Case 4:16-cv-04115-LLP Document 109-1 Filed 05/03/21 Page 1 of 53 PageID #: 1163
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`SETTLEMENT AGREEMENT
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`This Settlement Agreement (Agreement) is entered into among the United States of
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`America, acting through the United States Department of Justice and on behalf of the Office of
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`Inspector General (OIG-HHS) of the Department of Health and Human Services (HHS) and the
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`Defense Health Agency (DHA), acting on behalf of the TRICARE Program (collectively, the
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`United States); Wilson Asfora, M.D., Medical Designs, LLC, and Sicage, LLC (collectively,
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`Defendants); and Carl Dustin Bechtold, M.D. and Bryan Wellman, M.D. (collectively, Relators),
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`through their authorized representatives. Collectively, all of the above will be referred to as “the
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`Parties.”
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`RECITALS
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`A.
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`Wilson Asfora, M.D. (Asfora) is a neurosurgeon who resides in Sioux Falls, South
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`Dakota. Asfora provided medical services, including spinal surgeries and intrathecal infusion
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`pump procedures, to patients at Sanford Medical Center (SMC) and Sioux Falls Specialty Hospital
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`(SFSH) (collectively, the Hospitals). Medical Designs, LLC (MDLLC) is a South Dakota limited
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`liability company owned solely by Asfora and his wife, and Sicage, LLC (Sicage) is a South
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`Dakota limited liability company owned solely by Asfora. Both MDLLC and Sicage derived
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`revenue from the sale of medical devices to one or more of the Hospitals for Asfora’s use.
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`B.
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`On August 12, 2016, Relators filed a qui tam action in the United States District
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`Court for the District of South Dakota captioned United States ex rel. Bechtold, et al. v. Asfora, et
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`al., No. 4:16-cv-04115-LLP (D.S.D.), pursuant to the qui tam provisions of the False Claims Act
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`(FCA), 31 U.S.C. § 3730(b) (the Civil Action). The United States intervened in the Civil Action
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`on June 26, 2019 and filed the United States’ Complaint on November 13, 2019 (United States’
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`Complaint). The United States’ Complaint alleged that Defendants knowingly submitted, or
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` Exhibit A
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`caused to be submitted, claims for payment to federal healthcare programs resulting from
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`violations of the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b), and for medically
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`unnecessary procedures in violation of the FCA.
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`C.
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`The United States contends that Defendants submitted, or caused to be submitted,
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`claims for payment to the Medicare Program, Title XVIII of the Social Security Act, 42 U.S.C.
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`§§ 1395-1395lll (Medicare); the Medicaid Program, 42 U.S.C. §§ 1396-1396w-5 (Medicaid); and
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`the TRICARE Program, 10 U.S.C. §§ 1071-1110b (TRICARE).
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`D.
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`The following conduct is referred to below as the Covered Conduct:
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`1.
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`The United States contends that it has certain civil claims against
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`Defendants arising from their submission, or causing the submission of, false claims to Medicare,
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`Medicaid, and TRICARE from June 1, 2011 through December 31, 2018, as alleged in the United
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`States’ Complaint.
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`2.
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`The United States contends that it has certain civil claims against Asfora
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`arising from the following conduct from September 1, 2010 to September 30, 2019, by which
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`Asfora submitted, or caused to be submitted, false or fraudulent claims to Medicare, Medicaid,
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`and TRICARE: Medtronic USA, Inc. (Medtronic) employed various sales personnel to market
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`SynchroMed II intrathecal infusion pumps to Asfora and other physicians in South Dakota. Asfora
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`asked Medtronic’s sales personnel to pay for events at the Carnaval Brazilian Grill (Carnaval), a
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`restaurant in Sioux Falls, South Dakota that Asfora and his wife owned. Medtronic’s sales
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`personnel agreed to Asfora’s requests, paying over $87,000 to Asfora’s restaurant for over 130
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`events. Those events often featured lavish meals and alcohol, with multicourse tasting menus and
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`wines paired to each course, and were held in an open area of the restaurant not conducive to
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`medical discussions. Although disguised as educational events, the Carnaval events were in fact
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`social gatherings, with little or no discussion of Medtronic products. Asfora invited and expected
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`Medtronic to pay for his social acquaintances, business partners, favored colleagues, and potential
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`and existing referral sources, and Medtronic paid for their meals and drinks. At Asfora’s invitation,
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`spouses and significant others also attended most of the Carnaval events, and Medtronic paid for
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`some of their meals and drinks at Asfora’s request. Asfora knowingly and willfully solicited and
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`received kickbacks in the form of payments to his restaurant in return for his use of Medtronic’s
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`SynchroMed II intrathecal infusion pumps, in violation of the AKS. Asfora also implanted the
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`SynchroMed II intrathecal infusion pumps when the applicable drug did not need to be
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`administered by an implanted infusion pump, resulting in non-reimbursable claims for medically
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`unnecessary items and services pursuant to National Coverage Determination 280.14, 42 U.S.C.
