DECEMBER 2021
Healthcare Provider Alert
BRIBES DISGUISED AS ROYALTIES? WHY HEALTHCARE PROVIDERS SHOULD BE CAUTIOUS ABOUT MEDICAL DEVICE ROYALTY PAYMENTS
Some medical device companies pay physicians royalty fees to help develop their products. While these payments are permissible when structured appropriately, they are unlawful when their true purpose is to pay kickbacks to physicians for using or recommending medical devices. 

Federal enforcement agencies are cracking down on illegal kickbacks under the guise of royalty payments that improperly influence providers and result in the submission of false claims. In a recent settlement, Arthrex Inc., an orthopedic device company, agreed to pay $16 million dollars to resolve allegations it violated the False Claims Act (FCA) and Anti-Kickback Statute (AKS) by paying royalties intended to reward a physician for using and referring its products. 

How does this affect providers?

The Arthrex settlement was initiated by a whistleblower (“qui tam”) lawsuit, actions brought under the FCA that reward whistleblowers if the government recovers money lost to fraud. Whistleblowers are often staff members who have a front row seat to improper billing practices, including claims associated with medical devices. While this lawsuit was brought against a medical device company, many qui tam actions target providers. 

Additionally, the Sunshine Act requires medical device manufacturers to publicly disclose payments to physicians, including royalty payments, giving government agencies and whistleblowers easy access to payment details. Physicians that receive excessive royalty payments from device manufacturers could come under scrutiny for improper financial relationships. 

Providers should take precautions to ensure royalty payments they receive are appropriate and not structured in a manner that rewards them for recommending or utilizing the products they help develop. If you are a provider that receives royalty payments, ask the following questions:

  • Are the services you’re required to perform for a medical device company reasonable and necessary?

  • Does the device company require your level of expertise to further develop or improve a product?

  • Do the payments you receive seem excessive based on the amount of time and effort you contribute?

  • Have you had your contract with a device company reviewed by an independent appraiser to determine if your compensation is fair market value? 

  • Does your contract meet an AKS safe harbor? (Call us if you need guidance.)

Providers deserve to be compensated when their contributions advance medical products and improve patient outcomes. However, they should also be wary of medical device companies seeking to boost profits by incentivizing providers to use products and refer business.

If you have questions about royalty payments or how to comply with any of the laws discussed in this article, please contact Heather Skelton or John Gibson.
General Business Alert
WAKE-UP CALL FOR EMPLOYERS: REVERSE DISCRIMINATION LAWSUIT HIGHLIGHTS IMPORTANCE OF PERFORMANCE DOCUMENTATION
A federal jury recently awarded a former Novant Health employee $10 million dollars in a wrongful termination lawsuit, concluding Novant violated Title VII of the Civil Rights Act by terminating the white male employee based on his race and gender. 

In this case, the white male plaintiff had consistently positive performance reviews, but was abruptly terminated and then replaced by two diverse candidates who job shared to fill his position. The plaintiff alleged that the true reason for his firing was to allow Novant to hire diverse candidates as part of a sweeping diversity mandate.

Though Novant Health argued the employee was terminated for legitimate performance issues, the jury sided with the plaintiff, determining that the employee’s status as a white male was a motivating factor in his termination. A major factor for the jury appeared to be the lack of any documentation of the male employee’s allegedly poor performance.

Takeaways for Employers

It is critical for employers to adequately document performance issues contemporaneously when they arise. This is true for all employees - regardless of race or gender.

By documenting performance issues, employers can support their decision to terminate an employee with objective facts, mitigating the likelihood of a successful discrimination claim. In addition to documenting performance issues, employers should also document steps taken to help employees improve, further justifying termination when an employee fails to make progress.

In addition, while diversity initiatives are unquestionably important and valuable, employers must be cautious about putting excessive pressure on managers to hire diverse candidates. Employers cannot terminate white males simply to make way for diverse candidates. It is important to remember that any termination based on race or gender is illegal – even if the employee is a white male.

If you have any questions about this lawsuit or performance documentation, please contact Nicole Gardner or Erin Ball.
General Business Alert
IRS ANNOUNCES INCREASED 401(K) CONTRIBUTION LIMIT 
Last month, the Internal Revenue Service (IRS) announced that the 2022 employee contribution limit to 401(k) plans has been raised to $20,500, an increase from $19,500 for 2021 and 2020. People aged 50 and older may contribute a catch-up of $6,500 to 401(k), 403(b), most 457 plans, and the federal government’s Thrift Savings Plan. The 2022 IRA limit remains unchanged at $6,000.

If you have questions about the increased 401(k) contribution limit, please contact Fred Parker or Nicole Gardner. 
HEATHER SKELTON
(704) 390-7042 direct
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