 |
| 2016 Senate Report on PODs |
The
issue of physician owned distributorships (PODs) is still an issue with
orthopedic surgeons and neurosurgeons. The Justice Department is still filing qui tam actions and joining actions filed by whistleblowers. Physicians need to be very careful when forming their own device companies or distributorships. Since 2013, OIG has stated that PODs are "inherently suspect" under the federal anti-kickback statute.
Recently, on November 14, 2019, the United States filed a civil qui tam complaint against South Dakota neurosurgeon Wilson Asfora M.D. and his medical device companies Medical Designs
LLC and Sicage LLC. The complaint alleges False Claims Act violations arising from the
alleged payment of kickbacks to Dr. Asfora tied to the devices he used in
spinal surgeries which were purchased from his own distributorships Medical Designs and Sicage.
The
Anti‑Kickback Statute prohibits offering or paying anything of value to induce
the referral of items or services covered by Medicare, Medicaid, and other
federal healthcare programs. The government’s civil complaint alleges
that Dr. Asfora, Medical Designs, and Sicage engaged in multiple kickback
schemes designed to pay Dr. Asfora hundreds of thousands of dollars in exchange
for Dr. Asfora using spinal devices distributed by Medical Designs and Sicage
in his spine surgeries.
The
civil lawsuit also alleges that despite receiving numerous warnings that he was
performing medically unnecessary procedures with the devices in which he had a
financial interest, Dr. Asfora allegedly continued to perform such procedures
while personally profiting from his use of devices sold by Medical Designs and
Sicage.
The
case is captioned United States ex rel. Bechtold, et al. v. Asfora, et al., No. 4:16-cv-04115-LLP
(D.S.D.). The
claims asserted against the defendants are allegations only, and there has been
no determination of liability.
The case against Dr. Asfora arose from a different but related qui tam case which the United States resolved in October 2019. This related case was against several hospital entities Sanford Health, Sanford Medical Center, and Sanford Clinic (collectively, Sanford), of Sioux Falls, South Dakota where Dr. Asfora performed surgeries. That lawsuit was brought by two other Sanford neurosurgeons and Sanford ultimately greed to pay $20.25 million to resolve False Claims Act allegations that they knowingly submitted false claims to federal healthcare programs resulting from violations of the Anti-Kickback Statute and medically unnecessary spinal surgeries.
Attorney's Commentary: These qui tam lawsuits show an aggressive approach by the Justice Department to seek civil damages where there are inducements given to surgeons who perform surgeries and use implants or devices. The Justice Department decided not to pursue criminal charges but the civil qui tam settlements can have severe consequences on a physician's or hospital's status as a Medicare provider and involve significant fines and penalties.
How does a hospital or surgery center get involved in this type of qui tam lawsuit? How do physicians put themselves at risk when using devices from their own POD? We see the following problems. First, the hospital or surgery center lets the physician choose the device and the company he or she buys it from without checking the prices of the device and approving it internally. The physician then does not establish why he/she chooses to use their own device and not one of its competitors.
Second, the hospital or surgery center wants to keep the physician happy and does not question the increase in surgeries when the physician has a financial incentive to use his/her own devices. The allegation of "unnecessary" surgeries is one that is very serious to patients' health. On the criminal side, these allegations can be charged as honest services fraud if the conduct fails to notify patients of the conflict of interest.
Third, the amount of money earned from devices is significantly higher than from surgeries. Physicians are incentivized to create these companies and often their lawyers and accountants do not warn them of the high risks in these PODs. Fourth, one issue is whether these PODs are truly new products that vary from existing products on the market. What new benefitws will the patient receive?
The "everyone does these deals" does not help defend these cases in a civil context. It is true that many POD cases have bene ignored and not prosecuted civilly or criminally. However, where there are two knowledgeable whistleblower physicians, like here, who filed a case in which the U.S. intervenes: there is a significant financial and business problem for the physician and hospitals where the surgeries were performed.
The "everyone does these deals" does not help defend these cases in a civil context. It is true that many POD cases have bene ignored and not prosecuted civilly or criminally. However, where there are two knowledgeable whistleblower physicians, like here, who filed a case in which the U.S. intervenes: there is a significant financial and business problem for the physician and hospitals where the surgeries were performed.
Posted by Tracy Green, Esq.
