Medical device company Eargo has agreed to pay $34.37 million to resolve a federal charge of false claims. Eargo denies the government’s allegations and the payment is not an admission of liability for the alleged behavior.
Eargo is a public company based in San Jose, Calif., that manufactures rechargeable, nearly invisible hearing aids. In the second quarter of 2022, the company reported 44% year-over-year revenue growth from $15.9 million in 2020 to $22.9 million in 2021. Excluding settlement from the government, Eargo expects to have $20 million to $25 million in cash to burn each quarter and will need to raise funds in 2022, according to its earnings report.
Although the pandemic has slowed hearing aid sales, the aging population will continue to make hearing aids a growing market that will recover quickly. Fortune Business Insights says the market for hearing aids was valued at $9.7. billion in 2021 and is expected to grow steadily to reach a market of $17.68 billion by 2029.
The investigation was a collaboration between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Northern District of Texas. The government alleges that between 2017 and 2021, Eargo included unsupported diagnostic codes on hearing aid claims Eargo submitted to the federal Employee Health Benefits program, which is the largest health insurance employer-sponsored group program in the world, providing benefits to 8 million federal individuals. employees.
Eargo allegedly submitted the detailed invoices, called superbills, to the beneficiaries to obtain reimbursement from the FEHBP. Eargo then conducted an internal review of its billing and coding practices to resolve the issue, but government prosecutors say Eargo continued to submit unsupported diagnostic trouble codes on bills, meaning that knowingly submitted false statements to the payer. In most cases, a hearing aid can only be reimbursed if the patient undergoes a hearing test that results in a diagnosis of hearing loss.
“Officials rely on FEHBP to keep their families healthy,” U.S. Attorney for the Northern District of Texas Chad Meacham said in a statement. “Charging the program for medical devices that patients may not need increases costs across the board. We are proud to hold Eargo accountable for its alleged use of unsupported diagnostic codes.
As a result of the settlement, Eargo is no longer covered by federal employee insurance, but Eargo President and CEO Christian Gormsen said company management’s top priority is to find this cover. The FEHBP has not definitively excluded Eargo from its program and affirms that there will be possibilities to continue the dialogue. Gormsen says Eargo continues to invest significant time and resources into the organization’s compliance program.
“We are pleased to have reached the resolution announced today and plan to engage with the government regarding potential Eargo hearing aid coverage for federal employees in the future,” Gormsen said in a statement. “We remain committed to our mission to improve hearing aid accessibility and create innovative products that reduce the stigma of hearing loss.”
Will is the editor of CEO magazine and editor of D CEO Healthcare. He wrote about health care…