Kyphon employees sold, sold, sold Kyphon's products for spinal fracture repairs. One rep took his territory's sales from $16,000 a month to $200,000 per month in less than a year. Incentive programs do produce miracles. Kyphon, now Medtronics Spine,

Question

faced Medicare fraud allegations when two former employees brought suit under the False Claims Act. Medtronics acquired Kyphon in 2007 while the former employee suits for Medicare fraud were pending. According to documents in the case, Kyphon sales reps didn't just tout the benefits of Kyphon products, and indeed there are many. The sales reps offered the doctors and hospitals a way to keep patients overnight. Helping docs and hospitals bill Medicare for an overnight stay on what was only a one-hour, walk-away outpatient procedure was a boon. Kyphon created a mutually beneficial triangle: more sales for Kyphon, more commissions and bonuses for reps, and more revenue for docs and hospitals. Discuss the ethical issues in this scenario. Was it a violation of the law in terms of Medicare reimbursement?

Answer 1

There are conflicts of interest here: Doctors are influenced by additional reimbursement and may not make decisions in best interests of patients. The case is an interesting one because the conflict comes from the arrangement for extra benefits from the government, not from the sales reps themselves. Reps were conflicted – their actions might not be (and proved not to be) in the best interest of their companies. The incentive plan resulted in harm to the company. Students could also bring in the cultural issues that they learned in Unit Four. Hospitals were also conflicted because their decisions on billing might not have been in the best interest of their patients.