AtriCure to pay $3.8 million to settle Justice Department claims

AtriCure Inc. has agreed to pay the United States $3.76 million to settle claims that it promoted its surgical ablation devices for unapproved uses and participated in medical insurance fraud.

Updated 6:53 p.m.

WEST CHESTER, Ohio — AtriCure Inc. has agreed to pay the federal government $3.76 million to settle claims that it promoted its surgical cardiac ablation devices for unapproved uses, the Justice Department said today in a press release.

In November, AtriCure said it had tentatively settled a U.S. Department of Justice investigation and related whistle-blower lawsuit about the way the company marketed its surgical devices used to treat atrial fibrillation. “The agreement includes AtriCure’s assertion that the company and its employees have not engaged in any wrongdoing or illegal activity,” the company said at the time.

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AtriCure on Tuesday declined to elaborate on the terms of its definitive agreement with the Justice Department, saying the terms are “substantially identical” to those disclosed in November. Then, the company said it had set aside $3.8 million to cover the settlement, which will be paid, with interest, over five years.

David J. Drachman, president and chief executive, said in November that fighting the lawsuit would have distracted the managers of his emerging, growth-oriented company, and probably would have cost too much, even if the company had won.

“Moving forward, the men and women of AtriCure have never been more passionate and committed to our mission of improving and preserving human life or more confident in the power of our strategic plan,” Drachman said in a Tuesday statement. “We believe strongly that AtriCure is uniquely positioned to deliver results for patients, physicians and shareholders.”

His company’s technologies use focused energy to scar the heart, interrupting abnormal electrical activity that causes the top portion of the heart to beat too fast. The rapid heart rhythm can cause fainting in mild cases, but in the extreme, can lead to strokes or heart failure.

The recent European approval of the company’s AtriClip — formally named the AtriClip Gillinov-Cosgrove Left Atrial Appendage Exclusion System — a device that protects against blood clots during certain heart procedures, “represents a major product and clinical milestone,” Drachman told securities analysts in November.

The device is named after Cleveland Clinic Chief Executive Officer Dr. Toby Cosgrove and Clinic Dr. A. Marc Gillinov who helped pioneer the practice of using a clip to block a thumb-sized pouch on top of the left side of the heart to cut down on blood clots that can lead to strokes for patients who have atrial fibrillation. The Clinic ranked such “left atrial appendage-blocking devices” No. 9 in its list of Top 10 Medical Innovations for 2010.

The settlement, which is part of the government’s efforts to crack down on health insurance fraud, resolves allegations that AtriCure marketed its devices to treat atrial fibrillation, a use for which they are not approved by the U.S. Food and Drug Administration, the Justice Department said.

The department also said, AtriCure “promoted expensive heart surgery using the company’s devices when less invasive alternatives were appropriate, advised hospitals to up-code surgical procedures using the company’s devices to inflate Medicare reimbursement and paid kickbacks to health care providers to use its devices.”

These allegations were not covered in the department’s settlement with AtriCure, said the company’s chief financial officer, Julie Piton. “If you read the qui tam case, there were unfounded allegations in the case that the company didn’t address.”

The qui tam, or whistle-blower, case was filed in Texas by a former Boston Scientific employee, Piton said. The lawsuit also named device makers Boston Scientific, St. Jude Medical, Medtronic and Endoscopic Technologies, according to Mass Device. Endoscopic Technologies, also known as Estech, settled its part in the lawsuit in July, the Justice Department said.

The whistle-blower will receive $625,000 of the AtriCure settlement, the Justice Department said.

AtriCure shares fell less than 1 percent to $5.83 Tuesday on the NASDAQ Stock Market.