Courts & Crime

Justice Department: Kickback scheme could enrich doctors in a hurry

During a meeting that was secretly recorded, a salesman for Reliance Medical Systems promised that within a month or two of joining its illicit kickback scheme, spinal surgeons could collect enough money to pay for their kids’ college educations, Justice Department lawyers charge.

Taxpayers were the multimillion-dollar sugar daddies in this plot, initially uncovered by two doctors-turned-whistle blowers who could collect a sizable reward under a law compensating those whose tips lead to federal financial recoveries.

In May 2010, a Michigan spinal surgeon bought into one of the schemes that aimed to circumvent a federal law barring device manufacturers from making payments to induce physicians to use their products, the government alleges in two suits filed under the federal False Claims Act.

One suit charges that Dr. Aria Sabit, who now lives in Birmingham, Mich., and Sean Xie, who was studying under Sabit, each paid $5,000 to become an investor in Apex Medical Technologies, a distributorship for Southern California-based Reliance. That month, the government alleges, each got back $20,117 from Apex – a return of more than 400 percent in 30 days’ time.

That was just the beginning.

Over the next nine months, Apex paid Sabit $264,957 while he repeatedly used Reliance products for spinal fusion surgeries, some of them unnecessary – and $483,570 before he stopped using Reliance equipment, the suit said. Sabit also presumably collected handsome physician fees for his services.

Meanwhile, Community Memorial Hospital in Ventura, Calif. paid Apex $1.4 million for the cost of the implants that Sabit used in his surgeries.

The hospital, in turn, billed Medicare – and federal taxpayers – for nearly all of those devices.

A second California-based Reliance distributorship, known as Kronos Spinal Technologies, made improper payments to two other physicians, Drs. Ali Mesiwala and Gowriharan Thaiyananthan, the suit said. Kronos was based at the same Jacksonville, Fla., address as Apex, it said. One of the distributorships’ owners allegedly was recorded as saying that the scheme was formed as part of a plan to “get around” the federal Anti-Kickback Statute, it said.

In July 2011, Mesiwala was recorded as stating that there was an “expectation” that doctors who bought into the distributorships would be using Reliance equipment, the suit said. He also was quoted as saying: “If you truly are in this to make money and you have a finite time limit to do it, I don’t know a better way to do it.”

Kronos paid its investor physicians $4.9 million from August 2007 through September 2012, the government said.

Of 22 physician-investors tracked by the government, 20 were paid more in the first month than they invested. One of the three owners of the distributorships, Adam Pike, was recorded as saying in July 2011 that investments were only required so that “if and when we’re ever audited, by any ya know, branch of government, they can see that as a surgeon you didn’t just sign up and all the sudden get a fifty or eighty thousand dollar payment.”

Defendants in the suits include the other two distributorship owners, Brett Berry and John Hoffman, who proceeded with their scheme despite repeated warnings from the Department of Health and Human Services’ inspector general’s office that kickback schemes were illegal, the suit said.

The allegations that Sabit performed medically unnecessary or excessive surgeries on some patients were first raised by Drs. Cary Savitch and Gary Proffett, who sued as whistleblowers. The False Claims Act allows private citizens who know of fraud to bring such cases on behalf of the government, which they has the option to intervene. The Justice Department then intervened.

Stuart Delery, chief of the department’s Civil Division, said that “improper payments to physicians can alter a physician’s judgment about patients’ true health care needs and drive up the costs for everyone.”