Midwest Neurosurgeons: The Implant Commissions Behind the Practice’s Claims

The Midwest Neurosurgeons DS Medical settlement was a joint agreement to pay $825,000 to resolve allegations of spinal implant kickbacks involving the practice, the distributor and their owners. In a whistleblower case the government joined, it alleged that the practice’s surgeon chose implants that generated commissions for a distributorship owned by his fiancée, while the hospital and practice billed Medicare and Medicaid for the resulting care. For someone who knows the implant business, the important connection is between the product selected in the operating room, the commission it generated and the claims that followed.

The Department of Justice announced the settlement on March 22, 2023. Midwest Neurosurgeons was a Cape Girardeau, Missouri practice with a single physician, according to the government’s complaint. DS Medical supplied spinal implants for his surgeries. The practice’s role was central because it billed for the surgeon’s work and, the government alleged, helped cause the hospital claims too.

How Does Reimbursement Work for Medical Devices?

Medicare usually includes an implanted device’s cost within its payment for a hospital procedure or stay. The physician’s professional services generate a separate bill. In this case, the government’s complaint after it joined the case describes the transactions from implant selection through both sets of claims.

The hospital treated spinal implants as physician preference items. The surgeon could choose the manufacturer and product, obtain the implants directly or through a distributor, and use them in surgery. The hospital then received and paid the manufacturer’s invoice for the devices used. Where a distributor participated, the manufacturer typically paid it a commission based on what the hospital had paid.

The complaint described the hospital submitting claims to Medicare Part A and Medicaid for hospital services and supplies, including the implants. Midwest Neurosurgeons separately billed Medicare Part B and Medicaid for the surgeon’s services. That distinction puts the practice’s billing staff inside the story even though the hospital bought the hardware.

The split between selection and purchasing is built into this market. The Department of Health and Human Services’ Office of Inspector General explains in its 2013 alert on physician-owned entities that the physician may make or strongly influence the brand and type of implant. Here, the complaint describes the hospital paying the manufacturer’s invoice. The manufacturer invoice, distributor commission and professional claim each capture a different part of the same surgery. An insider who sees only one of them may still know why the choice was made.

A Distributor Dependent on One Practice

The government alleged that DS Medical depended almost entirely on the Midwest Neurosurgeons surgeon for business. From November 2008 through March 2012, he and his fiancée allegedly operated the distributor together for their mutual financial benefit. He used it as his virtually exclusive source of spinal implants, giving it a captive patient population and little financial risk or marketing expense.

The complaint put the first full month’s purchasing in perspective. In December 2008, the surgeon allegedly caused the hospital to order approximately $1,331,090 in spinal implants, more than twice as much as his nearest medical peer in the local market. DS Medical supplied virtually all of them.

The practice and distributor also shared employees and contractors, and DS Medical rented space from Midwest Neurosurgeons. According to the complaint, the surgeon helped manage the distributor and intervened when hospital employees challenged its prices. After meeting with a hospital employee, he reported that his preferred vendor would lower its prices.

The government also alleged a direct connection between commission negotiations and product selection. After a dispute over missing inventory and withheld commissions with one manufacturer, the surgeon stopped buying its implants and approached another manufacturer. Following a meeting attended by the surgeon and his fiancée, the second manufacturer raised DS Medical’s commission rate to 50%. The complaint alleged that the manufacturer understood the surgeon’s implant choices depended on that increase. Large purchases followed.

That is the decision an implant sales employee would recognize: a product switch tied, in the government’s account, to what the distributor would earn.

The Complaint Traced the Commissions to a Home

The alleged financial benefit reached the surgeon through spending by the distributor’s owner. The complaint said she used a DS Medical bank account and its commission revenue to buy the residence they shared. It described the purchase this way:

The government’s account joined the sale of an implant to a benefit inside the surgeon’s household. That is why the relationship between the businesses mattered as much as the name on a commission payment.

The 2020 Journal of Forensic and Investigative Accounting paper A Forensic Accountant’s Guide to the Most Potent Federal Laws Used Against Healthcare Fraud describes kickback arrangements as economic relationships that can extend beyond a simple payment for services, including indirect and noncash compensation. That analysis of health care fraud helps explain the evidence here: the commission deposits and the purchases made with them belong in the same account of the alleged benefit.

