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Former medtech CEO found guilty of insurance fraud with bogus medical device component

por John R. Fischer, Senior Reporter | March 12, 2024
Business Affairs Insurance
A former Medtech CEO has been found guilty of misrepresenting a medical product component and defrauding Medicare and private insurers out of millions.
A district court jury has found a former medtech CEO guilty of defrauding Medicare and private health insurers out of millions by misrepresenting a nonfunctioning dummy medical device component that her company developed and that was implanted in patients with chronic pain.

Laura Perryman founded Stimwave, a medical device company that designed implantable neurostimulation devices, in 2010. Its solution, the StimQ PNS System had a receiver component known as the pink stylet that transmitted electrical currents from an external power source to a lead component to stimulate peripheral nerves to treat chronic pain.

The company sold the device to providers for approximately $16,000 but soon received complaints that the stylet was too long to implant in certain patients. Knowing that trimming down the component would interfere with its functionality and cause doctors to incur a financial loss for every purchase, Perryman told her employees to create the white stylet, a dummy component made entirely of plastic that the company misrepresented as an alternative receiver to continue interest in the device among providers and sell it at the same price.

Stimwave told doctors they could cut the white stylet to size to implant in smaller anatomical spaces, enabling them to continue to bill for the receiver component. Perryman oversaw training to make the white stylet appear as a receiver to doctors and told other employees to say it was a receiver. In reality, the component had no copper and no conductivity, and Perryman did not recommend that doctors not implant the device or its receiver component in cases where the Pink Stylet could not fit comfortably.

Between 2017 and 2020, doctors implanted the white stylet in patients and billed insurance providers, including Medicare, between approximately $16,000 and $18,000 for the receiver and $4,000 and $6,000 for the lead.

“Perryman recklessly used patients as tools for financial gain, and this jury’s unanimous verdict sends a resounding message that individuals who defraud healthcare programs will be held criminally accountable,” said U.S. Attorney Damian Williams at the trial, which was overseen by Judge Denise Cote, of the Southern District of New York.

A whistleblower tipped off the government in 2018. Perryman, who was fired in 2019, was arrested last March in Florida and was charged with one count of conspiracy to commit wire fraud and healthcare fraud, and one count of healthcare wire fraud.

Stimwave filed for bankruptcy in 2022, selling substantially all assets to a third party through an auction. Under a nonprosecution agreement, it agreed to pay $10 million. It also accepted responsibility for its conduct under a false claims lawsuit and said it would pay $8.6 million to the U.S., which would be credited toward the initial $10 million.

Perryman was convicted on all charges against her and faces up to 10 years in prison for healthcare fraud and up to another 20 for conspiracy to commit healthcare fraud and wire fraud.

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