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`§ 1395y(a)(1)(A), and 32 C.F.R. §§ 199.4(a)(1)(i), 199.9(b).
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`3.
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`The United States contends that it has claims against MDLLC and Sicage
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`under the Open Payments Program (OPP), mandated by 42 U.S.C. § 1320a-7h and implemented
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`through 42 C.F.R. §§ 403.900-.914 (OPP Regulations), that arise from the following conduct by
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`MDLLC from April 1, 2014 to April 1, 2019, and by Sicage from April 1, 2018 to April 1, 2019,
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`during which MDLLC and Sicage failed to report to the Centers for Medicare & Medicaid Services
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`(CMS) payments or transfers of value to Asfora and ownership interests held by Asfora and his
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`wife: MDLLC and Sicage, which held Food and Drug Administration (FDA) clearances for and
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`distributed medical devices, were required to annually disclose to CMS payments or other transfers
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`of value to a physician like Asfora and any ownership or investment interest in the companies held
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`by a physician or immediate family member, including a spouse, pursuant to the OPP and OPP
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`Regulations. For calendar years 2013 through 2018, MDLLC failed to disclose to CMS any
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`physician payments or ownership interests by the required deadlines. For calendar years 2017 and
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`2018, Sicage failed to disclose to CMS any physician payments or ownership interests by the
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`required deadlines.
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`E.
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`This Agreement is neither an admission of liability by Defendants nor a concession
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`by the United States that its claims are not well founded. Defendants deny the United States’ and
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`Relators’ allegations in Paragraph D.
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`F.
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`Relators claim entitlement under 31 U.S.C. § 3730(d) to a share of the proceeds of
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`this Agreement and to Relators’ reasonable expenses, attorneys’ fees and costs.
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`To avoid the delay, uncertainty, inconvenience, and expense of protracted litigation of the
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`above claims, and in consideration of the mutual promises and obligations of this Agreement, the
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`Parties agree and covenant as follows:
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`TERMS AND CONDITIONS
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`1.
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`With respect to the conduct described in Paragraphs D(1) and D(2) above,
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`Defendants shall pay to the United States the sums specified in this Paragraph, under the terms and
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`conditions specified herein, by electronic funds transfer pursuant to written instructions to be
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`provided by the Civil Division of the United States Department of Justice.
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`a.
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`Defendants shall pay to the United States the sum of Nine Hundred
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`Thousand Dollars ($900,000.00) (Initial Payment) within sixty (60) calendar days of the Effective
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`Date.
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`b.
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`Defendants shall pay to the United States the sum of Three Million Five
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`Hundred Thousand Dollars ($3,500,000.00), plus interest at 0.875% per annum, calculated yearly,
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`pursuant to the payment schedule attached as Exhibit A (each a Payment Over Time and
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`collectively the Payments Over Time). The Payments Over Time may be prepaid, in whole or in
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`part, without penalty or premium. Defendants shall execute contemporaneously with this
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`Agreement and provide to the United States a Promissory Note (attached as Exhibit B) in the total
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`amount of Three Million Five Hundred Thousand Dollars ($3,500,000.00). Under the terms and
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`conditions specified in the Promissory Note and the Security Agreement (attached as Exhibit C),
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`the Payments Over Time shall be fully secured by assets sufficient to pay the Payments Over Time
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`due and owing under this Agreement.
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`c.
