A Medical Device Daily

Former cardiac care patients at Redding Medical Center (Redding, California) have reached an agreement in which four cardiologists will pay $24 million to settle claims arising from charges of unnecessary cardiac catheterizations and bypass surgeries performed at the hospital before November 2002, according to the law firm of Reiner, Simpson, Timmons & Slaughter and co-counsel.

Shasta County Superior Court Judge Jack Halpin approved the agreement, which boosts pending Redding Medical Center-related settlements to $419 million. Tenet Healthcare (Dallas) last month agreed to settle substantially all claims brought by more than about 770 former Redding cardiac care patients against the company and its subsidiaries.

Tenet established a $395 million fund to be allocated among the former patients (Medical Device Daily, Dec. 22, 2004).

Suits were filed against the Redding Medical Center after the FBI raided the offices of two cardiologists and the medical center in late 2002. Among the four cardiologists settling is Chae Hyun Moon, the center's former chief of cardiology, and Fidel Realyvasques, its former top cardiac surgeon. Both left the hospital in early 2003, according to the Redding newspaper, The Record Searchlight.

Attorney Robert Simpson, of Reiner, Simpson, Timmons & Slaughter (Redding), said, “Tenet and now the cardiologists have moved to bring this matter to a fair and honorable conclusion. It is time for the surgeons to do the same.“ Liaison counsel Russell Reiner of the law firm added: “We are prepared to work toward resolution with the surgeons but have found no willingness on their part to do so.“ He anticipated that a jury “will be forced to end this sad chapter in our community's history.“

A trial is set for July 25.

In 2003 Tenet agreed to pay the federal government and the state of California a total of $54 million in what officials called the largest-ever settlement for allegations of unnecessary surgeries, stemming from an investigation of the Redding hospital (MDD, Aug. 8, 2003). The U.S. Attorney's Office said the $54 million covers procedures performed under Medicare, Medicaid and Tricare programs.

In another proposed large payout, McKesson (San Francisco) reported agreeing to settle a consolidated securities class action, arising out of a 1999 financial restatement, pending against it and its subsidiary, the former HBO & Co. (HBOC; Alpharetta, Georgia). McKesson would pay the class members a total of $960 million.

The combination of the class-action settlement and establishment of reserves for the remaining HBOC restatement litigation will result in a charge for McKesson's fiscal third quarter, ended Dec. 31, 2004, of $810 million after-tax, or about $2.70 a share.

John Hammergren, McKesson chairman and CEO, said the agreement “represents a significant step toward fully resolving the uncertainty related to this unfortunate chapter in the company's history . . .“

The class action came after the discovery of accounting improprieties at HBOC, acquired by McKesson in early 1999, followed by a company investigation. McKesson was never, it said, the subject of any civil or criminal complaint by government authorities. Four former HBOC executives have pled guilty to certain charges, and charges are pending against other former company executives.

The settlement is subject to preliminary approval by the court, notice to the class and final approval by the court. McKesson and HBOC deny any violation of law and have agreed to the settlement solely, McKesson said, “to eliminate the uncertainties, burden and expense of further protracted litigation.“

Certain lawsuits brought independently by other stockholders of McKesson or HBOC arising from the restatement remain outstanding and are not resolved by the just-announced settlement. Thus, McKesson said it is establishing other reserves of $240 million, which it called “adequate to address . . . remaining potential exposure.“

McKesson is a provider of supply, information and care management products and services to healthcare.

In other legalities, Dr. David Gane, former president and CEO of Dicom Imaging Systems (San Francisco), a dental imaging company, has been cleared of all claims of securities fraud brought by the Securities and Exchange Commission (SEC), according to his counsel.

The SEC sued Gane in 2003, charging that he failed to disclose material information to investors and made false statements in press releases and interviews. The SEC sought an injunction and maximum monetary penalties against him, plus a lifetime ban from service as a corporate officer or director.

“This case was a classic example of government overreaching,“ said David Bayless, a partner at Morrison & Foerster, which represented Gane. He noted that Gane consistently maintained there was no basis for the charges.

The U.S. District Court for the Southern District of Florida agreed that the SEC had no case against Gane. Judge Jose Gonzalez ruled in favor of Gane on all claims, concluding that his statements about Dicom's revenue goals were not material and that no reasonable investor would rely upon them. He also ruled that Gane had no fraudulent intent as to any of the alleged misrepresentations or omissions; that he had no motivation for securities fraud; and that he “never sold, or attempted to sell, any Dicom stock that he owned.“

Name changed to Focus Diagnostics

Focus Technologies (Herndon, Virginia) said it has completed its change of name to Focus Diagnostics. The new name “is more descriptive of the services and products offered by our entire company,“ said CEO Charles Harwood Jr.

“In 2005 we plan to increase R&D investment in our Healthcare Diagnostics Group by over one-third to nearly $7 million,“ he said. “Much of this increase in investment is aimed at accelerating the development of new diagnostic products to enhance the productivity of our clients and the level of service they deliver to physicians.“

Focus Diagnostics offers laboratory testing services and products, reporting 2004 revenues of around $75 million. Its Healthcare Diagnostics Group serves commercial laboratories, hospitals and public health laboratories. Focus calls its national reference laboratory “an early innovator [offering] over 1,200 assays for infectious and immunological diseases.“

The Healthcare Diagnostics Group also manufactures diagnostic kits such as HerpeSelect.

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