By Fred Schulte, John A. Hartford Senior Correspondent on the enterprise team. and Elizabeth Lucas, data editor, who specializes in data analysis and reporting for the KHN enterprise team.Originally published at Kaiser Health News.
Dr. Kingsley R. Chin was little more than a decade out of Harvard Medical School when sales of his spine surgical implants took off.
Chin has patented more than 40 pieces of such hardware, including doughnut-shaped plastic cages, titanium screws and other products used to repair spines — generating $100 million for his company SpineFrontier, according to government officials.
Yet SpineFrontier’s success arose not from the quality of its goods, these officials say, but because it paid kickbacks to surgeons who agreed to implant the highly profitable devices in hundreds of patients.
In March 2020, the Department of Justice accused Chin and SpineFrontier of illegally funneling more than $8 million to nearly three dozen spine surgeons through “sham consulting fees” that paid them handsomely for doing little or no work. Chin had no comment on the civil suit, one of more than a dozen he has faced as a spine surgeon and businessman. Chin and SpineFrontier have yet to file a response in court.
Medical industry payments to orthopedists and neurosurgeons who operate on the spine have risen sharply, despite government accusations that some of these transactions may violate federal anti-kickback laws, drive up health care spending and put patients at risk of serious harm, a KHN investigation has found. These payments come in various forms, from royalties for helping to design implants to speakers’ fees for promoting devices at medical meetings to stock holdings in exchange for consulting work, according to government data.
Health policy experts and regulators have focused for decades on pharmaceutical companies’ payments to doctors — which research has shown can influence which drugs they prescribe. But far less is known about the impact of similar payments from device companies to surgeons. A drug can readily be stopped if deemed harmful, while surgical devices are permanently implanted in the body and often replace native bone that has been removed.
Every year, a torrent of cash and other compensation flows to these surgeons from manufacturers of hardware for spinal implants, artificial knees and hip joints — totaling more than $3.1 billion from August 2013 through the end of 2019, a KHN analysis of government data found. These bone specialists make up a quarter of U.S. doctors who have accepted at least $100,000 or more, and two-thirds of those who raked in $1 million or more, from the medical device and drug industries last year, the data shows.
“It is simply so much money that it is staggering,” said Dr. Eugene Carragee, a professor of orthopedic surgery at the Stanford University Medical Center and critic of the medical device industry’s influence. Much of the money is deemed to be compensation for consulting duties or medical research, or royalties for inventing, or fine-tuning, new surgical tools and techniques. In some cases, it pays for trips or splashy junkets or rewards surgeons for promoting products to their peers.
Device makers say the long-established practice leads to higher-quality, safer products. “Doctors help develop and refine medical devices, and they even create new devices themselves, sharing their intellectual property with companies to help save and improve patients’ lives,” said Scott Whitaker, president and CEO of AdvaMed, the medical technology industry’s trade group.
But industry whistleblowers and government investigators say all that money changing hands can corrupt medical judgment and tempt surgeons to perform unnecessary and wasteful operations. In ongoing lawsuits, patients say they have suffered life-altering injuries from screws or other spinal hardware that snapped apart or live with disabilities they blame on defective knee or hip implants. Patients alleging injuries range from seniors on Medicare to celebrities such as Olympic gold medalist Mary Lou Renner, who had surgery to replace both her hips. The gymnast sued device maker Biomet in January 2018, alleging the hip implants were defective. The suit has since been settled under confidential terms.
The case of Chin’s company, SpineFrontier, is among more than 100 federal fraud and whistleblower actions, filed or settled mostly in the past decade, that accuse implant surgeons of taking illegal compensation from device makers — from surgeon entrepreneurs like Chin to marquee names like Medtronic and Johnson & Johnson. In some cases, device makers have paid hundreds of millions of dollars in fines to wrangle out of trouble for their involvement, often without admitting any wrongdoing.
Court pleadings examined by KHN identified more than 700 surgeons who have taken money, including dozens who pocketed millions in royalties, fees or other compensation from 2013 through 2019.
