Spinal Device Manufacturer Innovasis Inc. and Executives Settle Kickback Allegations for $12 Million

Spinal device manufacturer Innovasis Inc. and its senior executives, Brent Felix and Garth Felix, have agreed to pay a total of $12 million to resolve allegations of violating the False Claims Act.

The allegations involve paying kickbacks to spine surgeons to induce the use of Innovasis’s spinal devices, compromising the integrity of medical decision-making.

The Allegations and Settlement

The settlement addresses allegations that from January 1, 2014, through December 31, 2022, Innovasis provided improper remuneration to seventeen orthopedic surgeons and neurosurgeons.

These payments were purportedly made to encourage the use of Innovasis spinal implants and other equipment in medical procedures performed on Medicare beneficiaries, violating the Anti-Kickback Statute.

Nature of the Alleged Kickbacks

The improper remuneration allegedly included consulting fees, intellectual property acquisition and licensing fees, registry payments, and performance shares in Innovasis.

Additionally, it was reported that Innovasis funded luxury travel, lavish dinners, and holiday parties for surgeons, their office staff, and family members.

For instance, the company paid physicians for consulting services at rates far exceeding fair market value or for work that was never actually performed.

Similarly, Innovasis allegedly paid physicians above market rates for intellectual property that was neither valued prior to purchase nor used for meaningful product development.

One notable example involved Innovasis sponsoring a conference at a luxury resort in Deer Valley, Utah, covering travel, lodging, and high-end meals for the attending surgeons.

During this period, Brent Felix, the company’s founder, President, and Chairman of the Board, along with his brother Garth Felix, who held various leadership roles including Chief Financial Officer, allegedly controlled or directed the operations and strategic decisions related to these kickbacks.

Statements from Authorities

“Payments from medical device manufacturers intended to influence a physician’s judgment about which medical devices or supplies to select are illegal,” stated Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division.

He emphasized that patients deserve to know that medical devices are selected based on quality of care rather than improper payments.

U.S. Attorney Leigha Simonton for the Northern District of Texas added, “The integrity of our healthcare system is dependent upon physicians’ recommendations being motivated by patient health.

Any time we learn that physician recommendations are being corrupted by improper financial inducements, we will seek to hold those involved accountable.”

Special Agent in Charge Jason E. Meadows of the Department of Health and Human Services Office of Inspector General (HHS-OIG) commented, “Improper financial arrangements can compromise medical judgment and adversely influence the medical decision-making process. These arrangements have no place in our healthcare system.”

The Role of the False Claims Act

The Federal Anti-Kickback Statute prohibits offering or paying anything of value to induce referrals of items or services covered by Medicare and other federally funded programs.

This statute ensures that medical providers’ judgments are not influenced by financial incentives. The resolution of these allegations under the False Claims Act underscores the government’s commitment to combating healthcare fraud.

The Whistleblower Case

The civil settlement includes the resolution of claims brought under the qui tam or whistleblower provisions of the False Claims Act by Robert Richardson, a former Regional Sales Director for Innovasis.

Under these provisions, a private party can file an action for false claims on behalf of the United States and receive a portion of any recovery.

Richardson will receive approximately $2.2 million as his share of the recovery in this case. The qui tam case is captioned United States ex rel. Richardson v. Innovasis Inc., et al., No. 3:19-CV-02440-X (N.D. Tex.).

Government Efforts and Future Implications

The resolution of this matter resulted from a coordinated effort between the Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section, and the U.S. Attorney’s Office for the Northern District of Texas, with assistance from HHS-OIG.

Trial Attorneys Jessica E. Krieg, Olga Yevtukhova, and Adam J. DiClemente of the Justice Department’s Civil Division and Assistant U.S. Attorneys Andrew S. Robbins and George M. Padis for the Northern District of Texas handled the matter.

This case illustrates the government’s emphasis on combating healthcare fraud, with the False Claims Act serving as a powerful tool in this effort. Tips and complaints about potential fraud, waste, abuse, and mismanagement can be reported to the HHS at 800-HHS-TIPS (800-447-8477).

It is important to note that the claims resolved by the settlement are only allegations, and there has been no determination of liability.

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