Virginia podiatrist Ilene Terrell, 65, was indicted this week of "making a false declaration to a grand jury" in connection with a federal investigation into Orthofix International (NSDQ:OFIX) and its bone-growth stimulators. The perjury charge may land Terrell 5 years in prison and $250,000 in fines if she’s found guilty.
Federal investigators accused Terrell of falsifying patient medical records in order to justify Medicare reimbursement for procedures using Orthofix’s bone-growth stimulators. When testifying before a grand jury Terrell denied her involvement in or awareness of any tampering, according to a statement from the U.S. Attorney’s office.
"Terrell lied to the grand jury, emphatically denying that she manipulated patient records or that she was even aware that anyone had done so," according to a federal press release. "Terrell lied about other matters as well, including her communications with an Orthofix representative about the government’s investigation and her role in obstructing an audit performed by Orthofix when the company requested that she provide medical records related to claims for bone growth stimulators."
Terrell’s case is part of a larger investigation into Orthofix and accusations of illegal marketing of its bone-growth products. The government alleges that Orthofix sales reps falsified the certificates of medical necessity required for Medicare reimbursement for its Spinal-Stim, Cervical-Stim and Physio-Stim bone-growth stimulators.
The company agreed to plead guilty to concealing the scheme during a 2008 Medicare audit. The settlement would have included a criminal fine of nearly $7.7 million and another $34.2 million plus interest, but no admission of wrongdoing in the civil portion of the case.
In February 2012 Texas-based Orthofix said it was close to a deal with the feds over the case. Two months later a former sales VP pleaded guilty to helping run a scheme to pay doctors to use the Spinal-Stim and Cervical-Stim devices. In June 2012 Orthofix and federal prosecutors brokered a deal which would have seen the company cop to a felony obstruction charge and fork over $42 million. Boston Federal Judge William Young put the kibosh on that settlement, saying the agreement would limit his ability to impose further penalties. The judge spiked the deal again in December, saying the agreement isn’t in the public’s best interest.
"It seems in this case the court’s hands ought not be tied," Young said at the time. "I have extreme unease of treating corporate criminal conduct like a civil case."
The U.S. attorney’s office has said the case also lobs charges against other Orthofix employees and contractors. A former regional sales director, Mitchell Salzman, pleaded guilty to making a false declaration to a federal grand jury in December 2011. Two territory managers, Derrick Field and Michael McKay, pleaded guilty this spring to falsifying patients’ records, and a physician’s assistant named Michael Cobb copped guilty to accepting kickbacks for ordering the stimulators.
