POD Kickbacks Land Entire Medical System in Hot Water

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In late October 2019, the Department of Justice (“DOJ”) announced a settlement with Sanford Health, Sanford Medical Center, and Sanford Clinic (collectively, “Sanford”) in which the government alleged that Sanford knowingly submitted false claims to federal healthcare programs, including performing medically unnecessary spinal surgeries, resulting in violations of the Anti-Kickback Statute (“AKS”).

The $20.25 million settlement resolves claims initially brought by two surgeons at Sanford, Dr. Carl Bechtold and Bryan Wellman, alleged that Sanford knew one of its top neurosurgeons, Dr. Wilson Asfora, was receiving improper kickbacks from his use of medically implanted devices distributed by his own physician-owned distributorship (“POD”). In addition, his colleagues and others repeatedly warned Sanford that the neurosurgeon was performing medically unnecessary procedures involving the devices in which he had a substantial financial interest.

The allegations revolve around the Asfora Bullet Cage, a device used in spinal fusion surgery. According to the DOJ, the number of major fusion surgeries performed by Dr. Asfora skyrocketed around 2009, when the Food and Drug Administration (“FDA”) approved the device for use in fusions. The year before FDA approval, Asfora performed 70 lumbar spine surgeries, implanting 142 cages. The year after he started to use his own cages, he performed 130 lumbar surgeries, implanting 394 cages. While the appropriateness of surgery cannot be determined based on statistics, these numbers are not seen in a good light for Asfora.

The DOJ alleged that despite warnings from Asfora’s colleagues about the kickback scheme, Sanford continued to employ the neurosurgeon, allowing him to continue to profit from the distributorship of the medical devices, and submitted claims for payment from federal healthcare programs for the medically unnecessary surgeries.

Corporate Integrity Agreement

Sanford also entered into a five-year corporate integrity agreement (“CIA”) with the Department of Health and Human Services Office of Inspector General (“HHS OIG”), which requires that Sanford maintain a compliance program, implement a risk management program, and hire an independent review organization to review claims made to Medicare and Medicaid plans for government payment. The CIA also requires compliance certifications from Sanford’s board of directors and senior executives.

Dr. Asfora

In conjunction with the settlement and CIA, Sanford also agreed to cooperate with the DOJ in litigation related to the co-defendants, including the POD itself and the neurosurgeon, Dr. Asfora.

Asfora was a former independent neurosurgeon until 2007, when he joined the staff at Sanford. During previous discussions, he had mentioned inventing surgical techniques and using off-label products in surgery, even going so far as to say, “I think I am very brave that I do things that nobody has ever done before, even the CEO of this hospital at the time I did his surgery.”

Asfora is somewhat of an entrepreneur – in addition to his ownership of Medical Designs, the POD that designs medical tools and devices that is at the center of the settlement, he owns a restaurant and formerly owned a recording studio, Mexican restaurant, and semi-pro soccer teams.

“More than six years ago the Department of Health and Human Services Office of the Inspector General warned in a fraud alert that PODs were inherently suspect under the Anti-Kickback Statute. Unfortunately, these distributors remain questionable,” said Curt L. Muller, Special Agent in Charge, Office of Inspector General at the U.S. Department of Health and Human Services (HHS-OIG). “Patients in government healthcare programs rightly expect that surgeries are medically indicated, not performed to increase provider profits.”

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