We recently reported on the government’s decision to intervene in a False Claims Act lawsuit against spinal surgeon Aria Sabit, which involved allegations of medically unnecessary spinal fusion operations in exchange for kickbacks from the Reliance Medical Group.
In a simultaneous and related event, the Department of Justice filed its own False Claims Act lawsuit against Reliance Medical Systems, several of its investors, and two affiliated distributors. The lawsuit alleges an extensive number of violations under the Anti-Kickback Statute and the Stark Law – both of which seek to eliminate financial self-interest by doctors and medical professionals when advising patients and choosing a course of treatment.
Details of Case Against Reliance, et al.
On September 8, 2014, government officials filed their False Claims Act lawsuit against Reliance Medical Systems, Apex Medical Technologies, Kronos Spinal Technologies, and a number of physicians holding a joint ownership in Reliance. The government’s theory is that all investment returns derived by the joint owners pursuant to their agreement with Reliance are considered unlawful kickbacks and violate the FCA and other federal and state statutes.
The federal government has intervened in cases involving physician-owned distributorships (POD’s) in the past. However, the case against Reliance is the first case filed unilaterally by the government under its theory that POD’s do not serve the patient’s best interests and are, therefore, considered kickbacks.
While the details of the investment scheme are not immediately apparent, the complaint revealed that a number of physician owners were set to receive generous payouts and dividends based on the number of surgical spinal products used within a given span of time. The complaint further alleges that any subsequent Medicare or Medicaid claims filed by a hospital treating referrals induced by the scheme may also trigger False Claims Act liability. However, the government acknowledges that in most instances, the investment schemes were concealed.
Growing Concern over Physician-Owned Distributorships
This recent filing comes on the heels of a special report involving POD’s, which are considered inherently problematic within the healthcare fraud realm. The report, issued by the Department of Health and Human Services, listed several red flags to look for when determining whether a joint ownership investment arrangement violates the False Claims Act, including:
-Kickbacks derived from “offering investment opportunities in [the POD’s] to physicians who agreed to use [certain] implants in their surgeries”;
-Investment opportunities offered only to certain doctors likely to order and utilize certain medical devices;
-An investment scheme that primarily serves the doctor-owner’s patient base;
-Physician suddenly shifts to the exclusive use of one product;
-Physicians condition their referrals to certain hospitals based on coercion tactics designed to implore the hospital to supply certain medical products;
-Investment returns correlate with number of referrals;
-Investment returns are based on volume.
Suspect a Scheme? Contact Berger Montague Today
If you are a patient or employee in the medical field, spotting a physician-owned distributorship investment scheme may be difficult. However, if you are aware of a suspicious ownership arrangement like that described above, we encourage you to contact us today with your information.