Articles by JCS
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PEPPER: The Death Knell for Spine Surgeries?
Climbing the Ladder of Opportunity
President Obama spoke of building “ladders of opportunity” in his State of the Union and Inauguration addresses. Due to his goal and other serendipitous events, let me explain that now is the time for the chiropractic profession to jump on this opportunity to ascend the healthcare ladder.
This could be the breakthrough our profession has been waiting for to assert ourselves as the portal of entry in spine-related disorders (SRDs).
While problems registering people for Obamacare have gotten most of the attention in the news recently, other policy issues to lower costs have suddenly appeared on the news radar that play to our advantage, namely the recent confrontation between the Centers for Medicare & Medicaid Services (CMS) and the medical spine care industry.
This should not be surprising inasmuch as this is the Affordable Care Act and the accumulating shocking evidence against the cost and clinical-ineffectiveness of spine surgery. A leading voice in spine care, Mark Schoene, the editor of The BACKLetter, an international spine research journal, admits “such an important area of medicine has fallen to this level of dysfunction should be a national scandal.” Well, this national scandal is finally being addressed head-on by CMS and OIG.
Payors to the Rescue
Indeed, the scandal and money in spine care are both shocking. According to the Short-Term National Q3FY13 Report−Target Area Summary Report, the cost for Medical Back Problems (non-surgical) nationwide for CMS alone totaled $381,556,000 from Q4 FY 2012 to Q3 FY 2013. Spinal Fusion totaled $3,504,705,000 for the same fiscal period.
Both categories together totaled $3,886,261,000, (that’s $3.8 billion) which explains why CMS is taking a very close look at the huge costs for spine surgeries and hospitalization.
Considering in 2006 the Dartmouth Institute of Health Policy suggested 30-40% of spine surgeries (and the associated hospitalization costs) were unnecessary, a 40% reduction in this $3.886 billion dollar cost equates to a $1.554 billion savings for one fiscal year alone.
The Office of Inspector General (OIG) also believes there is an abundance of Medicare fraud. According to the Medicare Fee-For-Service 2010 Improper Payment Report, the error rate was 10.5 percent or $34.3 billion in improper payments. 
In this light, it is odd that some pundits still wonder why Obamacare/healthcare reform is necessary. Obviously the need to control these outrageous medical costs and fraud are paramount and the new CMS PEPPER program will lead the way to real change in spine care.
PEPPER: The Death Knell for Spine Surgeries?
Since 2000, spine surgeons have gone wild and hospitals were their biggest enablers, so CMS has decided to enforce the guidelines and withhold payment for questionable disc fusions.
CMS has already rendered Decision Memos denying payment on many controversial issues in medical care, including spine procedures such as percutaneous image-guided lumbar decompression for lumbar spinal stenosis, lumbar artificial disc replacement, thermal intradiscal procedures, and now under scrutiny is spinal fusion for the treatment of low back pain secondary to lumbar degenerative disc disease.
According to Mr. Schoene, “A CMS non-coverage decision can be something of a death knell for proprietary surgical procedures, particularly in a condition where so many prospective patients are elderly and covered by Medicare or Medicaid insurance policies.” 
In March, 2012, spinal fusion procedures were finally placed on the Medicare Program for Evaluating Payment Patterns Electronic Report (PEPPER) target list that also included hospital admissions that have the highest propensity for improper payments.
Without meaningful competition or restraints, hospital charges rose drastically and arbitrarily in all three categories of spine surgeries from 2004 to 2009:
But this cash cow may now experience leaner times if CMS has its way. According to an article, “The Future of Spine Surgery: Pervasive Scrutiny & Shifting Trends Create Uncertainty for Inpatient Spine Procedures,” written by Todd Schuck, Senior Director-Business Development, Specialty Healthcare Advisers, CMS has given their regional payors, aka, Medicare Administrative Contractor (MAC), greater pre-payment authority allowing for denial of payment after a procedure has been performed. Each MAC can have slight variation of CMS policy called a local carrier determination (LCD).
Apparently the hospitals’ “open-door” policy for any surgeon to do any surgery on anyone for any reason is coming to an end. Perhaps of most significance to chiropractors is the requirement that patients scheduled for elective spinal fusion procedures must have well-documented attempts at various forms of conservative care beforehand, just as the Agency for Health Care Policy & Research (AHCPR) guideline #14 on acute low back pain in adults recommended twenty years ago.
