St. Jude Medical, Parma Community General Hospital and Norton Healthcare have paid the U.S. $3.9 million to resolve false claim allegations that St. Jude paid illegal kickbacks to two hospitals to secure heart device business.

The Department of Justice (DoJ) alleged the kickbacks caused false claims to be submitted to federal healthcare programs in violation of the False Claims Act. The kickbacks included alleged rebates that were ‘retroactive’ and paid based on a hospital’s previous purchases of St. Jude heart device equipment and rebates that the company paid for purchases of heart device equipment sold by its competitors to induce purchases of similar equipment from St. Jude in the future.

Under the terms of the settlement, the St. Paul, Minn.-based St. Jude will pay $3.73 million. Parma Community General Hospital in Parma, Ohio, is paying $40,000, and Norton Healthcare in Louisville, Ky., is paying $133,300. The DoJ asserted that Parma and Norton were recipients of improper rebates from St. Jude.

"Hospitals should base their purchasing decisions on what is in the best interests of their patients," said Tony West, Assistant Attorney General for the Civil Division of the DoJ.

This action was initiated by the filing of an action under the False Claims Act by Jerry Hudson. Under the qui tam, or whistleblower case, provisions of the Act, private citizens may bring lawsuits on behalf of the U.S. and share in any recovery. Hudson’s share of the settlement announced today will be $640,050, according to the DoJ.

St. Jude said that the settlement agreement with the DoJ “fully resolves our previously disclosed investigation in Ohio.” However, the company said it does not admit liability or wrongdoing.

The DoJ reported it has recovered approximately $3 billion since January 2009 in cases involving fraud against federal healthcare programs.