(Reuters) — A federal judge yesterday ordered a surgical funding company to turn over information about payments it made to healthcare providers for surgeries performed on plaintiffs suing over artificial hips made by a unit of Johnson & Johnson (NYSE:JNJ).
DePuy Orthopaedics in August sought to compel Texas-based MedStar Funding to hand over the information, saying it was concerned that Medstar was trying to squeeze excessive profits from liens it had placed against personal-injury settlements for 11 hip plaintiffs.
Yesterday U.S. District Judge David Katz in Toledo granted the motion and directed Medstar to comply by Nov. 13.
“DePuy’s request for billing and payment information is necessary to properly assess the validity of the liens,” Katz wrote.
Surgical funders like MedStar essentially invest in operations on injured plaintiffs. If a litigant cannot afford surgery to correct problems blamed on a medical device, the funder will step in to purchase their medical bills at a deep discount from physicians, hospitals and other healthcare providers. When the patient’s lawsuit settles, the funder reaps a profit by placing a lien on the settlement for the full amount of the patient’s bill.
Following a report about the role of MedStar in pelvic-mesh litigation, DePuy asked Katz for permission to probe MedStar liens for the 11 plaintiffs suing over its ASR hip implants.
DePuy agreed to pay $2.5 billion in 2013 to settle approximately 8,000 personal-injury claims over its all-metal ASR hip implants, which some patients said could cause pain and joint dislocation. An unusual feature in that settlement allows lienholders to seek payment directly from the company, rather than the plaintiff’s settlement.
According to DePuy, MedStar submitted claims for nearly $1.5 million for medical care that should have cost no more than $336,000. DePuy said MedStar is trying to collect 4 times what DePuy considers to be a reasonable cost and that it should be allowed to see what MedStar paid to healthcare providers.
DePuy said the information will help it determine what portion of MedStar’s lien demands were directly related to surgeries for plaintiffs’ ASR hip devices, as opposed to unrelated issues such as neck injuries, or psychological evaluations.
MedStar founder Dan Christensen said in court filings that it did not mark up plaintiffs’ invoices. Plaintiffs turned to MedStar for funding because they were uninsured or their insurance did not fully cover the necessary procedures, he said.
In previous comments to Reuters, Christensen said MedStar’s claims in the DePuy hip implant litigation are “usual, customary and reasonable.” A medical pricing expert retained by MedStar deemed the bills it submitted to DePuy to be within 4 percent of typical hip replacement charges, according to Christensen.
Christensen did not immediately return requests for comment today. A DePuy spokeswoman declined to comment.
MedStar faced a similar order compelling it to hand over information in the pelvic-mesh cases. Manufacturers like Endo International‘s (NSDQ:ENDP) American Medical Systems, J&J’s Ethicon subsidiary, Boston Scientific (NYSE:BSX) and C.R. Bard (NYSE:BCR) obtained records and deposition testimony related to MedStar after learning a MedStar representative was soliciting physicians to perform mesh removal surgery.
In August, Reuters reported that funders’ liens on patients’ settlements in the pelvic mesh litigation sometimes spiraled to as much as 10 times what private insurers or government programs like Medicaid would pay for the same procedures. MedStar has said that it is medical providers, not funders, who determine how much procedures cost.
