Conflicted Care: Physicians With a Financial Stake in the Medical Devices They Use

In reflecting on five years of “reading medical journals and writing to inform patients of the hazards of medical care,” patient safety advocate John James says he has “learned some difficult realities.”

Our blog posts frequently mirror his observations.

“Perhaps foremost is that when people want to believe that their health-care system is safe and just, their opinions are not going to be easily swayed by data and facts, regardless of how reliable the source may be. Secondly, people want to believe that physicians always have their interest at heart; this naïve supposition is not easily replaced by caution when seeking medical care. Thirdly, most people are less interested in preventing their own poor health than getting treatment when a preventable disease has gotten the best of them. Finally, most people cannot view the health-care industry in terms of how it affects less fortunate Americans – for them it is about me and my health care.”

In a poignant example of his second point, consider a recent fraud alert issued by the Department of Health and Human Services’ Office of the Inspector General. It addresses physician-owned businesses that market implantable medical devices “ordered by their physician-owners for use in procedures the physician-owners perform on their own patients at hospitals or ambulatory surgical centers (ASCs).”

We wrote about the alert when it was issued in the spring, and now, the Wall Street Journal probes the smelly entities knows as physician-owned distributorships (PODs).

“Surgeon in Probe Is Working in Detroit-Area Hospitals,” concerns the story of Dr. Aria Sabit. He had a decided preference for an obscure brand of spinal implants, but many of his surgeries had tragic outcomes. Dozens of medical malpractice lawsuits were filed. The California medical board, the FDA and the Department of Justice, the Journal reports, are investigating Sabit because he had “an ownership interest in the company that distributed, and profited from, the surgical devices he switched to, people familiar with the matter say.”

Federal prosecutors say Sabit is part of a broader civil investigation into a network of doctor-owned spinal-implant distributorships operated by two former medical-device company employees that earned millions of dollars for its investors over six years.

“Physician-owned distributorships … have proliferated in medicine,” the Journal writes. “Distributorships, whether owned by physicians or not, act as intermediaries between medical-device makers and hospitals: In exchange for marketing and stocking devices, the distributors get a cut of each sale. When surgeons own the distributorship, that commission goes into their pockets. And [because] surgeons often dictate to their hospitals which devices to buy, they can effectively steer business to themselves.”

Apparently, Sabit’s dicey doings didn’t dissuade other hospitals from seeking his “talents.” Sabit, the Journal reports, is a senior staff member at a Michigan hospital, and has privileges at several others in the region.

He continued to use spinal implants from Apex Medical Technologies, the distributorship in which he had an ownership, on patients in Michigan until last June.

In depositions for the malpractice cases filed against him in California, Sabit has been … inconsistent, sometimes saying he didn’t receive monetary benefit from Apex implants, sometimes saying he didn’t know if he did.

“A Detroit Medical Center spokeswoman,” according to the Journal, “says it wasn’t aware that Dr. Sabit owned part of a spinal-implant distributorship. ‘We are currently looking into this,’ she said.”

The spokeswoman told the paper that the medical center wasn’t aware of any problems during Sabit’s time in California when it recruited him to join its surgical staff in 2011, and only later learned about the malpractice suits when they were filed. He, of, course, has denied the allegations.

Another Wall Street Journal story, “Does My Surgeon Profit From My Implants?” delineates how the owner-and-provider role common among spine, hip and knee surgeons is spreading to cardiac surgeons, and how difficult it is for patients to know if their surgeon is involved in a POD, unless the doctor discloses the information.

Incorporation documents for PODs in the Reliance Medical Systems network, the Journal reports, name Adam Pike and Bret Berry or one of their business associates as officers. They say nothing about any surgeons or their ownership structure. “The only clue about the companies’ business,” the story says, “is in their names, which all include the terms “Spine,” “Spinal,” “Medical,” or “Surgical.”

Pike is listed as a “registered agent,” and Pike Industries Inc. and Berry Medical Enterprises Inc. are “managing members/managers.” The company’s address is a post office box in Jacksonville, Fla.

This sounds more like a covert mail drop than a legitimate business.

The Journal says that Pike and Berry shared ownership of each POD with a different group of surgeons. Each investor got an equal stake and received an equal profit distribution based on the POD’s overall sales.

The Reliance network grew to include at least 11 PODs in six states by last year, when Pike and Berry bought out all the surgeon investors when PODs starting drawing scrutiny from the Justice Department.

As we suggested earlier this year, if your doctor recommends a procedure, or if you are having surgery to implant a medical device, find out:

  • What is the purpose of this procedure/device, what results can I expect, and how soon?
  • Are there alternatives?
  • Why am I having the procedure at this particular facility?
  • What is your financial interest in the equipment used or the facility where it’s performed?

To report suspected fraud involving physician-owned entities, contact the Office of the Inspector General’s hotline at (800) 447-8477, or online here.

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