Feds target physician-owned companies for unnecessary surgeries

Federal prosecutors filed a lawsuit last week against a network of physician-owned companies. They said it involved 35 doctors nationwide and that it led some of them to perform risky surgeries that were not necessary, reports CBS News correspondent Jeff Glor.

Last year CBS News reported a story focused on a doctor named Aria Sabit. He is now accused of overbilling Medicare and harming patients, simply to sell more hardware.

Kevin Reynold's mother, Lillian Kaulback, suffered serious complications after Sabit performed back surgery on her. She passed away in May 2011.

"The independent team asked me not once, but twice to pull the plug on her. They couldn't do anything. I said no," Reynolds told CBS News in a story that aired last October.

Now the Justice Department is saying her surgery was not necessary and that Sabit performed it because he was profiting off of the hardware that he put in her back. A single pedicle screw like the ones he implanted in her spine can cost $100 to make and sell for $1,000.

Reynolds said Sabit never told him about having an ownership stake in Apex Medical Technologies LLC, the company where the screws came from.

Prosecutors said Sabit was part of a network of physician-owned companies across the country started by Bret Berry and his business partner, Adam Pike.

Some of the most troubling details in the complaint came from an undercover recording of Berry and Pike trying to recruit a surgeon. They told him their doctors make enough to "put their kids through college" in the first two months alone, but that it should all be kept secret.

"Our job is...to let everyone outside...think that you're just using this product," Berry said. "We don't want anyone to know that you're an owner."

Republican Sen. Orrin Hatch has been looking into physician-owned companies for years.

"If you have doctors who are over-utilizing a medical device strictly because they can make more money out of it...you have to conclude, 'Hey, wait a minute, there's something wrong here,'" he said.

Hatch said the Justice Department's actions mark a turning point, and he is now questioning whether these companies should be legal at all.

"My personal belief is doctors should not invest in medical devices that they're going to utilize in their practice...I would limit that to serious invasive surgical devices," Hatch said.

Physician-owned companies now supply an estimated one-sixth of spinal implants nationwide. A report from the inspector general of the Department of Health and Human Services found the hospitals these companies serve average 28 percent more than spine surgeries.

Sabit, Berry and Pike would not grant CBS News an interview, but an attorney for Pike and Berry provided a statement in an email saying: "The government's allegations...are reckless and untrue. Our clients have always made every attempt possible to comply with the letter and spirit of the myriad of laws and regulations applicable here."

Last month Sabit lost his license to practice medicine in California, but he is still practicing in Michigan.

While he would not provide CBS News with a statement, in the past he has denied the allegations.