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United States v. Boston Scientific Neuromodulation Corp.

United States District Court, Third Circuit

May 31, 2013

UNITED STATES OF AMERICA ex rel. et al., Plaintiff,


SUSAN D. WIGENTON, District Judge.

Before the Court is defendant Boston Scientific Neuromodulation Corporation's ("BSNC" or "Defendant") motion to dismiss the Amended Complaint filed on behalf of the United States of America and the Qui Tam States[1] by Wendy Bahnsen ("Bahnsen") and Carolina Fuentes ("Fuentes"), (collectively "Relators") pursuant to Federal Rules of Civil Procedure 12(b)(6), 8(a) and 9(b) ("Motion to Dismiss"). Also before the Court are Defendant's Motion to Strike Confidential Information ("Motion to Strike") and Motion to Disqualify Counsel pursuant to the New Jersey Rules of Professional Conduct ("RPC") Rule 3.7(a) ("Motion to Disqualify").

This Court has jurisdiction over this action pursuant to 31 U.S.C. § 3732(a), 28 U.S.C. § 1331, and 28 U.S.C. § 1345. Venue is proper under 31 U.S.C. § 3732(a) and 28 U.S.C. §§ 1391(b) and (c).

These motions are decided without oral argument pursuant to Federal Rule of Civil Procedure 78.

For the reasons set forth below, this Court will DENY the Motion to Dismiss, the Motion to Strike, and the Motion to Disqualify Counsel.


Defendant has stated that "[f]or purposes of this motion to dismiss only, the Relators' factual allegations are accepted as true." (Def.'s Mot. to Dismiss Br. at 1.) The following are the facts relevant to the pending motion.



BSNC is a wholly-owned subsidiary of Boston Scientific Corporation ("BSC"). It is based in California and is incorporated under the laws of Delaware. (Am. Compl. ¶ 16.) BSNC markets and sells a spinal cord stimulation system called Precision Plus SCS System ("the System"). (Am. Compl. ¶ 16.) This device was approved by the Food and Drug Administration ("FDA") in April 2004 for the management of intractable back pain, and consists of both implanted and external parts. (Am. Compl. ¶¶ 16-17, 90.) The implanted part sends electrical signals through "leads" placed under the patient's skin along the spinal cord. (Am. Compl. ¶ 17.) The external equipment for the system includes a remote (Precision SCS Remote Model SC-5210), a charger (Precision SCS Charger 2.0 Model SC-5312), and an adhesive kit (Precision Adhesive Kit Model SC-6350). (Am. Compl. ¶¶ 17-20.) The cost for the entire system, including the external ancillary equipment, is approximately $30, 000. (Am. Compl. ¶ 91.) Claims for these devices were billed to government programs, including Medicare and Medicaid, in New Jersey and throughout the United States. (Am. Compl. ¶¶ 16, 22.)

ii. Relator Bahnsen

Bahnsen is a resident of California and was employed by BSNC from March 31, 2008 until October 15, 2009. (Am. Compl. ¶ 7.) From March 31, 2008 until January 2009, Bahnsen worked in the Customer Service Department, and then from January 2009 until her date of termination, she worked as a Reimbursement and Claims Management Specialist in the Billings and Collections Department. (Am. Compl. ¶¶ 8-9.) Her job as a Claims Management Specialist was to submit claims for payment to Medicare, Medicaid, and private insurance companies. (Am. Compl. ¶ 9.) Bahnsen had previously been employed by other health care providers in billings and collections positions, and was certified as a medical biller in October 2004 by the Medical Association of Billers. (Am. Compl. ¶ 10.)

iii. Relator Fuentes

Fuentes is a resident of California and was employed by BSNC from May 2005 to June 2010. (Am. Compl. ¶ 13.) She was employed as an administrative assistant from May 2005 through March 2008, and was then transferred to the Billings and Collections Department in February 2009, where she worked until June 2010.[2] (Am. Compl. ¶ 13.)


i. Fraudulent Billing Practices

Relators allege that BSNC submitted fraudulent claims for payment to Medicare and government programs for the System's external equipment. (Am. Compl. ¶¶ 23, 25.) The alleged practices include submitting claims without a physician's order indicating medical necessity, changing/fabricating diagnosis codes on claim forms, and falsely certifying truthfulness on other government forms, including the CMS-1500 claim form. (Am. Compl. ¶ 23.) For example, Relators allege that since diagnosis code 724.2 (lumbago-back pain) is financially advantageous to BSNC, Defendant would submit claims under this diagnosis code even when the system was used for an "off-label" purpose.[3] (Am. Compl. ¶¶ 33-35.) Relators also allege that the fraudulent practices stemmed from a backlog in the Billings and Collections Department, and that instead of implementing methods to deal with the backlog, BSNC increased pressure on billers to process claims. (Am. Compl. ¶¶ 27-28.)

Relators allege that these false claims caused government programs to approve and pay claims that should not have been paid, and that this violated the False Claims Act ("FCA").[4] ( See Am. Compl. ¶¶ 44-54.)

ii. Concealment of Defective Equipment

Relators allege that BSNC trained and instructed its customer service representatives to avoid documenting device problems, in order to prevent such events from being reported to the FDA. (Am. Compl. ¶¶ 58-60, 68, 75.) Furthermore, Relators allege that BSNC denied replacement or reimbursement for defective devices and continued to market these devices. (Am. Compl. ¶¶ 61, 69.)

iii. Kickback Schemes

Relators allege that BSNC circumvented FDA guidelines through its kickback program, which "promoted the Precision Plus System beyond FDA-approved indications, and the provision of free services and other inducements to physicians." (Am. Compl. ¶ 88.) They allege that Defendant unlawfully promoted and prescribed the system for "off-label" uses, and would provide physicians with free reimbursement and prior authorization services in order to induce the prescribing of the System paid for by government programs. (Am. Compl. ¶¶ 92-99, 105-106.)

iv. Unlawful Retaliation

Relators allege that they were unlawfully retaliated against for protected activity such as internal reporting and investigation of BSNC's unlawful conduct, and were forced to engage in this unlawful activity as a condition to maintaining their employment. (Am. Compl. ¶¶ 143-144.) For example, Bahnsen claims she was trained to routinely use a 724.2 diagnosis code even when she knew it to be fraudulent and illegal. (Am. Compl. ¶¶ 148-151.) Bahnsen complained about these practices. (Am. Compl. ¶ 154.) As of mid-July 2009, Relator Bahnsen raised these issues at weekly Billings and Collections ...

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