Operation Profit: Some surgeons pull in millions by owning medical device companies

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Sometimes a surgeon is the salesman. Across the country, there are physician-owned distributorships where doctors own part of a medical device company and then buy (or have their hospital buy) that hardware to use in their own surgeries.

InvestigateTV - Surgeries gone awry. Unnecessary procedures. Extra hardware implanted in patients’ bodies. Insurance companies and government insurance over-charged.

According to government research, doctors who own medical distributorships are more likely to operate. For example, the rate of spinal surgery, according toAccording to the Health and Human Services Office of Inspector General's data analysis in 2013, the rate of spinal surgery grew more rapidly in hospitals that utilized POD-supplied devices.The government has warned about the potential for issues with physician investments in medical companies.

When it comes to financial interests, proponents also say that many doctors are already paid based on the number of surgeries they do and that owning a piece of a distributorship they buy equipment from helps keep down costs for hospitals and clinics.Some doctors have made extra money by cutting out big device companies and acting as their own middleman to funnel devices into their own operating rooms.

“I’m supposed to have several surgeries over the last decade, and I’ll never get another surgery in my life again. I’d rather die than trust,” said Paul Shinn. “I can’t hold food down. I pretty much get sick and lay on the floor,” Shinn said. “You’re spinning, you’re lightheaded, you’re sick, you’re throwing up, but you have nothing to throw up.”

A surgeon removed this hardware from Paul Shinn’s back. He said some of the fusion material remains lodged in his back.Days after his initial surgery, he went back in for emergency surgery. Shinn said his main escape from pain is being creative. He paints and plays music and is a tattoo artistInvestigateTV identified Shinn as a patient of Dr. Aria Sabit, a surgeon who operated in California, through public court records and news articles.

Sabit performed the surgeries unusually fast, prosecutors said. And he performed a lot of them in his short time at his California post. In many of Sabit’s surgeries, he used hardware from a company called Apex. Sabit, it turned out, had financial interest in the company. A court complaint filed against Dr. Aria Sabit in California details some of the allegations about surgical procedures. A federal court complaint against a medical device company details a list of payments made from the company to Sabit. The complaint alleges prior to his financial involvement, he did not use that company's products; however, after his investment, he used those products in 90% of his surgeries.It was ultimately his billing of government insurance that landed Sabit in prison.

“When they put an implant in, the doctor makes extra money on every implant they put in, every screw, every piece of metal. Everything that goes into a patient is conceivably owned by the doctor, and so that doctor will make more money with more implants that they put in,” Lederhaus said. “In fact, a lot of the early PODs that got started were viewed as competitors of the big device companies,” said Charles Oppenheim, an attorney with expertise in the laws potentially at play in this area. “The big device companies were selling name brand products at high prices. And the physician-owned distributorships were purchasing and reselling as distributors, sort of generic, much lower cost products that were functionally equivalent.

HHS too looked at the device costs. In its research, it did not find a significant cost difference for the hospitals between POD and non-POD devices in any areas except spinal plates, where POD-provided parts averaged higher in the sample.also found in its sample that surgeries involving PODs devices used about two fewer devices per surgery than non-PODs-supplied surgeries.

“When it came down to it, it was about hardware. It was about physician-owned distributorships. It was about money, capital gains,” Reynolds said. “He took it upon his own accord to do more levels, three to four levels in total. So two extra levels without our consent,” Reynolds said. “In hindsight, with the amount of fraud and the amount of savage carnage that he inflicted on people, it seemed to be the … incentive was to get financial gains, I would say, personally.”

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