Federal investigators are pushing forward with claims against Reliance Medical Systems, saying that they have evidence that the company’s owners devised a kickback scheme to induce doctors to use Reliance spinal implants, even sometimes when patients didn’t need the procedure.
The Justice Dept. accused Reliance owners Brett Berry, John Hoffman and Adam Pike of using the company to create a physician-owned distributorship to funnel illegal payments to several physicians to reward them for using Reliance spinal implants.
"Allegedly, Reliance’s owners were recorded telling a potential Kronos investor that Reliance was formed as part of a plan to ‘get around’ the federal Anti-Kickback Statute, which prohibits such improper payments, and that Reliance pays its physician-investors enough in the first month or 2 to ‘put their kids through college,’" the DoJ reported.
Reliance Medical did not immediately respond to requests for comment.
One physician, Dr. Aria Sabit, allegedly began using Reliance implants only after acquiring an ownership in Reliance distributorship Apex Medical, from which he received nearly $440,000 between May 2010 and July 2012, according to a DoJ statement. The agency added that the payments induced Sabit to use the implants excessively and unnecessarily in patients who didn’t need them.
Reliance allegedly had similar set-ups with a pair of physicians, Drs. Ali Mesiwala and Gowriharan Thaiyananthan, through the company’s Kronos distributorship.
"Improper payments to physicians can alter a physician’s judgment about patients’ true health care needs and drive up health care costs for everyone," Justice Dept. Civil Division Assistant Attorney General Stuart Delery said in prepared remarks. "The Justice Department is committed to enforcing the laws that prohibit such payments."
Reliance has been facing off against federal officials for nearly a year now, stemming back to an October 2013 lawsuit that the company filed against the U.S. Health & Human Services Dept. and its inspector general, Daniel Levinson, over its "crusade" against physician-owned businesses.
In March 2013 Levinson issued a "Special Fraud Alert" labeling physician-owned entities as "inherently suspect" under Medicare’s anti-kickback rules. The businesses, often called physician-owned distributors or PODs, create "produce substantial fraud and abuse risk and pose dangers to patient safety," according to the alert.
Reliance, which bills itself as "a small business that collaborates with spine surgeons to design highly customized spinal implant devices and surgical tools," had gotten out of the POD game in 2012 but was looking to return. The company claimed that Levinson’s comments were preventing that. The lawsuit further alleged that a cabal of large medical device companies were successfully lobbying for stricter regulation of PODs to keep small companies down.