Diopsys Inc. Agrees to $14.25 Million Settlement Over False Claims

Key Takeaways

• Settlement Details: Diopsys Inc. will pay up to $14.25 million to settle allegations of false claims related to vision testing services.
• False Claims: The claims involved the company’s NOVA device, which was used for unapproved ERG testing and led to false submissions to Medicare and Medicaid.
• Whistleblower Involvement: The settlement resolves a lawsuit brought by Dr. Atul Jain, a California ophthalmologist, under the whistleblower provisions of the False Claims Act.
• Payments Breakdown: Diopsys will make an upfront payment of $1.225 million, with additional contingent payments of up to $13.025 million, depending on the company’s financial condition.
• Focus on Healthcare Fraud: The settlement highlights the ongoing efforts of the government to combat healthcare fraud, particularly through the False Claims Act.

Deep Dive

Diopsys Inc., a medical device company based in Pennsylvania, is reaching into its coffers to settle a significant legal matter, agreeing to pay up to $14.25 million to resolve allegations of submitting false claims to Medicare and Medicaid. The claims were tied to the company’s NOVA device, a piece of equipment cleared by the FDA for visual evoked potential (VEP) testing. But it turns out, the device was being used in ways it wasn’t approved for—something the government says led to false claims for payment from both Medicare and Medicaid.

Between 2015 and 2021, Diopsys allegedly pushed healthcare providers to use the NOVA device for electroretinography (ERG) testing—a different kind of vision test, and one that the NOVA device was never cleared for. To make matters worse, the company is accused of modifying the NOVA device without submitting these changes to the FDA for approval, even though they knew full well that such alterations required formal clearance.

In a statement, U.S. Attorney John Giordano for the District of New Jersey stressed that this settlement sends a clear message to healthcare companies across the country, “Health care companies must not encourage doctors to submit claims for payment for medically unnecessary tests,” Giordano said, emphasizing the importance of keeping public health programs like Medicare and Medicaid free from fraudulent activities.

Under the terms of the settlement, Diopsys will pay $1.225 million upfront, with additional contingent payments that could reach up to $13.025 million, depending on the company’s financial situation. This resolution also wraps up a qui tam lawsuit filed by Dr. Atul Jain, a California ophthalmologist, under the whistleblower provisions of the False Claims Act. Dr. Jain, who exposed the misconduct, will receive at least $207,000 as his share of the recovery.

The Diopsys settlement serves as a crucial reminder that companies must rigorously adhere to FDA guidelines and properly vet the claims they submit to Medicare and Medicaid. Failing to do so not only puts financial resources at risk but also undermines the trust placed in public health programs that millions rely on. For healthcare organizations, this case highlights the need for continuous oversight, proper training, and a culture of accountability.

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