Feds pursue doc-owned distributorships for unnecessary surgery, kickbacks

In a one-two punch against alleged fraud, federal prosecutors filed a pair of False Claims Act complaints against a Michigan neurosurgeon and a network of physician-owned companies, the Department of Justice announced. The government intervened in a whistleblower's medical necessity case against Aria Sabit, M.D. and filed a separate lawsuit containing kickback claims against Sabit and other defendants linked to the spinal implant company Reliance Medical Systems, Inc. Reliance distributorships allegedly paid doctors to use Reliance spinal implants in surgery.

The Justice Department's complaint appears to be the first False Claims Act action by the government against a physician-owned distributorship, according to JD Supra Business Advisor. This follows increased federal scrutiny of physician-owned companies and spinal surgery claims, JD Supra noted. A FierceHealthPayer eBook article explored how payers manage utilization of spinal fusion surgeries, which are increasingly-used procedures involving serious patient risks.

Medicare beneficiary Lillian Kaulback, for example, had severe health problems after Sabit performed back surgery on her and later died, CBS News reported. The Justice Department says her operation was unnecessary and that Sabit only did it because he had a financial incentive to put hardware in her back. Kaulback's son told CBS that Sabit never told the family he had an ownership interest in the company that supplied the screws.  

In an undercover recording that's part of the government's case, Reliance owners allegedly tried to recruit a surgeon by saying their doctors made enough money in two months "to put their kids through college," CBS reported.

"Improper payments to physicians can alter a physician's judgment about patients' true healthcare needs and drive up healthcare costs for everyone," said assistant attorney general Stuart F. Delery in the announcement. "The Justice Department is committed to enforcing the laws that prohibit such payments."

An attorney for Reliance's owners told CBS in an email that the government's charges are "reckless and untrue." Sabit has also denied the allegations.

For more:
- here's the Justice Department announcement
- read the CBS News article
- see the JD Supra article
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