“Low back pain is a common disorder affecting 80% of people at some point in their lives. Causes stem from a wide variety of conditions, although in some cases no specific etiology is identified. Age-related intervertebral disc degeneration, typically resulting in degeneration of the discs themselves, facet joint arthrosis, and segmental instability are causative factors. Initial management can include rest, exercise program, avoidance of activities that aggravate pain, application of heat/cold modalities, pharmacotherapy, local injections, lumbar bracing, chiropractic manipulation, and physical therapy. When conservative therapy (non-surgical medical management) is unsuccessful after at least 3 to 12 months, depending on the diagnosis, lumbar spinal fusion may be considered for certain conditions.”
According to Mr. Schuck, when any MAC performs a Spinal Fusion-Medical Necessity and Coding Analysis, they expect documentation in the patients' medical charts to reflect the appropriate diagnosis and include the following:
Finally, CMS and some private payors, such as the North Carolina BC/BS, now basically realize that “bad discs” are “red herrings,” adroitly described by Donald Murphy, DC, because the evidence does not support a purely pathoanatomical model for spine-related disorders because they also appear in pain-free people.
The Ax Man Cometh
This decision is a huge step up our ladder of opportunity when payors are denying payment for inefficient medical spine care based upon evidence-based reasons that will certainly reduce the tsunami of unnecessary spine surgeries.
This past October, 2013, an update from Palmetto Government Benefits Administrators (GBA), another regional MAC, revealed the results of their pre-payment service review of “Medicare-severity” diagnosis related groups (MS-DRG).
Palmetto's findings for MS-DRG 460 (spine fusions) in North Carolina, Virginia, and West Virginia exposed high error rates regarding lack of medical necessity documentation, no doubt causing a panic among spine surgeons and hospitals when this Palmetto MAC refused to pay them.
According to data published on the Palmetto GBA website, a pre-payment review of 251 claims in North Carolina, Virginia, and West Virginia led to 168 claims either completely or partially denied. The total reviewed was $6,356,890 and $4,141,771 was denied, resulting in a charge denial rate of 65%.
Imagine the shock wave when payment for 65% of fusions were denied! Finally, there appears to be some sanity in the medical spine industry, at least by the payors at CMS.
According to Barry Zeman, former hospital CEO and consultant for Specialty Healthcare Advisers, “Today, with greater pre-payment review authority being given to MACs, it's creating a whole new ball game. Under a pre-payment review, MACs have greater authority to examine the medical necessity documentation prior to making payment…With ICD-10, the days of performing cases with less than adequate documentation are gone forever.”
Bloody Hospital Hands
Certainly hospitals are not above this fray. OIG and CMS are keenly interested to decrease not only unnecessary surgeries, but unnecessary hospitalization that is the most obvious benefactor and expensive element in this medical fraud.
On the average, Medicare pays these hospitals about $31,000 for spinal fusions and surgeons about $12,000 for procedures. Despite pleas of being nonprofit, hospital CEOs earn an average of almost $600,000 a year and the CEOs at hospitals with teaching institutions have a median salary of more than $1.66 million.
The next round of the PEPPER guidelines has flagged these short-term acute care hospitals that are performing more than their “fair share” of spinal fusion procedures. CMS will focus on the medical necessity and, because most spinal-fusion procedures are performed on an inpatient basis to qualify for Medicare reimbursement, hospitals will have to evaluate whether patients need them at all. No longer can hospitals have an open door policy to any surgeon who wants to fill a bed.
“This target area is different from most other admission target areas because we are not just asking hospitals to question whether the patient needed to be admitted. It’s deeper—it’s whether the patient needed the procedure, and if the patient didn’t need the procedure, the admission most likely is not medically necessary,” says Kim Hrehor, project director for TMF Health Quality Institute, which generates PEPPERS for CMS.
“Medicare now requires physicians to document more conservative treatments before ordering spinal fusion, an expensive surgery that may have serious repercussions… you would hope physicians would try the conservative route first without jumping into surgery,” according to Ms Hrehor.
Follow the Money
The media has also jumped on this tsunami of spine surgeries and hospitalization. On Spinal Fusions Serve As Case Study For Debate Over When Certain Surgeries Are Necessary” by .
This is a must-read that includes the frank conclusion:
"But at a broader level, the rapid rise of spinal fusions in the United States, especially for diagnoses that generally don’t require the procedure, has raised questions from experts about whether, amid medical uncertainty, the financial rewards are spurring the boom."
The Washington Post investigation clearly illustrated this tsunami of spine surgeries in Florida alone:
The Post article revealed the huge costs of hospitalization and surgery for back fusion, so is it any wonder why hospitals do not want chiropractors on staff when they would lose over $100,000 per case?
DCs are too cost-effective to please hospital administrators inspired by a “perverse motivation” to use the most expensive treatments. Obviously money, nay, a lot of money, still drives the American medical spine industry despite the research and guidelines to the contrary.