More Implants Meant More Commission Income

The government alleged that the surgeon changed his practice while DS Medical operated, performing more surgeries and generally using more implants in each surgery than before or afterward. Hospital staff saw the purchasing consequences. A hospital employee cited connectors priced at $3,150 through the surgeon’s vendor against $1,341 from another hospital vendor.

The distributor’s owner saw the same implant use from the sales side. The complaint described her messages:

Those messages give the alleged incentive a voice. The hospital was questioning the expense while the person earning commissions celebrated the volume. Patients had the hardware implanted in their bodies, and taxpayers funded the Medicare and Medicaid payments. The complaint alleged that each treatment decision involving DS Medical’s products affected the distributor’s income and financially benefited the surgeon’s fiancée.

What the Distributor Was Supposed to Do

Implant distribution includes practical work around surgery. A Senate Finance Committee staff report describes manufacturers and their representatives handling delivery, stocking, restocking, instrumentation and assistance in the operating room. Those services put sales and clinical staff close to both the product and the purchasing decision.

The government’s complaint alleged that DS Medical struggled with those functions. Its owner lacked prior spinal implant distribution experience and could not personally evaluate competing products. For complex surgeries, it requested help from manufacturer employees. Manufacturers also raised inventory discrepancies after audits.

The allegations concern who supplied the expertise, who managed the stock and what the distributor contributed when the surgeon selected its products. The government alleged that almost all significant physician business came from the same surgeon whose household benefited from the proceeds.

The Reversal Changed the Civil Outcome

The government first won a civil judgment against the defendants. In July 2022, the Eighth Circuit reversed it and required a new trial because the jury had been given the wrong instructions about connecting the alleged kickbacks to the bills. The parties later settled.

The connection between the money, the implant choices and the bills was central to the case.

The Practice’s Suspended Medicare Payments

The settlement agreement records a part of the case the announcement does not. Effective December 1, 2017, the Centers for Medicare & Medicaid Services suspended Medicare payments to the surgeon and to Midwest Neurosurgeons, based on the government’s determination that credible allegations of fraud existed. The surgeon and the practice denied those grounds, and the agreement states that it is not a concession that the suspension was well founded.

By March 7, 2023, the government held $410,988 from that suspension. The agreement counted it toward the first $450,000 of the $825,000 settlement, so the cash added at signing was $39,012. The remaining $375,000 was due in three annual installments with interest.

A separate Medicare review stayed outside the settlement. A program integrity contractor opened a review of the practice’s claims in November 2017, covering claims outside the settled conduct, and in September 2022 found that the practice had been overpaid by $899,816. A demand letter followed in October 2022. The surgeon and the practice denied any overpayment and appealed, and the agreement states that it does not resolve that demand.

What Kind of Proof Is Needed to Be a Whistleblower?

In a healthcare fraud case like this, the evidence must connect implant decisions, financial benefits and the resulting claims. We work with you to make those connections. The Midwest Neurosurgeons complaint made those connections through purchasing comparisons, commission negotiations, hospital emails, text messages and the use of distributor funds. Each explained a different part of the alleged arrangement.

The people who brought the case came from different parts of the business. The Justice Department’s account of joining the whistleblower case identifies physicians, a spinal implant salesperson and a former Midwest Neurosurgeons employee. The whistleblowers’ complaint identifies that former employee as a certified surgical assistant. Their professional perspectives reached beyond the claims department. Our work with an insider starts with the decisions they understand and connects them to the payments and claims those decisions produced.

How Much Does Medicare Fraud Whistleblower Pay?

A whistleblower case under the False Claims Act can pay 15% to 30% of what the government recovers. In the Midwest Neurosurgeons case, the settlement resolved claims brought by whistleblowers.

You Know How the Implant Was Chosen

If you know why a surgeon switched products, how commissions were negotiated or what the practice billed, speak with our whistleblower experts about how the implants were chosen. We build the case with you and bring in medical device fraud whistleblower lawyers who understand implant sales and provider billing. From the first conversation through the recovery effort, we are your partners in building the strongest case the evidence supports.