Two major state schools--UC San Diego and the University of Washington--will pay $8.3 million to settle civil charges that their research hospitals bilked the federal government by improperly billing Medicare for experimental medical devices, officials disclosed Wednesday.
The action by the two universities is expected to increase pressure on 127 other research centers, which face similar federal charges, to settle with prosecutors. Already, the litigation is the biggest case ever originating from a federal whistle-blower lawsuit over payments for medical devices.
Prosecutors charged that UCSD and the University of Washington violated the federal False Claims Act. The schools did so, federal authorities said, by billing the government from 1989 through 1994 for experimental cardiac-related medical gear that university doctors knew did not qualify for reimbursement.
"They knew what the rule was. They made the claims anyway," said Stephen J. Segreto, an assistant U.S. attorney who handled the case against UCSD.
The universities admitted no wrongdoing under the settlement, and in statements issued Wednesday they defended their actions as proper.
The government case against the two universities, and the pending litigation against the other hospitals, began as a whistle-blower case filed in 1994 by Kevin Cosens, a medical device salesman in Seattle. Cosens, 45, will receive a still-undisclosed portion of the settlement.
Cosens, whose identity was kept private until Wednesday, also provided secret testimony before a Senate panel in 1996 in which he maintained that hospitals and doctors used experimental medical devices in exchange for financial payoffs. Cosens testified that doctors who served as clinical investigators of the devices often received stock options, royalty contracts and cash from the equipment manufacturers.
The payoff issue was not addressed in the settlement. But Charles Mittman, UCSD Medical Center's dean for clinical affairs and its chief compliance officer, acknowledged that a doctor, whose bills at the hospital were cited in the litigation, had received money from a medical device manufacturer.
Mittman said new safeguards have since been developed that require conflict-of-interest reviews to prevent medical care from being compromised.
The allegedly false billings from the hospitals mainly went to the Medicare program, but some also were submitted to a federal program called Tricare, which covers military or retired military personnel.
Other hospitals still facing charges include Cedars-Sinai Medical Center in Los Angeles and UCLA Medical Center. Another facility, Sutter Hospital in Sacramento, previously agreed to a $1.3-million settlement.
According to prosecutors, medical centers at UC San Diego and the University of Washington tried to sneak improper billings past government officials. They allegedly did that by exploiting claims procedures that do not require hospitals to specify the devices included in certain medical procedures.
Still, prosecutors acknowledged, the hospitals did not outright lie about what medical gear they used when they submitted their reimbursement claims to the government.
The quality of the care provided to the more than 300 patients who received the experimental devices involved in Wednesday's settlements was not challenged by federal prosecutors. In fact, nearly all of the devices cited eventually were approved by the Food and Drug Administration.
The potential for tragedy, however, was underscored by the death of a UCSD patient who received one of the cardiac devices, a Rotablator, that had been involved in the clinical trials at the hospital in the early 1990s. The patient died when the Rotablator, a device for clearing arterial obstructions, malfunctioned and cut into the patient's heart. Prosecutors said they did not know whether the specific Rotablator involved in the tragedy was one of the devices involved in the allegedly false billings.
Phillip E. Benson, an attorney in Orange and one of the two lawyers representing Cosens, said the hospital industry had "done everything in its power to shake this case off."
Representatives of UCSD and the University of Washington defended the medical care provided to their patients and said the federal litigation stemmed from narrow, technical issues.
"We do not believe that submitting the bills was incorrect. The procedures that were done were medically necessary and, in fact, the best possible therapy for the patients," said UCSD's Mittman.
University of Washington officials offered a similar defense. In a statement, the university said its medical procedures "involved pacemakers and automatic defibrillators that were among the latest, most advanced versions of such devices available."
Under the settlements, UCSD paid $4.7 million and the University of Washington paid $3.6 million.