The names of hundreds more surgeons were redacted in court filings or sealed by judges.
Court filings named 35 spine surgeons who used SpineFrontier’s surgical gear, some for years. At least six of those surgeons have admitted wrongdoing and paid a total of $3.3 million in penalties. Another has pleaded guilty to criminal charges. It’s illegal under federal law to accept anything of value from a device maker for using its wares, though most offenders don’t face criminal prosecution.
Chin, 57, who lives in Fort Lauderdale, Florida, and owns SpineFrontier through his investment company, declined comment about the DOJ lawsuit or the consulting agreements.
“There is a court date [for the DOJ case] as ordered by a judge,” Chin said via email. “If we get to that point the facts of the case will be litigated.”
Back Surgeries Under Scrutiny
The nation’s outlay for spine surgery to treat back pain, or to replace worn-out knees and hips, tops $20 billion a year, according to one industry report.
Taxpayers shoulder much of that cost through Medicare, the federal program for those 65 and older, and Medicaid, which caters to low-income people.
In one common spinal procedure, surgeons may replace damaged discs with an implant and screws and metal rods that hold it in place. The demand for surgery to replace worn-out knees and hips also has mushroomed as aging boomers and others seek relief from joint pain that restricts their movement.
Perhaps not surprisingly, the competition for sales of orthopedic devices is fierce: Some 250 companies proffer a dizzying array of products. Industry critics blame the Food and Drug Administration, which allows manufacturers to roll out new hardware that is substantially equivalent to what already is sold — though it often is marketed as more durable, or otherwise better for patients.
“The money is just phenomenal for this medical hardware,” said Dr. James Rickert, a spine surgeon and head of the Society for Patient Centered Orthopedics, an advocacy group. He said most of the products are “essentially the same,” adding: “These are not technical instruments; [it’s often] just a screw.”
Hospitals can end up charging patients $20,000 or more for the materials, though they pay much less for them. Spine surgeons — who make upward of $500,000 a year — bill separately and may charge $8,000 to $20,000 for major procedures.
Which equipment hospitals choose may fall to the preference of surgeons, who are wooed by manufacturing sales reps possibly present in the operating room.
And it doesn’t stop there. Whistleblower cases filed under the federal False Claims Act allege a startling array of schemes to influence surgeons, including compensating them for joining a medical society created and financed by a device company. In other cases, companies bought billboard space or other advertising to promote medical practitioners, hired surgeons’ relatives, paid for hunting trips — even mailed checks to their homes.
Orthopedic and neurosurgeons collected more than half a billion dollars in industry consulting fees from 2013 through 2019, federal payment records show.
These gigs are legal so long as they involve professional work done at fair market value. But they have drawn fire as far back as 2007, when four manufacturers that dominated the hip and knee implant market, including a J&J division, agreed to pay $311 million to settle charges of violating anti-kickback laws through their consulting deals.
KHN found at least 20 whistleblower suits, some settled, others pending, that have since accused device makers of camouflaging kickbacks as consulting work, including paying doctors to sit on suspect “advisory boards” or other activities that entailed little work to justify the fees.
In November 2019, device maker Life Spine and two of its executives admitted to paying consulting fees to induce dozens of surgeons to use Life Spine’s implants in the operating room. In all, 21 of the top 30 Life Spine adopters were paid and they accounted for about half its total device sales, according to the Justice Department. Life Spine and the executives paid a total of $6 million in penalties. The company did not respond to requests for comment.
Similarly, SpineFrontier received “the vast majority” of its sales, more than $100 million worth, from surgeons who were compensated, the Justice Department alleges. Often, they were paid by way of a “sham” company run by Chin’s wife, Vanessa, from a mail drop in Fort Lauderdale, according to the Justice Department. Vanessa Dudley Chin, a defendant in the DOJ civil case, had no comment.
