Medtronic Spine LLC has agreed to pay the federal government $75 million to settle allegations that it caused the submission of false claims to Medicare, the Justice Department announced Thursday.

The government alleged that Kyphon Inc., which was bought by Medtronic Spine in November 2007 for $3.9 billion after whistleblower allegations were made, was involved in submitting fraudulent claims for its kyphoplasty procedure. The minimally invasive surgery is used to treat compression fractures of the spine caused by osteoporosis, cancer or benign lesions.

Kyphon engaged in a seven-year marketing scheme that resulted in certain hospitals billing Medicare for certain kyphoplasties performed on an inpatient basis rather than less costly and clinically appropriate outpatient kyphoplasty treatment, the allegation stated. The conduct resulted in the Medicare program paying more for certain inpatient kyphoplasty procedures.

"Today's settlement demonstrates our commitment to ensure that the Medicare Trust Fund is used to pay for necessary medical care and is not depleted as a result of aggressive marketing schemes intended to increase sales of unnecessary devices or procedures," Acting Assistant Attorney General Gregory Katsas, head of the Justice Department's Civil Division, said in a prepared statement.

The allegations were reported in Buffalo by two former Kyphon employees who will receive a total of $14.9 million as their statutory share of the settlement proceeds.

"A big, inpatient price tag allowed Kyphon to make thousands of dollars each time it sold a kyphoplasty kit," said Mary Louise Cohen, a Washington, D.C., attorney whose firm, Phillips & Cohen LLP, represented the whistleblowers in their qui tam case. "Because of the company's scheme, the Medicare program paid many millions of dollars more than it needed to pay."

They filed under the federal False Claims Act, which allows private citizens to bring lawsuits on behalf of the United States and receive a portion of a settlement or judgment awarded against a defendant.

"The settlement further demonstrates the private-public partnership fostered through the False Claims Act involving whistle blowers working with the United States continues to result in the identification of waste, fraud and abuse and the significant return to the taxpayers of ill-gotten gains," Terrance Flynn, the U.S. Attorney for Western New York, said in a statement.

Kyphon, located in California, has also entered into a Corporate Integrity Agreement with the U.S. Department of Health and Human Services, Office of Inspector General. The agreement contains measures to ensure compliance with Medicare regulations and policies in the future.