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`If 2401 South Carolyn Avenue, Sioux Falls, South Dakota 57106 (the
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`Carnaval Property) is sold in whole or in part before Defendants have fully paid all Payments Over
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`Time, the sale of the Carnaval Property must be for fair market value, and within thirty (30)
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`calendar days of the closing of the sale of the Carnaval Property, Defendants shall pay to the United
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`States an amount equal to the lesser of: (i) the total of all outstanding Payments Over Time; or
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`(ii) the total proceeds of the sale of the Carnaval Property less (I) any associated federal, state, and
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`local tax payments and transaction fees directly incurred by Defendants in effectuating the sale of
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`the Carnaval Property and (II) repayment of Defendants’ mortgage obligations to First Dakota
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`National Bank (or the then-current mortgage holder) for the Carnaval Property that existed as of
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`January 1, 2021 and had not been satisfied as of the closing of the sale of the Carnaval Property.
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`Each payment specified in the preceding sentence shall be applied to satisfy the Payments Over
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`Time in reverse chronological order, beginning with the Payment Over Time for Year 6.
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`d.
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`In the six (6) years after the Effective Date (Payment Period), Defendants
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`shall pay to the United States one hundred percent (100%) of each royalty payment that Blackstone
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`Medical, Inc. d/b/a Orthofix Spinal Implants (Orthofix) or any parent, subsidiary, affiliate,
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`successor, or assignee of Orthofix pays to any Defendant or any entity owned by any Defendant,
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`including Asfora IP, LLC (collectively, Gross Orthofix Royalties), less any associated federal,
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`state, and local tax payments (collectively, Net Orthofix Royalties). Within fourteen (14) calendar
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`days of receipt of any Gross Orthofix Royalties, Defendants shall pay the corresponding Net
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`Orthofix Royalties to the United States and shall provide the United States with signed written
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`certification and documentation of the Gross and Net Orthofix Royalties. During the Payment
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`Period, Defendants shall not transfer or assign, or cause any person to transfer or assign, the right
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`of any Defendant or any entity owned by any Defendant to receive any Gross or Net Orthofix
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`Royalties, except that (i) Defendants may transfer or assign their right to receive any portion of
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`the Net Orthofix Royalties that exceeds the Orthofix Royalty Payment Ceiling (defined below);
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`and (ii) once the Orthofix Royalty Payment Ceiling has been reached, including by any pre-
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`payment(s) by Defendants, then Defendants may transfer or assign their right to receive any
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`subsequent Gross or Net Orthofix Royalties. Notwithstanding the foregoing, Defendants are not
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`obligated to make any further payment pursuant to this subparagraph after the payments made
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`pursuant to this subparagraph have reached a total of Three Hundred Fifty Thousand Dollars
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`($350,000.00) (Orthofix Royalty Payment Ceiling), regardless of when the Orthofix Royalty
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`Payment Ceiling is reached during the Payment Period.
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`e.
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`In the Payment Period, Defendants shall pay to the United States twenty-
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`five percent (25%) of each royalty payment that Medtronic PLC or any parent, subsidiary, affiliate,
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`successor, or assignee of Medtronic PLC, including Medtronic PS Medical, Inc., pays to any
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`Defendant or any entity owned by any Defendant, including Asfora IP, LLC (collectively, Gross
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`Medtronic Royalties), less any associated federal, state, and local tax payments (collectively, Net
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`Medtronic Royalties). Within fourteen (14) calendar days of receipt of any Gross Medtronic
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`Royalties, Defendants shall pay the corresponding Net Medtronic Royalties to the United States
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`and shall provide the United States with signed written certification and documentation of the
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`Gross and Net Medtronic Royalties. During the Payment Period, Defendants shall not transfer or
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`assign, or cause any person to transfer or assign, the right of any Defendant or any entity owned
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`by any Defendant to receive any Gross or Net Medtronic Royalties, except that (i) Defendants may
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`transfer or assign their right to receive any portion of the Net Medtronic Royalties that exceeds the
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`Medtronic Royalty Payment Ceiling (defined below); and (ii) once the Medtronic Royalty
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`Payment Ceiling has been reached, including by any pre-payment(s) by Defendants, then
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`Defendants may transfer or assign their right to receive any subsequent Gross or Net Medtronic
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`Royalties. Notwithstanding the foregoing, Defendants are not obligated to make any further
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`payment pursuant to this subparagraph after the payments made pursuant to this subparagraph have
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`reached a total of Two Hundred Thousand Dollars ($200,000.00) (Medtronic Royalty Payment
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`Ceiling), regardless of when the Medtronic Royalty Payment Ceiling is reached during the
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`Payment Period.