The Washington Post article also revealed that the Department of Justice is prosecuting a landmark case in what could turn out to be the largest Stark Law violation in U.S. history against Daytona, Florida-based Halifax Medical Center [U.S. ex rel. Baklid-Kunz v. Halifax Medical Center].
The Stark Law concerns a limitation on certain physician referrals with hospitals if the physician has a financial relationship such as ownership, investment, or compensation arrangements.
The government claims Halifax's contracts with nine physicians were improper, contending that the hospital improperly “incentivized” their physicians. Potential damages and penalties in the suit could hit $1 billion, making it one of the largest of its kind. In addition, the DOJ is seeking $750 million to $1 billion for 74,838 claims made between 2000 and 2010, totaling up to $823.2 million in penalties. 
Dr. Fredrico Vinas, a spine surgeon at the Halifax hospital is accused of performing spinal fusion procedures that were not medically necessary. A news release by the Halifax hospital said, “Dr. Vinas requires every patient to have failed maximal non-surgical treatment, extensive physical therapy with analgesics and anti-inflammatory drugs as well as procedures by an independent interventional pain specialist.” 
Notice there is no mention of chiropractic care or SMT in his definition of “maximal” non-surgical treatment. As well, this typical medical protocol of drugs, PT, and epidural injections by an “interventional pain specialist” preceding surgery is the same medical care that has already been branded as “the poster child for inefficient spine care.”
Not only is this case that of a whistleblower patient suffering failed back surgery against an alleged knife-happy surgeon enabled by a greedy hospital, it may also be a case of the lack of legal informed consent if Dr. Vinas did not mention chiropractic care as part of “maximal” non-surgical care.
The Post article said that the Halifax case will serve as a case study on the many financial incentives that come into play when a surgeon is deciding whether or not to operate, including kickbacks from Big Pharma, device manufacturers, MRI centers, and from hospitals that pay surgeons for filling beds.
For example, another recent investigation into medical payola by the Senate Committee on Finance found the medical device giant Medtronic paid one spine surgeon $1.28 million in royalties in the first three quarters of 2010.
According to the Washington Post, attempts by insurers and Medicare to curb excessive surgeries in the past have been squelched by negative publicity and heavy lobbying by the American Medical Association, the American Hospital Association, and the North American Spine Society (NASS) as we saw in the AHCPR aftermath.
In response to the Post article, the NASS Executive Committee responded with a press release stating:
“NASS is collaborating with Medicare and private insurers carriers to develop evidence-based guidelines for surgical intervention and to define conditions that are best treated without surgery. Spinal fusion is currently undergoing rigorous scrutiny; the indications for spinal fusion are being evaluated and re-evaluated constantly in an effort to develop optimal indications to serve the best interest of the patient."
Been There, Done That
Lest we remind CMS and NASS that despite “an effort to develop optimal indications to serve the best interest of the patient," the initial comparative study “to develop evidence-based guidelines” to determine the best algorithm for treatment began over twenty years ago when the AHCPR conducted the most extensive meta-analysis ever done.
Since 1994 many comparative studies31 have confirmed the inefficiency of medical spine care, such as the AHCPR’s conclusion only one in 100 cases of acute low back pain requires surgery. This agency also failed to recommend narcotic painkillers, epidural steroid injections, standard physical therapy, or the majority of medical methods routinely used by the medical spine industry for spine-related disorders. 
However, the AHCPR’s Patient Guide did list three “Proven Treatments” for acute low back pain in adults:
The recommendation for SMT should not come as a surprise considering the NASS also has admitted that spinal manipulation should be considered before surgery in the October, 2010, edition of The Spine Journal:
Several RCTs (random controlled trials) have been conducted to assess the efficacy of SMT (spinal manipulative therapy) for acute LBP (low back pain) using various methods. Results from most studies suggest that 5 to 10 sessions of SMT administered over 2 to 4 weeks achieve equivalent or superior improvement in pain and function when compared with other commonly used interventions, such as physical modalities, medication, education, or exercise, for short, intermediate, and long-term follow-up. Spine care clinicians should discuss the role of SMT as a treatment option for patients with acute LBP who do not find adequate symptomatic relief with self-care and education alone.
The NASS also admitted on its website:
Fusion under these conditions is usually viewed as a last resort and should be considered only after other conservative (nonsurgical) measures have failed. 
The admission by NASS that fusion should be a last resort and that SMT is a first resort has been unheard by the public and ignored by spine surgeons, hospitals, and general medical practitioners. Indeed, the medical inability to follow guidelines speaks louder than the lofty words expressed by the NASS “to develop evidence-based guidelines for surgical intervention and to define conditions that are best treated without surgery.”