Kingsley Chin told KHN via email that he takes no salary from SpineFrontier, based in Malden, Massachusetts. In 2013, Chin received $4.3 million in income from the company, according to court filings in a divorce case in Philadelphia from an earlier marriage. In 2018, SpineFrontier valued Chin’s interest in the company at $75 million, according to government records, though its current worth is unclear.
SpineFrontier’s management thought paying doctors was “the only reliable way to steadily increase its market share and stave off competition,” Charles Birchall, a former business associate of Chin’s, alleged in a whistleblower complaint. The case is one of two whistleblower suits filed against SpineFrontier that the DOJ has joined and consolidated. Chin has yet to file a response in court.
From March 2013 through December 2018, the company offered some surgeons $500 or more an hour for “consulting,” which could include the time they spent operating on patients — even though they already were being paid by Medicare or other health insurers. Other surgeons were paid repeatedly to “evaluate” the same products, though their feedback was “often minimal or nonexistent,” according to the DOJ complaint.
Patient Injuries Pile Up
While the payments have piled up for doctors, so have injuries for patients, according to lawsuits against device makers and whistleblower testimony.
Orthopedic surgeon-turned-whistleblower Dr. Manuel Fuentes is suing his former employer, Florida device maker Exactech, alleging it offered “phony” consulting deals to surgeons who had complained about alarming defects in one of its knee implants.
Their findings should have been forwarded to the FDA to protect the public, Fuentes and two former Exactech sales reps alleged in their suit. Instead, the company paid the surgeons “to retain their business and secure their silence” about patients needlessly undergoing a second operation to address the defects implanted in the first, according to the suit. Lawyer Thomas Beimers, who represents Exactech in the case, said the company “emphatically denies the allegations and looks forward to presenting the real facts to the court.” In a court filing, the company said the suit was “full of conclusory, vague and immaterial facts” and said it should be dismissed.
In Maryland, spine surgeon Dr. Randy F. Davis faces a lawsuit filed in early 2020 by 14 former patients who claim he implanted counterfeit hardware from a device distributor that had paid him hundreds of thousands of dollars in consulting fees and other compensation.
Davis used the hardware, which had not been FDA-approved, on about 250 patients at the University of Maryland Baltimore Washington Medical Center in Glen Burnie, Maryland, according to the suit. Several patients say screws or other implants failed and they sustained permanent injuries as a result. One woman said she was left with little feeling in her right foot and needs a cane or walker to get around. Others claim “extreme mental anguish” for fear the hardware inside them will fail, according to the suit.
The patients allege that Davis improperly disposed of defective screws and other hardware he removed rather than send the items for analysis or report the failures to authorities. Instead, the University of Maryland hospital sent “hush” letters to patients that falsely told them that no defects had been found, according to the suit. A spokesperson for the hospital, which also is a defendant in the suit, denied the allegations, noting: “We will vigorously defend this lawsuit and at its conclusion are quite confident we will prevail.” Davis and his lawyer didn’t respond to repeated requests for comment. The lawsuit is pending in Anne Arundel County state court.
Surgeons are free to implant devices they helped bring to market or promoted, though doing so can prompt criticism when injuries or defects occur.
That happened when three patients filed lawsuits in 2018 against Arthrex, a Florida device company. The patients argued they were forced to undergo repeat operations to replace defective Arthrex knee devices implanted by Pennsylvania orthopedic surgeon Dr. Thomas Meade.
Meade was not a defendant in the cases. But the patients accused him of misleading them about the product’s safety and a recall. One noted that Meade had served as a prominent consultant to Arthrex and had “participated in the design, testing, marketing, promotion and sales” of the knee implant. The patient alleged that Arthrex had paid Meade more than $250,000 for work that included “promotional speaking, travel, lodging, and consulting.”
In court filings, Arthrex admitted making payments to Meade for “consulting and royalties” but denied wrongdoing. The cases were settled in 2020. Meade did not respond to requests for comment.