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`f.
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`In the Payment Period, Defendants agree to provide thirty (30) calendar
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`days’ advance, written notice to the United States of any sale, transfer, merger, or liquidation of
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`any Qualifying Asset (defined below) that individually or collectively has a fair market value of
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`at least Twenty Thousand Dollars ($20,000.00) (Sale Event). As referred to herein, a Qualifying
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`Asset is any asset or assets of MDLLC or Sicage, or any other property, entity, or venture in which
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`MDLLC or Sicage has an ownership interest, including inventory, but excluding inventory sold in
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`the ordinary course of business by MDLLC or Sicage directly to hospital(s) and/or physician(s).
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`In the event of any Sale Event, prior to any repayment to Asfora or Asfora IP, LLC using any
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`proceeds from any Sale Event and within fourteen (14) calendar days of the closing of each Sale
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`Event, Defendants shall pay to the United States fifty percent (50%) of the following amount: the
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`total proceeds from the Sale Event less any associated federal, state, and local tax payments and
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`transaction fees directly incurred by Defendants in effectuating the Sale Event (Sale Event
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`Payment).
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`g.
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`In the Payment Period, if Asfora recovers any monetary amount in
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`connection with, or to compromise any claim or counterclaim in, any legal proceeding pending at
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`any time between January 1, 2021 and the Effective Date, Asfora shall pay to the United States
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`seventy-five percent (75%) of the portion of his total recovery from any such proceeding that
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`exceeds Eight Hundred Thousand Dollars ($800,000.00) (Recovery Payment).
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`h.
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`All payments by Defendants under subparagraphs (a)–(g) up to Four
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`Million Four Hundred Eighty-Two Thousand Nine Hundred Eighty-One Dollars ($4,482,981) are
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`restitution to the United States.
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`2.
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`Conditioned upon the United States receiving from Defendants the Initial Payment,
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`Payment(s) Over Time (including any payments pursuant to Paragraph 1(c) above), Net Orthofix
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`Royalties, Net Medtronic Royalties, Sale Event Payment(s), and/or Recovery Payment(s), the
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`United States agrees that it shall pay to Relators by electronic funds transfer twenty percent (20%)
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`of each such payment received under this Agreement (Relators’ Share) as soon as feasible after
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`receipt of the payment.
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`3. With respect to the conduct described in Paragraph D(3) above, MDLLC and
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`Sicage shall pay to the United States the sum of One Hundred Thousand Dollars ($100,000.00),
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`within sixty (60) calendar days of the Effective Date, under the terms and conditions specified
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`herein, by electronic funds transfer pursuant to written instructions to be provided by the Civil
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`Division of the United States Department of Justice.
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`4.
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`Defendants shall pay to Relators the sum of Seventy-Six Thousand Dollars
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`($76,000.00) for attorneys’ fees and costs within sixty (60) calendar days of the Effective Date.
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`5.
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`a.
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`Subject to the exceptions in Paragraph 7 (concerning reserved claims)
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`below, and subject to Paragraph 11 (concerning disclosure of assets), Paragraph 19 (concerning
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`default), and Paragraph 20 (concerning bankruptcy) below, and upon the United States’ receipt of
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`the sums specified in Paragraph 1 above, the United States releases Defendants from any civil or
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`administrative monetary claim the United States has for the Covered Conduct in Paragraphs D(1)
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`and D(2) above pursuant to the False Claims Act, 31 U.S.C. §§ 3729-3733; the Civil Monetary
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`Penalties Law, 42 U.S.C. § 1320a-7a; the Program Fraud Civil Remedies Act, 31 U.S.C. §§ 3801-
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`3812; or the common law theories of payment by mistake, unjust enrichment, and fraud. This
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`Agreement does not release any claims of any State.
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`b.
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`Subject to the exceptions in Paragraph 7 (concerning reserved claims)
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`below, and subject to Paragraph 11 (concerning disclosure of assets), Paragraph 19 (concerning
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`default), and Paragraph 20 (concerning bankruptcy) below, and upon the United States’ receipt of
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`the sum specified in Paragraph 3 above, the United States releases MDLLC and Sicage from any
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`civil or administrative monetary claim the United States has for the Covered Conduct in Paragraph
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`D(3) above pursuant to the OPP or OPP Regulations.