It appears NASS is simply blowing smoke to buy time by obfuscating the situation, but hopefully that deceptive talk will soon change. According to Mr. Schuck, “It appears likely that concentrated examination of the spine market consisting of pre and post-payment reviews are here to stay” despite the protests of the NASS or hospitals CEOs.
PEPPER for Chiropractors
What does this PEPPER paradigm mean for the chiropractic profession—one hell of a lot, that’s for sure, if we play our cards right to climb this ladder of opportunity. But our ascension requires that we become a voice in this process.
If our leadership has ever made a strong case to expand our market share by positioning DCs as the portal of entry for SRDs, now is the time to do it. The obvious challenge for the chiropractic profession is to position itself to be the only physician-level leader in conservative spine care as America’s “primary spine provider” (PSP).
This is an easy case to make in light of the revelations about the dubious management of back pain by medical PCPs who have been shown to be “inept” in their training on musculoskeletal disorders, more likely to ignore recent guidelines, and more likely to suggest spine surgery than surgeons themselves.
Moreover, patients don’t realize that 50% of all medical schools do not even teach one class in musculoskeletal disorders. Indeed, researchers have found that medical primary care physicians are actually the least educated to diagnose and treat musculoskeletal chronic pain problems, and only 2% of medical PCPs refer to DCs.
The “national scandal” in spine care is fueled not only by their incompetence and misrepresentation of qualifications, but it is another example of medical fraud causing inefficiency.
The paradox of this ineptness of medical PCPs is that patients with chronic low back pain are more likely to see a family physician (65%) for their pain compared with orthopedists (56%), physical therapists (51% percent), and chiropractors (47% percent).
Obviously the clinical-effectiveness by DCs has proven our benefit as primary spine care providers. For example, a Washington State workers’ comp study found for patients whose first provider was a chiropractor, only 1.5% had surgery in contrast to 42.7% of workers who went through the typical medical system inevitably had surgery.
Indeed, satisfied patients have always been the mainstay of chiropractic care throughout the medical war against chiropractors. In a Congressionally-mandated pilot project conducted from April, 2005, to March, 2007, testing the feasibility of expanding chiropractic services in the Medicare program, 87% of patients in the study gave their chiropractor a level of 8 or higher with 56% rating their chiropractor with a perfect 10. 
The growing number of comparative research studies cannot be clearer that chiropractic stands at the top of cost-effective spinal treatments as Anthony Rosner, PhD, testified in 2003 before The Institute of Medicine: “Today, we can argue that chiropractic care, at least for back pain, appears to have vaulted from last to first place as a treatment option.”
This is the message we must take to CMS and Capitol Hill if we are to ascend to the top of our ladder of opportunity.
The Hard Climb Up the Medicare Ladder
Let me give you a short history lesson of chiropractic in Medicare to show the difficult climb up this ladder by our predecessors.
Although the CMS crackdown on this national scandal of unnecessary spine surgeries and hospitalizations will eventually play out to our benefit, the climb to inclusion and equality up the Medicare ladder has been a treacherous one with miss steps along the ascent, to say the least, as well as occasionally having the ladder pulled from beneath our feet, to say the worst.
The AMA bitterly opposed JFK’s legislation in 1960 for Medicare/Medicaid in a PR campaign dubbed Operation Coffee Cup lead by actor Ronald Reagan, but once signed into law by LBJ in 1965, the AMA quickly took control in its typical tyrannical fashion.
Although chiropractors were included in the original language of the bill, after clandestine political skullduggery by the AMA’s Committee on Quackery, chiropractors found themselves excluded in the enactment. Before Medicare was even enacted, we were one step in the hole.
In 1972, President Richard Nixon gave chiropractors one step up on the Medicare ladder with limited inclusion, but by 1994 the chiropractic profession found itself withering on the Medicare vine when Sec. Donna Shalala pulled the ladder out from beneath our feet by allowing Medicare+Choice managed groups to exclude chiropractors by allowing PTs to render our service. She also mandated that patients needed MD referrals to see DCs.
In fact, when Medicare managed care groups went to medical gatekeepers to enforce a "medically necessary" rule, utilization of the chiropractic service dropped by 85 percent.
The American Chiropractic Association (ACA) filed suit against HHS in November, 1998, and after much legal haggling as a direct result of the ACA’s lawsuit, the HHS, now headed by Sec. Tommy Thompson, issued a new policy directive on January 15, 2002 by the Center for Beneficiary Choices that suddenly gave DCs four steps up the Medicare ladder:
However, in October, 2004, chiropractors took a fall down the rungs when the U.S. District Court ruled that since MDs and DOs had universal (plenary) licenses, they were qualified to deliver the service and act as gatekeepers for the medical necessity of the chiropractic service. Two steps back down the Medicare ladder for DCs.
