Guilty plea illuminates the proper use of the Open Payments Program

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Initially implemented as part of Section 6002 of the Affordable Care Act (ACA) as the Physician Sunshine Act, on November 13, 2014, the Centers for Medicare & Medicaid (CMS) issued a final rule in 79 Fed. Reg. 67548, which changed the name to the Open Payments Program. Its primary purpose is to establish “establishes a system for annually reporting and increasing public awareness of financial relationships between drug and device manufacturers and certain health care providers.”

Over a decade ago, I wrote an article for Physicians Practice on the Sunshine Act and the intersection with the Anti-Kickback Statute (AKS) and Stark Law, as well as compliance steps espoused by the American Medical Association. After the 2014 article, two (2) cases involving the False Claims Act (FCA) brought by whistleblowers, AKS and Open Payments Program settled.

• October 29, 2020 – Medtronic USA, Inc. paid $8.1 million to settle a FCA case for alleged violations of the AKS for inducing a South Dakota neurosurgeon to utilize certain products, which caused the submission of false and fraudulent claims for payment to CMS. Medtronic also paid an additional $1.11 million to resolve Open Payments Program violations for failing to accurately report payments made to the neurosurgeon.
• May 19, 2021 – Medicrea International and its American affiliate Medicrea USA, Inc. paid $2 million to resolve a FCA case involving the AKS and Open Payments Program violations. Of the $2 million, $1 million related to the AKS violations and the other $1 million related to Open Payments Program violations for failing to fully report physician entertainment expenses.

This brings us to May 19, 2025. The Chief Executive Officer of Spine Frontier, Inc. pled guilty to submitting false statements to CMS through the Open Payments website. The Key items are as follows:

• According to the charging documents, SpineFrontier offered surgeons the opportunity to engage in purported consulting on product development.
• Specifically, Chin directed his employees to report the payment of fees paid to a surgeon as consulting fees that were not compensation for actual consulting work. Chin caused his employees to report a payment of $4,750 on Jan. 19, 2016, to the surgeon as a “consulting” payment, even though Chin knew that the surgeon had not performed actual consulting work for the payment. He also knew that he and SpineFrontier were required to accurately report any payments or transfers of value to the surgeon.
• The charge of making false statements provides for a sentence of up to five years, up to three years of supervised release and a fine of up to $250,000. Sentences are imposed by a federal district court judge based upon the U.S. Sentencing Guidelines and statutes which govern the determination of a sentence in a criminal case.

In sum, violations of the Open Payments Systems are material to the Government. Persons should be vigilant about addressing these requirements, along with fraud, waste and abuse laws in compliance programs.

Rachel V. Rose, JD, MBA, advises clients on compliance, transactions, government administrative actions, and litigation involving healthcare, cybersecurity, corporate and securities law, as well as False Claims Act and Dodd-Frank whistleblower cases. She also teaches bioethics at Baylor College of Medicine in Houston. Rachel can be reached through her website, www.rvrose.com.