For years, a small group of Southern California doctors performed unnecessary or overly extensive spinal surgeries, which were then fraudulently billed to Medicare, according to a complaint recently filed by the U.S. Attorney's office.
The Justice Department is suing former Ventura surgeon Dr. Aria Sabit and three investors in a spinal implant distribution company, attempting to recover money Medicare paid for what government lawyers say were unnecessary or excessive surgeries encouraged by the defendants.
The civil complaint (PDF), filed Sept. 8, claims Adam Pike and Bret Berry are the founders of Reliance Medical Systems, an implant company, and subsequently at least 12 physician-owned distributorships (PODs). John Hoffman was an investor in one of the Reliance PODs.
PODs are a business model in which doctors are investors in a company that makes products that may be used by the doctors. Over the years, there have been several concerns raised by the Health and Human Services' Office of Inspector General.
KPCC has reported on Reliance Medical Systems and its ties to local spinal surgeons.
The U.S. Attorney’s Office says Berry and Pike offered doctors the chance to be "physician investors" in the Reliance PODS in exchange for agreeing to use Reliance spinal parts in surgeries.
According to the complaint, that relationship "tainted" spinal fusion claims made to Medicare by four local doctors — Aria Sabit, Sean Xei, Ali Mesiwala and Gowriharan Thaiyananthan — by essentially giving "kickbacks" for using certain products.
The doctors did not respond to requests for comment.
Patric Hooper, attorney for Pike, Berry and Hoffman, says his clients didn't break any laws and that the lawsuit "is a show trial by the government in the area of physician ownership." Hooper filed his response to the complaint last week.
Doctors handpicked to be investors
Court papers reference a series of meetings in July 2011 secretly recorded by the government in which Pike, Berry and Hoffman thought they were meeting with a potential POD investor.
During one of those meetings, the document claims, Adam Pike and Bret Berry said they "hand pick" physicians as investors and monitor the number of surgeries they do.
"We always start guys out with an evaluation period. We mandate that," Adam Pike allegedly said during a July 26, 2011, meeting with a prospective investor.
The Justice Department claims Pike and Barry wouldn't allow physicians to become investors unless the hospitals they worked at agreed to purchase Reliance devices.
Apparently some doctors didn't make the cut, court documents say.
Dr. David Lundin, an investor in a Reliance POD, was forced to leave because he didn’t use Reliance implants in a "significant number of his surgeries," according to the complaint. Lundin has not responded to a request for comment.
Another doctor didn't even get a chance to be an investor because John Hoffman felt "he's not busy at all,” the complaint says.
The U.S. Attorneys Office also alleged surgeons who were investors in Reliance PODs were pressured to get hospitals to pay above-market prices for Reliance implants.
The claim says:
On Aug. 10, 2007, Adam Pike reported approvingly that Reliance's "surgeon champions" were "fight[ing] battles on our behalf against Scripts [Hospitals]."
Reliance operators allegedly tracked the volume of surgeries performed by its physicians.
According to the civil complaint, Adam Grant, a Reliance employee, was responsible for generating daily surgery reports and would "regularly celebrate" reports from physician investors who had increased their surgery count.
Both Adam Pike and Bret Berry "personally encouraged" surgeons to increase the number of instrumented fusion surgeries, according to the complaint. It included these examples:
- "On May 17, 2007, in response to an inquiry from Dr. Erik Westerlund regarding a patient 'that would…consider heroic surgical measures,' Adam Pike encouraged Westerlund to perform 'a seven level fusion with interbody using EST (Embassy Spinal Technologies, a Reliance POD).'
- "On Oct. 18, 2007, in response to a Reliance distributor's report that Dr. David Greenwald 'booked 5 cases today… I LOVE IT!' Adam Pike wrote, 'Please tell Dr. Greenwald to slow down. How dare he go crazy like this! PS. We are on it.'"
PEEK refers to a spinal cage distributed by Reliance PODS.
The U.S. Attorney's office alleges Sabit was paid $438,570 between May 2010 and July 2012 by a Reliance POD and used Reliance implants in approximately 90 percent of his spinal fusion surgeries. In its complaint, the government also says some – if not all — surgeries were unnecessary or excessive.
Sabit surrendered his medical license in California last month after the Medical Board of California made an accusation against him involving his treatment of patients. He still has an active license in Michigan, where he has since relocated.
"We have reason to believe they have taken things completely out of context," said attorney Patric Hooper, who also said he has not seen the emails excerpted in the complaint or the transcripts of the recorded meetings.
He also noted he has produced 168,000 pages of documents to the Department of Justice attorneys and that "what you are seeing is the best they can come up with."
"It's all about the money"
During a meeting with a prospective investor on July 26, 2011, Reliance operator Adam Pike is recorded describing the purpose of the Reliance's PODs as "all about the money."
"I always scoff at someone I'm sitting with that says well it's really not about the money, ah b**sh**, it is all about the money. We make a lot of money," Pike is recorded saying at the meeting, according to the federal complaint.
Pike went on to tell the potential investor Reliance operators were making anywhere from $30,000 to $80,000 a month, depending on the amount of business.
"It's likely to make you more money than your practice does," Pike is quoted as saying during a 2011 meeting.
The U.S. Attorney's filings claim both Pike and Berry benefited from being Reliance operators, having paid themselves $36 million from 2007 to 2012.
Patric Hooper, their attorney, calls that number "completely false," claiming the government is mistaking revenue for profits.
It was not just the operators of Reliance who were allegedly boasting of the lucrative returns of the Reliance PODs, the government alleges.
"If you truly are in this to make money and you have a finite time limit to do it, I don't know a better way to do it," Dr. Ali Mesiwala is quoted as saying during a July 20, 2011, recorded meeting.
Mesiwala, an alleged investor in the Reliance POD called Kronos, was paid $3,697,018 by Reliance between 2007 and August 2013, according to the federal complaint. Those payments, the document says, were based on the profits Mesiwala generated for Kronos by using Reliance implants in his surgeries on Medicare patients.
Neither Mesiwala nor Thaiyananthan are named as a defendants in the federal complaint. Both work at Pomona Valley Hospital Medical Center, according to Compliance Officer Kathy Perkins-Smerdel, who said that "the Board of Directors and Medical Staff Leadership are continuing to evaluate Drs. Mesiwala’s and Thaiyananthan’s relationship with the hospital."
A total of 35 doctors – 16 from California – are being investigated by the Federal Department of Justice because of their alleged ties to Reliance PODS, according to a court filing earlier this year.
The Justice Department declined comment for this story.
This story was updated at 1:15 p.m. on September 23, 2014.