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`6.
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`Subject
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`to Paragraph 11 (concerning disclosure of assets), Paragraph 19
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`(concerning default), and Paragraph 20 (concerning bankruptcy) below, and upon the United
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`States’ receipt of the sums specified in Paragraph 1 above, Relators, for themselves and for their
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`heirs, successors, attorneys, agents, and assigns, release Defendants from any civil monetary claim
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`the Relators have on behalf of the United States for the Covered Conduct in Paragraphs D(1) and
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`D(2) above pursuant to the False Claims Act, 31 U.S.C. §§ 3729-3733.
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`7.
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`Notwithstanding the releases given in Paragraph 5 above or any other term of this
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`Agreement, the following claims and rights of the United States are specifically reserved and are
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`not released:
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`a.
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`b.
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`c.
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`Any liability arising under Title 26, U.S. Code (Internal Revenue Code);
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`Any criminal liability;
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`Except as explicitly stated in this Agreement, any administrative liability or
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`enforcement right, including mandatory exclusion from Federal healthcare
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`programs;
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`d.
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`Any liability to the United States (or its agencies) for any conduct other than
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`e.
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`f.
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`g.
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`h.
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`i.
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`the Covered Conduct;
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`Any liability based upon obligations created by this Agreement;
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`Any liability of individuals other than Wilson Asfora, M.D.;
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`Any liability for express or implied warranty claims or other claims for
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`defective or deficient products or services, including quality of goods and
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`services;
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`Any liability for failure to deliver goods or services due; and
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`Any liability
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`for personal injury or property damage or for other
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`consequential damages arising from the Covered Conduct.
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`8.
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`Relators and their heirs, successors, attorneys, agents, and assigns shall not object
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`to this Agreement but agree and confirm that this Agreement is fair, adequate, and reasonable
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`under all the circumstances, pursuant to 31 U.S.C. § 3730(c)(2)(B). Conditioned upon Relators’
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`receipt of the Relators’ Share, Relators and their heirs, successors, attorneys, agents, and assigns
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`fully and finally release, waive, and forever discharge the United States and its agencies, officers,
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`agents, employees, and servants, from any claims arising from the filing of the Civil Action or
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`under 31 U.S.C. § 3730, and from any claims to a share of the proceeds of this Agreement and/or
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`the Civil Action.
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`9.
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`Relators, for themselves, and for their heirs, successors, attorneys, agents, and
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`assigns, release Defendants, and their officers, agents, and employees, from any liability to
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`Relators arising from the filing of the Civil Action, including but not limited to any claim, cause
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`of action, or liability that was asserted or that could have been asserted therein, or under 31 U.S.C.
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`§ 3730(d) for expenses or attorneys’ fees and costs.
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`10.
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`Permissive Exclusion
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`a.
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`In compromise and settlement of the rights of OIG-HHS to exclude
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`Defendants pursuant to 42 U.S.C. § 1320a-7(b)(7), based upon the Covered Conduct in Paragraphs
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`D(1) and D(2) above, each Defendant agrees to be excluded under this statutory provision from
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`Medicare, Medicaid, and all other Federal healthcare programs, as defined in 42 U.S.C. § 1320a-
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`7b(f), for a period of six (6) years. Each Defendant’s exclusion shall be effective upon the
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`Effective Date (as defined in Paragraph 31).
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`b.
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`Each Defendant’s exclusion shall have national effect. Federal healthcare
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`programs shall not pay anyone for items or services, including administrative and management
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`services, furnished, ordered, or prescribed by any Defendant in any capacity while such Defendant
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`is excluded. This payment prohibition applies to each Defendant and all other individuals and
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`entities (including, for example, anyone who employs or contracts with any Defendant, and any
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`hospital or other provider where any Defendant provides services). The exclusion applies
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`regardless of who submits the claim or other request for payment. Violation of the conditions of
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`the exclusion may result in criminal prosecution, the imposition of civil monetary penalties and
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`assessments, and an additional period of exclusion. Defendants further agree to hold the Federal
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`healthcare programs, and all federal beneficiaries and/or sponsors, harmless from any financial
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`responsibility for items or services furnished, ordered, or prescribed to such beneficiaries or
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`sponsors after the effective date of the exclusion. Defendants waive any further notice of the
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`exclusion and agree not to contest such exclusion either administratively or in any state or federal
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`court.
