False Claims Act Enforced With Back Surgeons- Investors

Federal probe of doc-owned   distributorship yields False Claims suit



The Justice Department is moving forward with False Claims Act allegations against a company that sells spine implants to hospitals, alleging that the company and its owners made improper payments to surgeons to use the company's medical devices in the procedures they performed.

A complaint was filed in U.S. District Court in the Central District of California against Reliance Medical Systems, a marketer and distributor of spine-implant devices; the three owners of Reliance Medical; and Dr. Aria Sabit, a neurosurgeon who invested in Reliance Medical.

Physician-owned distributors and distributorships, or PODs, sell and distribute medical implants.Hospitals buy the devices and the surgeons who perform procedures using the implants are often owners or investors in the PODs.

 

Over the last few years, these kinds of companies have come under scrutiny. That led the HHS' Office of the Inspector General to last year issue a special fraud alert calling PODs “inherently suspect” under the anti-kickback statute and a report that found hospitals that purchased implants from PODs reported increases in volumes of spinal surgeries.

The lawsuit is considered significant because "it appears to be the first time any of the government's POD investigations have caused the government to file its own (False Claims Act) lawsuit based on the theory" that a physician's return on the investment is a kickback.