This story, which has its lurid aspects, was reported with various local slants by newspapers in Arkansas, Massachusetts, and Canada. It may have implications that go beyond these local angles. Let me try to piece it together. For an overview, we start with the Canadian National Post,
A Canadian neurosurgeon pleaded guilty in an Arkansas court yesterday to taking hefty kickbacks from medical-device suppliers and agreed to pay the U.S. government and a whistleblower $1.5-million in compensation.
Dr. Patrick Chan could also face up to five years in jail when he is sentenced later in the dramatic case, which involved an undercover sting operation, hidden FBI video cameras and envelopes brimming with cash.
Pressure is now mounting on him to testify against one company that, according to newly divulged allegations, offered him stock options worth at least $1-million as part of a kickback arrangement. Lawyers say Dr. Chan's guilty plea may be just the first step to opening the window on a much broader kickback program.
He also still faces several lawsuits for allegedly performing spine operations that were unnecessary and severely damaging to patients.
Dr. Chan was charged in late 2006 with accepting thousands of dollars in kickbacks from device suppliers. Kelley Yielding, a sales representative for a number of manufacturers, wore recording equipment at the request of police as she handed over cash payments to him. In a strange twist, Ms. Yielding died suddenly the night before she was to testify at a grand-jury hearing, though police have ruled out foul play.
Dr. Chan pleaded guilty yesterday to one count of the kickback charges, while three others were withdrawn in a plea bargain with prosecutors that did not address his sentence.
The coverage in the Boston Globe focused on Chan's involvement with one medical device company, but suggests that he was involved with multiple companies.
The Massachusetts subsidiary of an international surgical device manufacturer is under federal investigation for allegedly paying kickbacks to doctors to use its equipment, according to court documents and company disclosures.
more stories like this
The federal case against Blackstone Medical of Springfield got a boost yesterday when an Arkansas neurosurgeon pleaded guilty to soliciting and accepting kickbacks from a salesman who worked for Blackstone's parent company, Orthofix International, based in Netherlands Antilles, as well as three other companies.
Orthofix purchased Blackstone in 2006, and has set aside $50 million of the purchase price to pay for possible settlements of allegations involving improper payments to doctors. Blackstone manufactures and sells devices used in spinal surgery.
The Boston Globe story also noted that allegations were made about how the companies paid Chan.
Yesterday, Chan also agreed to pay $1.5 million to settle allegations against him in the whistle-blower suit, which alleges Blackstone and another company provided kickbacks in the form of bogus consulting contracts, fake research studies, and gifts to Chan and doctors across the nation who agreed to use the companies' devices in back surgeries. The whistle-blower suit, filed on behalf of the government, alleges that the scheme led to false claims by hospitals where the operations were performed that defrauded the federal Medicare and Medicaid programs.
I should note here that we posted extensively, most recently here, about how manufacturers of orthopedic devices paid orthopedic surgeons often huge amounts, ostensibly for consulting, speakers' honoraria, royalties, or research expenses. The new case of Dr Patrick Chan at least raises the possibility that sometimes payments labelled in this way made by commercial health care companies to physicians may be not merely sources of conflicts of interest, as we have discussed (here and here), but also kickbacks and bribes.
The Globe supplied some more details about the alleged kickbacks.
In the whistle-blower suit, Thomas alleges that Chan stopped buying equipment from him after Chan signed a $25,000 consulting agreement with Blackstone. Thomas had earlier rebuffed a request from Chan for cash kickbacks, even after Chan said salesmen for competing companies were providing them, according to the suit. Thomas also alleges that Blackstone, through a sales agent, offered similar bogus consulting contracts to other doctors in Arkansas, Missouri, Mississippi, and other states. The suit also alleges that Chan performed unnecessary surgeries. While he admitted guilt in the criminal matter, Chan did not admit wrongdoing in settling the whistle-blower case.
Finally, a story in the Searcy, Arkansas, Daily Citizen suggests other companies that may be involved.
A class action suit was filed against Chan and the medical supply companies Orthofix, Osteotech, Alphatec [presumably Alphatec Spine Inc] and Signus [presumably Signus Medical LLC] by attorney John Ogles of Little Rock in the case of Scotty Foster of Searcy.
A civil suit was filed by Eddie Don Glenn of Searcy against Chan and Orthofix, Osteotech and Alphatec Spine by attorney Watson Bell of Searcy.
The Rollins, Foster and Glenn suits were filed in White County Circuit Court and are assigned to judge Bill Mills.
A $2 million federal civil suit was filed by John Thomas in an attempt to recover money for the federal government which Thomas claims was illegally billed and collected.
That case will be heard by judge Leon Holmes and defendants are Chan, Michael M. Bailey, Bailey Management Group, the Foundation for Orthopedic and Spine Education and Research, Innovative Health Solutions, Motiontek, Blackstone and Synthes, Inc.
Again, what makes this story important is that it seems implausible that the case of Dr Patrick Chan was unique. If he in fact was being paid kickbacks, possibly by multiple companies, disguised as consulting payments and research funding, it is likely that many other doctors received such payments. At least the National Post story suggested some people are already thinking along these lines. Thus, this small cloud could presage a huge storm.
And again, the story reminds us of the pervasiveness of conflicts of interest in health care. Further, more of these conflicts may cross the line to criminality than we heretofore believed.
ADDENDUM (4 January, 2008) - See also comments on the Managed Care Matters blog by Joe Paduda, and on the WSJ Health Blog.
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