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`c.
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`Reinstatement to program participation is not automatic. If any Defendant
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`wishes to be reinstated, such Defendant must submit a written request for reinstatement to OIG-
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`HHS in accordance with the provisions of 42 C.F.R. §§ 1001.3001-.3005. Such request may be
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`made to OIG-HHS no earlier than ninety (90) days prior to the expiration of the six (6)-year period
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`of exclusion. Reinstatement becomes effective upon application by the Defendant, approval of the
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`application by OIG-HHS, and notice of reinstatement by OIG-HHS. Obtaining another license,
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`moving to another state, or obtaining a provider number from a Medicare contractor, a state
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`agency, or a Federal healthcare program does not reinstate any Defendant’s eligibility
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`to
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`participate in these programs.
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`11.
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`Defendants have provided sworn financial disclosures and supporting documents
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`(collectively, Financial Disclosures) to the United States, and the United States has relied on the
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`accuracy and completeness of those Financial Disclosures in reaching this Agreement. Defendants
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`warrant that the Financial Disclosures are complete, accurate, and current as of the Effective Date.
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`If the United States learns of asset(s) in which any Defendant had an interest of any kind as of the
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`Effective Date (including, but not limited to, promises by insurers or other third parties to satisfy
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`any Defendant’s obligations under this Agreement) that were not disclosed in the Financial
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`Disclosures, or if the United States learns of any false statement or misrepresentation by any
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`Defendant on, or in connection with, the Financial Disclosures, and if such nondisclosure, false
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`statement, or misrepresentation changes any Defendant’s estimated net worth set forth in the
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`Financial Disclosures by One Hundred Thousand Dollars ($100,000.00) or more, the United States
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`may at its option:
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` (a) rescind this Agreement and reinstate its suit or file suit or initiate
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`administrative action based on the Covered Conduct; or (b) collect the sums specified in
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`Paragraphs 1 and 3 above (collectively, Settlement Amount) in accordance with this Agreement
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`plus one hundred percent (100%) of the net value of Defendants’ previously undisclosed assets.
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`Defendants agree not to contest any collection action undertaken by the United States pursuant to
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`this provision, and agree that they will immediately pay the United States the greater of (i) a ten-
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`percent (10%) surcharge of the amount collected in the collection action, as allowed by 28 U.S.C.
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`§ 3011(a), or (ii) the United States’ reasonable attorneys’ fees and expenses incurred in such an
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`action. In the event that the United States, pursuant to this paragraph, rescinds this Agreement,
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`Defendants waive and agree not to plead, argue, or otherwise raise any defenses under the theories
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`of statute of limitations, laches, estoppel, or similar theories, to any civil or administrative claims
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`that (a) are filed by the United States within one hundred twenty (120) calendar days of written
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`notification to Defendants that this Agreement has been rescinded, and (b) relate to the Covered
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`Conduct above, except to the extent these defenses were available on the Effective Date.
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`12.
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`Defendants waive and shall not assert any defenses Defendants may have to any
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`criminal prosecution or administrative action relating to the Covered Conduct that may be based
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`in whole or in part on a contention that, under the Double Jeopardy Clause in the Fifth Amendment
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`of the Constitution, or under the Excessive Fines Clause in the Eighth Amendment of the
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`Constitution, this Agreement bars a remedy sought in such criminal prosecution or administrative
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`action.
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`13
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`13.
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`Defendants fully and finally release the United States and its agencies, officers,
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`agents, employees, and servants, from any claims (including attorneys’ fees, costs, and expenses
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`of every kind and however denominated) that Defendants have asserted, could have asserted, or
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`may assert in the future against the United States and its agencies, officers, agents, employees, and
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`servants, related to the Covered Conduct, the Civil Action, and the United States’ investigation
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`and prosecution of the Covered Conduct and/or the Civil Action.
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`14.
