment of medical providers. This verdict is an important reminder to companies who intend to provide kickbacks in exchange for business that these violations are accompanied by FCA liability and hefty penalties.

Thanks to our friends at Hoyer Law Group for their insight into this case alert.