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OrthoLogic Settles Legal Dispute; Associated Costs Were Recognized in the Fourth Quarter of 2000.

Business Editors & Health/Medical Writers

TEMPE, Ariz.--(BW HealthWire)--June 28, 2001

OrthoLogic Corp. (Nasdaq:OLGC) announced today that it has agreed to pay $650,000 to settle a civil false claim matter with the U.S. Department of Justice.

The original complaint in this matter was filed under confidential seal in 1995 against Sutter Corporation under the qui tam provisions of the Federal False Claims Act. OrthoLogic was added later as a defendant after it purchased Sutter Corporation in 1996. The U.S. Department of Justice has agreed to release fully OrthoLogic's officers, employees and directors from any causes of action for civil damages or civil penalties for the allegations being settled in this matter.

OrthoLogic denies any wrongdoing or liability with respect to the allegations in this matter. Nevertheless, to avoid the expense, distraction, and uncertainty of litigation in the case, OrthoLogic has agreed to settle this matter. The allegations primarily relate to activities that occurred prior to the time OrthoLogic entered the CPM business via its acquisition of Sutter Corp. in the fall of 1996. The legal dispute involved primarily the adequacy of the effort made to collect the patients' coinsurance amounts relating to claims for reimbursement for the provision of Continuous Passive Motion (CPM) treatment for patients covered by various federal health care programs, including Medicare, from January 1989 through June 1998.

In connection with this settlement agreement, the Department of Health and

Human Services' Office of the Inspector General has agreed not to exclude OrthoLogic or any of OrthoLogic's officers, directors or employees from participation in any federal health care program as a result of the alleged conduct being settled in this matter. OrthoLogic has agreed to enhance its existing corporate compliance program as part of a corporate integrity agreement with the Department of Health and Human Services' Office of the Inspector General.

The Government's amended complaint was dismissed with prejudice. Payment to the Department of Justice is due from OrthoLogic shortly in a lump sum. In anticipation of a resolution of this matter, OrthoLogic recognized the costs associated with this settlement agreement in the fourth quarter of 2000. The company does not anticipate that this settlement will have any impact on its ongoing plans for the divestiture of the CPM business.

According to Thomas R. Trotter, president and CEO of OrthoLogic, "We are disappointed that we were unable to prevail entirely in this matter, however, given the costs of litigation and its burden on management, we believe that this settlement is in the best interest of OrthoLogic."

Statements in this release that are not historical may be deemed forward-looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. Although the company believes the expectations reflected in any forward-looking statements are based on reasonable assumptions, it can give no assurance that its expectations will be attained. These forward-looking statements involve risks and uncertainties that could cause actual results to differ materially. For a more complete description of the risks and uncertainties that face the company, please see the company's annual report on Form 10-K for the fiscal year ended December 31, 2000 and other documents filed by the company with the Securities and Exchange Commission.
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Publication:Business Wire
Geographic Code:1USA
Date:Jun 28, 2001
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