Ophthalmology Company Settles False Claims Act Case for Significantly Less Than Original Judgment

Precision Lens and the estate of its late founder Paul Ehlen have agreed to settle a False Claims Act (FCA) case for $12 million. It’s significantly less than the $487 million judgment issued by a federal court judge last year after a jury found the company guilty of paying kickbacks to ophthalmic surgeons to get them to use its products in cataract surgeries.

The Judgment

After a six-week trial, the jury found that Precision Lens’s conduct resulted in 64,575 false claims being submitted to Medicare, which resulted in $43,694,641.71 in damages. The court then entered a $487 million judgment against the company and Ehlen. The amount included $358,445,780 in statutory penalties and an additional $131,083,925.13 in treble (triple) damages, resulting in a total amount of $489,529,705.13 minus $2,481,000 in proceeds from a previous settlement with Sightpath Medical.

Just months after being found guilty, Ehlen died when his vintage plane crashed after takeoff at an airport in Montana. He was alone on the plane.

The Judgement Reduced

The court later reduced the judgment to $216.6 million. Then, following a review of the defendants’ financial position and ability to satisfy the judgment, the parties entered into a settlement agreement which requires Precision Lens and Ehlen’s estate to immediately pay $12 million to resolve False Claims Act charges.

The Kickback Scheme

It was alleged that Precision Lens provided kickbacks to some 50 physicians in the form of travel and entertainment. These included ski trips, fishing, golfing, hunting, sporting and entertainment vacations, often at exclusive destinations.

For many of the trips, physicians were transported to luxury vacation destinations on private jets, including trips to New York City to see a Broadway musical, the College Football National Championship game in Miami, and the Masters Tournament in Augusta.

Precision Lens sold frequent flyer miles to its physician customers at a significant discount, allowing physicians to take personal and business trips at well below fair market value.

A Whistleblower Alerts Authorities

The False Claims Act case was brought to the attention of the federal government by Kipp Fesenmaier who had worked in the ophthalmology industry in Minnesota. Fesenmaier was a former employee of Sightpath Medical which partnered with Precision Lens and Ehlen.

Fesenmaier filed a whistleblower lawsuit against the defendants in November 2013, alleging violations of the False Claims Act. The law allows whistleblowers to bring cases in the name of the United States against government contractors charged with fraud.

According to court documents, Fesenmaier first notified the FBI that the company was providing kickbacks and he later was designated as a “confidential human source.” The FBI then went on to interview Precision Lens employees while Fesenmaier secretly recorded conversations with Ehlen and those employees. The conversations took place between 2013 and 2017.

The U.S. Government Intervenes

The United States filed an intervenor complaint against Precision Lens and Ehlen on Feb. 8, 2018.  The law allows a third party, who was not named as an original party but has a personal stake in the outcome, to enter an existing civil case.

With this resolution, the United States has collected nearly $27 million as a result of the misconduct alleged in this False Claims Act case. The United States previously announced a $12 million settlement of related allegations with Sightpath Medical, Inc. and TLC Vision Corporation and their former CEO, James Tiffany. Dr. Jitendra Swarup also resolved claims that he had accepted kickbacks in a settlement agreement of more than $2.9 million.

FCA and AKS Claims a Priority

As we wrote about earlier this year, settlements and judgments under the False Claims Act exceeded $2.68 billion in the fiscal year ending Sept. 30, 2023. Of that, more than $1.8 billion related to matters involving the healthcare industry.

DOJ has said that healthcare fraud will continue to be a priority area of focus and that it would continue to prosecute violators under the FCA and Anti-Kickback Statute. Healthcare organizations can mitigate their risk by addressing whistleblower claims as soon as they are made and by establishing best practices in their compliance programs.

How We Can Help

The Health Law Offices of Anthony C. Vitale is known for its representation of whistleblowers, as well as its ability to defend those who become the target of a whistleblower action. Whether you are a whistleblower or the target of a whistleblower action, our extensive experience and specialized knowledge will ensure your case is handled with exceptional skill and care. For more information call 305-358-4500 or send us an email to info@vitalehealthlaw.com and let’s discuss how we might be able to assist you.