Surgeon’s Alleged Kickback Scheme Leads to $20 Million Settlement

A hospital in Sioux Falls, S.D., will pay $20 million to settle a whistleblower lawsuit alleging it allowed a neurosurgeon to take kickbacks for using implantable devices obtained from a distributorship he owned, the Department of Justice said Oct. 28.

Sanford Health allegedly received warnings about the neurosurgeon’s scheme from colleagues at the hospital, but it continued to employ him and allow him to profit from the use of devices in which he had a financial interest, the government said.

The hospital also allowed the neurosurgeon to engage in medically unnecessary procedures using the devices, it said. Some of the patients were covered by Medicare, which prompted the government to allege False Claims Act violations as well.

The settlement highlights the compliance risks associated with physician-owned distributorships, Curt L. Muller, special agent in charge with the Office of Inspector General in the Department of Health and Human Services, said in a statement.

Must Hire Corporate Monitor

“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,” Muller said. “Unfortunately, these distributors remain questionable.”

Sanford Health also agreed to enter into a corporate integrity agreement requiring it to maintain a compliance program, implement a risk-assessment program, and hire an Independent Review Organization to review its Medicare and Medicaid claims.

Sanford Health denied any liability or wrongdoing in connection with the settlement.

“We chose to settle because the amount is far less than the unnecessary costs and operational disruption that would have persisted for multiple years,” the hospital said in a statement.

The case is U.S. ex rel. Bechtold v. Asfora, D.S.D., No. 4:16-cv-04115, settlement 10/28/19.