New Focus Of Inquiry Into Bribes: Doctors

A long-running federal investigation into the orthopedic device industry’s suspected kickback payments to hip and knee surgeons now has the doctors in the spotlight.

These five medical device makers are required, under a federal settlement, to publicly list the consulting payments they make to doctors:

Having reached settlements with the five leading makers of artificial joints last year over the payments, the government has been focusing on the many doctors who receive money as the companies’ paid consultants.

“We are going to be looking at those soliciting kickbacks,” Lewis Morris, the chief counsel in the federal office that pursues civil complaints of Medicare fraud, told an audience of hundreds of doctors, company representatives and investors this month in San Francisco at the annual meeting of the American Academy of Orthopedic Surgeons.

The same message has gone out to health care lawyers attending legal education seminars in recent months and, directly from Christopher J. Christie Jr., the United States attorney in Newark, who is overseeing the investigation. Executives say Mr. Christie has addressed sales meetings of the five companies, which reached a settlement last fall to avoid prosecution on charges they had routinely paid illegal kickbacks to surgeons.

Mr. Christie said “ ‘I’ve dealt with the supply issue, now I need to deal with the demand issue,’ ” recalled Edward B. Lipes, the executive vice president in charge of surgeon relationships at the device maker Stryker Corporation, the first of the companies to cooperate in the investigation, which began in 2005.

Although industry executives say they have heard that some doctors have received subpoenas, none have been publicly identified. “Our investigation is continuing into the conduct of individual surgeons,” Michael Drewniak, the spokesman for the United States attorney’s office in Newark, said Friday.

Mr. Drewniak declined to say whether any of the doctors had become targets of the investigation.

The government has not argued that any of the kickbacks led to unnecessary knee or hip surgery or maltreatment of any patients. Nor has it established a direct link to higher Medicare costs. Switching a patient from one company’s device to another would not change the amount Medicare pays hospitals for an implant.

But kickbacks might raise the overall cost of health care. Doctors can be convicted of violating Medicare’s antifraud statutes simply for submitting a bill for a procedure linked to a kickback, whether or not the procedure was necessary.

Besides Stryker, the original targets of the investigation were Biomet; DePuy Orthopaedics, a unit of the Johnson & Johnson Company; Smith & Nephew; and Zimmer Holdings. Those four agreed to pay $310 million in fines to settle civil charges.

In December, two smaller competitors, the Wright Medical Group and Exactech, received subpoenas, indicating that the government is intent on making sure that the entire major joint business — the $6 billion core of the orthopedics industry — is playing on the same field.

From the government’s perspective, the investigation has already been successful. Even before the settlements with the device makers, those companies and others had sharply curbed entertainment, travel payments and other practices the government regarded as possibly influencing doctor’s medical decisions. And with the settlements, still tighter restrictions were forced on the companies.

To avoid prosecutions that could have threatened the companies’ Medicare business — a crushing blow in a segment of the health care industry where the average patient is 68 years old — the device makers not only agreed to pay the fines but to operate for 18 months under stricter federal scrutiny than military contractors do.

Mr. Christie’s appointed monitors, overseers whom the companies pay monthly retainers plus up to $895 an hour, screen every payment the companies make to doctors who help with training or with developing new products.

Each company is required to develop and gain government approval of a “needs assessment” detailing every task for which it will engage doctors this year. The settlements also set a $500-an-hour ceiling for most consulting agreements.

In addition, all five were required to disclose on their Web sites cash payments last year to each doctor or medical group they dealt with, as well as compensation paid each of them in the form of plane tickets, lodging, food and gifts.

The companies halted nearly all types of payments to doctors and many education programs while completing the needs assessment, including previously pledged support for groups like the American Academy of Orthopedic Surgeons.

Stryker and Smith & Nephew say they have received final approval for their 2008 assessments. Other companies are at various stages of getting their assessments approved.

For all the disclosures and scrutiny though, the details of the misconduct that attracted the Justice Department’s attention remain murky.

The companies were allowed to deny any wrongdoing in the criminal and civil settlements they negotiated. The four that signed so-called delayed prosecution agreements — Biomet, DePuy, Smith & Nephew and Zimmer — have been promised that the criminal cases filed against them in September will be dropped a year from now if they live up to compliance procedures in their agreements.

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