Chin’s dual roles as SpineFrontier’s CEO and user of its hardware was called a “huge” conflict of interest by a judge in a pending malpractice case filed against him and the company in South Florida.
In that case, Miami resident Patrick Chapoteau alleges Chin performed back surgery in 2014 using SpineFrontier hardware even though it had little chance of success. According to the suit, a Chin-designed screw implanted to stabilize Chapoteau’s spine broke in half, causing him pain and disabling injuries.
In a legal brief, Chin’s lawyers argued that he regularly operates on people with disabling back problems, noting: “The surgery is sophisticated and challenging. On a few rare occasions, his patients have not obtained the relief they expected or experienced unanticipated complications that required additional care.”
Joseph Wooten, a former Chin patient and Florida power company employee, alleged in a 2014 lawsuit in Broward County Circuit Court that Chin had 15 previous malpractice claims that had ended in more than $8 million in settlements, an assertion Chin’s lawyers disputed.
“He never told me of his bad record injuring people,” Wooten, 64, wrote in a court filing. He and his wife, Kim, said the surgery caused “debilitating and life-altering injuries.” The case has since been settled. Chin acknowledged no wrongdoing and the terms are confidential.
KHN reviewed court pleadings in nine settled malpractice cases in Philadelphia, where Chin served on the faculty of the University of Pennsylvania Medical School from 2003 to 2007, and six in South Florida filed since 2012. Details of the settlements are confidential. Five of the six South Florida cases are pending, including one filed in December by the widow of a man who died shortly after spine surgery. In all the cases and settlements, Chin has denied negligence.
In her lawsuit pending against Chin in South Florida, Nancy Lazo of Hialeah Gardens, Florida, said she slipped and tumbled down the stairs outside her Miami office, landing on her back and arm. When the pain would not go away, she turned to Chin and had two operations, in 2014 and 2015. Her lawyers allege that a SpineFrontier screw Chin implanted in her spine in the second procedure caused nerve damage. Lazo, 51, a former billing clerk with two adult sons, said she can no longer work and remains in “constant” pain. “Based on what my doctors have told me,” she said, “I will never get back to normal.” Chin denied any negligence and the case is pending.
Government Struggles to Keep Pace
Concerns that industry payments can corrupt medical practice have been aired repeatedly at congressional hearings, in media exposés and in federal investigations. The recurring scandals led Congress to require that device makers and pharmaceutical companies report the payments, starting in August 2013, to a government-run website called Open Payments. That website shows that payments to all doctors have risen from $8.6 billion in 2014 to just over $10 billion last year. A recent study found payments by device makers exceeded those of pharmaceutical companies by a wide margin.
Both the North American Spine Society and the American Academy of Orthopaedic Surgeons told KHN that close ties with the industry, while seeming to generate huge payouts to some surgeons, lead to the design of safer and better implants. “These interactions are really essential for good outcomes in patient care and that needs to be preserved,” said Dr. Joshua J. Jacobs, who chairs the orthopedic surgery department at Rush University Medical Center in Chicago and the AAOS’ ethics committee.
Although more than 600,000 American doctors lap up industry largesse, most do so through small payments that cover the cost of food, drinks and travel to industry-sponsored events. When it comes to big money, however, orthopedists and neurosurgeons dominate, collecting 25% of the total — even though they represent only 5% of the doctors accepting payments, according to the KHN analysis of Open Payments data.
Dr. Charles Rosen, a spine surgeon and co-founder of the advocacy group Association for Medical Ethics, said he was once offered $2,000 just to show up and watch an industry-sponsored panel. “It was quite unbelievable,” he said.
Rosen said while he believes a “relatively small number” of surgeons cash whopping industry checks, many who do so are influential figures who can “help direct medical care.”
Government data confirms that even as several orthopedic and neurosurgeons received tens of millions of dollars in 2019, 81% of them got less than $5,000 from industry.
Federal officials recently signaled their displeasure with the hefty fees paid to doctors who promote their products to peers, especially at restaurants, entertainment or sports venues that feature free food and booze but little educational content. In November, the inspector general at the Department of Health and Human Services issued a special fraud alert that such gestures could violate anti-kickback laws.
