Reliance Medical Systems is suing the U.S. Health & Human Services Dept. and its inspector general, Daniel Levinson, over its "crusade" against physician-owned businesses.
Last March 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," got out of the POD game last year but wants to get back in, according to the lawsuit. But Levinson’s "inherently suspect" label is preventing that, Reliance said.
"The [Office of the Inspector General] is currently investigating Reliance, and physicians with whom Reliance previously communicated, in connection with Reliance’s prior formation of physician-owned entities, and Reliance cannot exercise its First Amendment rights to communicate with physicians about forming new physician-owned entities out of fear that any such entities are instantaneously cloaked with a presumption of guilt, in violation of Reliance’s due process rights, since these entities are presumed by the OIG to be ‘inherently suspect,’" according to the lawsuit.
The lawsuit also alleges that a cabal of large medical device companies successfully lobbied for stricter regulation of PODs.
"Unable to win in the marketplace, the Big Corporations embarked on a multi-year effort to win at the legislative/agency level through substantial lobbying efforts," according to the lawsuit.
The Woodlands, Texas-based company wants the U.S. District Court for Central California to find that PODs that adhere to the anti-kickback statutes are not inherently suspect and that healthcare providers who do business with them are not at risk.