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`Defendants fully and finally release the Relators from any and all claims (including
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`attorneys’ fees, costs, and expenses of every kind and however denominated) that Defendants have
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`asserted, could have asserted, or may assert in the future against the Relators, related to the
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`Covered Conduct, the pursuit and filing of the Civil Action, and Relators’ investigation and
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`prosecution thereof. Further, Defendants covenant that they will not maintain any present or bring
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`any future action or proceeding against the Relators of any type, including retaliatory in nature,
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`that directly or indirectly relate to damages, other injury or consequences flowing from the Civil
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`Action or Relators’ investigation or pursuit thereof, including, but not limited to, Asfora v. Sanford,
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`No. 4:20-cv-04032-KES (D.S.D.).
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`15.
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`The Settlement Amount shall not be decreased as a result of the denial of claims
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`for payment now being withheld from payment by any Medicare contractor (e.g., Medicare
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`Administrative Contractor, fiscal intermediary, carrier), TRICARE carrier or payer, or any state
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`payer, related to the Covered Conduct; and Defendants agree not to resubmit to any Medicare
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`contractor, TRICARE carrier or payer, or any state payer any previously denied claims related to
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`the Covered Conduct, agree not to appeal any such denials of claims, and agree to withdraw any
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`such pending appeals.
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`16.
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`Defendants agree to the following:
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`14
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`a.
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`Unallowable Costs Defined:
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` All costs (as defined in the Federal
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`Acquisition Regulation, 48 C.F.R. § 31.205-47; and in Titles XVIII and XIX of the Social Security
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`Act, 42 U.S.C. §§ 1395-1395lll and 1396-1396w-5; and the regulations and official program
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`directives promulgated thereunder) incurred by or on behalf of Defendants, their present or former
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`officers, directors, employees, shareholders, and agents in connection with:
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`(1)
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`(2)
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`the matters covered by this Agreement;
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`the United States’ audit(s) and civil investigation(s) of the matters covered
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`by this Agreement;
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`(3)
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`Defendants’ investigation, defense, and corrective actions undertaken in
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`response to the United States’ audit(s) and civil
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`investigation(s)
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`in
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`connection with the matters covered by this Agreement (including
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`attorneys’ fees);
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`(4)
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`(5)
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`the negotiation and performance of this Agreement; and
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`the payments Defendants make to the United States pursuant to this
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`Agreement and any payments that Defendants may make to Relators,
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`including costs and attorneys’ fees,
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`are unallowable costs for government contracting purposes and under the Medicare Program,
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`Medicaid Program, TRICARE Program, and Federal Employees Health Benefits Program
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`(FEHBP) (hereinafter referred to as Unallowable Costs).
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`b.
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`Future Treatment of Unallowable Costs: Unallowable Costs shall be
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`separately determined and accounted for by Defendants, and Defendants shall not charge such
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`Unallowable Costs directly or indirectly to any contracts with the United States or any State
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`Medicaid program, or seek payment for such Unallowable Costs through any cost report, cost
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`15
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`statement, information statement, or payment request submitted by Defendants or any of their
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`subsidiaries or affiliates to the Medicare, Medicaid, TRICARE, or FEHBP Programs.
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`c.
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`Treatment of Unallowable Costs Previously Submitted for Payment:
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`Defendants further agree that within ninety (90) days of the Effective Date of this Agreement, they
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`shall identify to applicable Medicare and TRICARE fiscal intermediaries, carriers, and/or
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`contractors, and Medicaid and FEHBP fiscal agents, any Unallowable Costs (as defined in this
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`paragraph) included in payments previously sought from the United States, or any State Medicaid
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`program, including, but not limited to, payments sought in any cost reports, cost statements,
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`information reports, or payment requests already submitted by Defendants or any of their
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`subsidiaries or affiliates, and shall request, and agree, that such cost reports, cost statements,
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`information reports, or payment requests, even if already settled, be adjusted to account for the
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`effect of the inclusion of the Unallowable Costs. Defendants agree that the United States, at a
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`minimum, shall be entitled to recoup from Defendants any overpayment plus applicable interest
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`and penalties as a result of the inclusion of such Unallowable Costs on previously-submitted cost
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`reports, information reports, cost statements, or requests for payment.
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`Any payments due after the adjustments have been made shall be paid to the United States
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`pursuant to the direction of the Department of Justice and/or