Companies that ignore the reporting law can be fined up to $1 million, though no fines were levied from 2014 through spring 2020, according to a CMS report. That changed in October, when device giant Medtronic agreed to pay the government $9.2 million to settle allegations that it paid kickbacks to Sioux Falls, South Dakota, neurosurgeon Dr. Wilson Asfora to promote its goods. Officials said the company sponsored more than 100 events at a Brazilian restaurant owned by the surgeon to clinch the sales. Just over $1 million of the fine was assessed for failing to report the transactions. A Medtronic spokesperson said the company fired or took other disciplinary action against the sales employees involved and “remains committed to maintaining the highest standards of ethical conduct.”
KHN identified four spinal device makers — including SpineFrontier — that have been accused in whistleblower cases of scheming to hide consulting payments from the government.
Responding to written questions, a CMS spokesperson said the agency “has multiple formal compliance actions pending which it is unable to discuss further at this time.”
But penalties for paying, or accepting, kickbacks often are small compared with the profits they can generate.
“Some people would say if you penalize companies enough, they won’t be making these offers,” said Genevieve Kanter, an assistant professor at the University of Pennsylvania Perelman School of Medicine. She said small fines may be chalked up to the “cost of doing business.”
The Federation of State Medical Boards does not keep data on how often its members discipline doctors for civil kickback offenses, according to spokesperson Joe Knickrehm. The federation has “long advocated for stronger reporting requirements,” Knickrehm said.
Justice Department officials would not discuss whether they are seeking fines from more surgeons. But in a statement in April 2020, then-U.S. Attorney for the District of Massachusetts Andrew E. Lelling noted that the government will investigate any doctor “who accepts money from a device manufacturer simply for using that company’s products.”
This pretty much spells out why we can’t have a health care system, only a health industry.
‘But industry whistleblowers and government investigators say all that money changing hands can corrupt medical judgment and tempt surgeons to perform unnecessary and wasteful operations.’
Imagine this company also manufactured artificial legs and also had such deals with these surgeons. So would you have these surgeons unnecessarily taking off injured legs so that the patients could be fitted with one of those artificial legs?
Things were simpler forty years ago, when I heard that the most important property for an implantable synthetic material to have is being white. “Because if it’s not white, the surgeons won’t use it.”
It is worse than this article outlines and a lot more generalized. A lot of this is lawyer driven as well. Spine surgery is for backache which is generally poorly understood on purpose and a common cause (the most common) of worker’s comp claims and personal injury claims. Lawyers are looking at a 30,000 settlement for a soft tissue back claim but if they can get a surgeon to implant a lot of metal which shows nicely on an X-Ray in a jury trial and get a huge treatment bill you might be looking at 500,000 or a million or even more. And the lawyer in a PI case is going to get a third and many get referral fees from the doctors they send the claimants too. There are a million ways to hide all this but it comes out of the US healthcare budget. And most lawyers from tier 2 and 3 law schools like our lawyer in chief depend on this kind of work. The white shoe firms want Ivy League tier one graduates. A lot of patients will climb on the OR table for that sort of outcome especially our laboring class of third world illegal migrants. They get their cash and can return to their home country and open a little business and enter the middle class if they are enterprising and if not they can go to pain clinics for injections and Vicodin and detoxification ad nauseum on Medicare since almost all go on SSI at the end. Recently, a few orthopedic surgeons and neurosurgeons have done jail time in California but they were the small fry. The big players can buy immunity from the government with a few appropriate political and charitable donations. Look up Pacific Hospital in Long Beach on Google. This problem is a major reason no manufacturer in his right mind is going to set up business in California or New York unless they have to. The only solution is to put all doctors on salary with no bonus for production or patient satisfactions and they cannot be allowed to work on the side. And then we need tort reform. England has a good model medically and legally that could work in the US with more funding even better.