A Diagnostics & Imaging Week

Facing continued ramifications of a corporate accounting scam is Richard Scrushy, former chief executive of HealthSouth (Birmingham, Alabama).

While Scrushy earlier this year was found, by an Alabama jury, not guilty for heading a multi-year conspiracy to inflate company accounts by more than $2 billion (Diagnostics & Imaging Week, Aug. 4, 2005), a federal judge has ordered mediation in the SEC's claim against him.

U.S. District Judge Inge Johnson wrote that mediation was appropriate in the SEC's suit against Scrushy because separate federal lawsuits filed by investors previously were referred for negotiations before a mediator. Details of the mediation have not yet been worked out. A spokesman for Scrushy termed the order a "positive development."

Nellcor (Pleasanton, California), a division of the Mallinckrodt (St. Louis) unit of Tyco Healthcare, last week issued an open letter to its customers discussing the injunction issued against it earlier this month in its dispute with Masimo (Irvine, California) (D&IW, Sept. 15, 2005).

Nellcor said the ruling would not prevent it from continuing to supply its "entire line of pulse oximetry sensors, including OxiMax sensors," or prevent it from supporting its products.

Signed by Nellcor President David Sell, the letter said that the company was disappointed with the court's affirmation of an early decision ruling that Nellcor had infringed some of Masimo's patents, but that it had "prepared for this possible outcome."

The letter continued: "The decision and eventual injunction will not impact your use of Nellcor pulse oximeters and Nellcor-compatible patient monitors currently in place at your institution. Nellcor will not be prevented from supporting our products; you can continue to count on us as you always have."

It said that the injunction "only prohibits Nellcor from future sales of certain products. This includes standalone units (N-395, N-550, N-595 pulse oximeters), hand-helds (OxiMax NPB-40, NPB-75) and certain OEM pulse oximetry modules (circuit boards)."

The letter promised launch of a new line of pulse oximeters "in the near future that includes bedside and hand-held monitors as well as OEM oximetry circuit boards that we provide to our multiparameter monitor partners" using "a new and different signal processing engine."

It also promised expansion of the company's OxiMax system, "the pulse oximetry platform for the future – and remains focused on maintaining our leadership position in this market."

In other legalities, MedQuest Associates (Alpharetta, Georgia) and its subsidiaries reported reaching a settlement agreement with the U.S. Department of Justice (DOJ) to resolve an investigation into MedQuest's billing practices. MedQuest admitted no liability or wrongdoing in the settlement agreement.

MedQuest will pay the U.S. government about $519,000 for alleged Medicare overpayments, it said, "to facilitate an expeditious resolution of the matter and to avoid further costs associated with protracted litigation." It said it also has entered into a separate, confidential agreement with private parties in the qui tam litigation, and will pay an undisclosed amount that it termed "immaterial."

Donald Tomasso, MedQuest interim CEO, said, "The company's operating performance has remained strong thanks to our people and their commitment to quality patient care."

MedQuest and its affiliates are providers of MRI, computed tomography, nuclear medicine, fluoroscopy, X-ray, ultrasound, mammography and bone densitometry services.

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