Minnesota-based company will pay $487M to settle kickback, fraud case

A building in the sun
The Warren E. Burger Federal Building & United States Courthouse in St. Paul.
Courtesy of Warren LeMay via Flickr

A federal judge in St. Paul has ordered a medical products company and its owner to pay $487 million to settle allegations that it defrauded Medicare.

The judgment comes after nearly a decade of litigation that an industry whistleblower and the Justice Department brought against Precision Lens.

In 2013, Kipp Fesenmaier sued Sightpath, Precision Lens and a third company, TLC Vision, under the False Claims Act. Sightpath and Precision Lens are headquartered in the same building in Bloomington, Minn.

Fesenmaier worked for Sightpath, formerly Midwest Surgical Services, in the 1990s and early 2000s. The company provides equipment to eye surgeons who treat patients with cataracts and glaucoma.

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Among other things, Fesenmaier alleged that the Minnesota-based companies paid illegal kickbacks to doctors in exchange for their business and submitted fraudulent claims to Medicare. 

The government reached a settlement with Sightpath and TLC in 2017, but the portion of the civil case involving Precision Lens went to trial earlier this year.

In February, a federal jury in St. Paul found that Precision Lens and its owner Paul Ehlen violated the False Claims Act and the federal Anti-Kickback law.

Siding with the government and Fesenmaier, jurors determined that Precision Lens sent physicians on high-end ski, golfing, and hunting vacations, and in many instances paid for them to fly on private jets.

The U.S. Attorney’s Office said the doctors went on trips to the Masters golf tournament and the College Football National Championship and received frequent flier miles at significant discounts in exchange for using Precision Lens products in cataract surgeries that were reimbursed by Medicare. 

Precision Lens made 64,575 false claims to Medicare totaling $43.7 million. U.S. District Judge Wilhelmina Wright ordered that under the False Claims Act, Precision Lens must pay triple that amount, or $131 million in damages. In addition, Wright ordered the company to pay $358.4 million in statutory penalties — $5,551 for each of the fraudulent Medicare bills.  

The False Claims Act, known as Lincoln’s Law, was originally aimed at combating Civil War profiteering and it provides for hefty rewards to encourage whistleblowers to report wrongdoing. Under that law Fesenmaier stands to receive between 15 and 25 percent of the $43.7 million recovered.  

In the 2017 settlement against Sightpath and TLC Vision Fesenmaier received nearly 20 percent, or about $2.3 million.

The Justice Department said in February that in fiscal year 2022 there were 351 False Claims Act settlements and judgments, the second-highest number in history. The total amount recovered in those cases exceeded $2.2 billion.  More than $1.7 billion involved the health care industry, from drug and medical device companies to health care providers such as hospitals, pharmacies, and physicians. 

Attorneys for Precision Lens have not responded to a request for comment from MPR News and have not said whether they plan to appeal.