The ACA again appealed and on December 13, 2005, the U.S. Court of Appeals for the District of Columbia in Washington ruled the District Court had no jurisdiction to render the decision approving the use of MDs and DOs to render the chiropractic service. One step back up the ladder for DCs.
However, chiropractic took an unexpected step back up the Medicare ladder when the appeals panel also questioned the District Court's opinion on the issue of which health care providers are qualified to provide chiropractic services, not just which providers are licensed to provide such services.
The Court of Appeals emphasized the importance of "scope of competence" and “qualified to furnish” rather than the outmoded model of a plenary license being all the qualification required to deliver a skilled service.
Indeed, if that were the case, a medical general practitioner would be qualified to render brain surgery simply due to his/her medical license.
Attorney George McAndrews put it bluntly during the Trigon case:
“When patients are forced to take their health problems from a chiropractor to a medical physician [or PT] who isn't skilled in that area…that is a funneling of business from the most-skilled to the least-skilled providers.”
Then-ACA President Richard Brassard, DC, announced:
"We are happy that the issue is now whether or not a practitioner is 'qualified,' not whether or not a practitioner is simply licensed. The ACA's position has been and remains that only chiropractors are qualified by education and training to correct subluxations. Because of the Appeals Court's decision, chiropractors can continue to fight to safeguard their right to be the sole providers of this service, and to ensure Medicare patients' rights to access doctors of chiropractic." 
This point remains paramount today in regards to who is best qualified to render “conservative care” for patients with acute LPB in Medicare.
Although back pain can have various causes that are helped by various professionals, such as disc derangement, radiculopathy, and muscle trigger points, the single-largest source is due to joint pain. Two studies by Murphy and Hurwitz found joint dysfunction was the cause of neck pain in 69% of cases and the cause of low back pain (lumbar and sacroiliac) in 50% of patients.,
Considering there are over 300 joints in the entire spinal column, this should not come as a surprise why spinal manipulative therapy (SMT) is considered the leading treatment in the majority of cases.
The question whether or not SMT and chiropractic care is the best type of conservative care for the pandemic of low back pain was also explained in testimony by John McMillan Mennell, MD, who enlightened the court as to the value of spinal manipulation during his testimony at the Wilk trial:
“Eight out of ten patients that come out of any doctor’s office complain of a musculoskeletal system problem, regardless of what system the pain is coming from…I will say 100 percent of those complaints…are…due to joint dysfunction in the musculoskeletal [system]…If you don’t manipulate to relieve the symptoms from this condition of joint dysfunction, then you are depriving the patient of the one thing that is likely to relieve them of their suffering.”
In this light, spinal manipulative therapy to correct joint dysfunction must be considered the leading treatment for neck and low back pain. Certainly, a case can easily be made that DCs stand heads-above MDs, DOs, and PTs in regards to rendering SMT by virtue of our training and practice.
DCs as America’s PSPs
If we are to ascend to the top of the Medicare ladder of opportunity during this “national scandal” in spine care, we must assert to CMS as the bellwether for all payors that DCs are the best practitioners offering the best service for the majority of back pain cases. This must become the goal for both the ACA and the F4CP during the upcoming year.
Obviously there is the need to train DCs in the clinical PEPPER protocols and best practices to assume this role, such as the Primary Spine Practitioner course offered by Donald Murphy, DC, and John Ventura, DC, featuring the new textbook, Primary Management of Low Back Disorders Using the CRISP protocols by Dr. Murphy.
Just as all conservative treatments are not equivalent, certainly not all chiropractic methods have the same effectiveness for acute low back pain in adults. If general practitioner DCs want to assume the role of PSP, it behooves them to realize the best practices for acute LBP.
We must address the same issue as the Court of Appeals, that is, “whether or not a practitioner is 'qualified,' not whether or not a practitioner is simply licensed.”
For example, a 2001 comparative study published in JMPT rated on a scale of 1-10 the effectiveness of procedure ratings for acute low back pain for 10 procedures. Ranking them in descending order for low back pain found the following:
1. HVLA, no drop table (side posture) = 9.5
2. HVLA, prone, with drop table assist = 8.7
3. Distraction technique = 8.7
4. Mobilization = 8.0
5. HVLA, prone, without drop table assist = 6.4
6. Pelvic blocking procedures = 6.3
7. Lower extremity adjusting = 3.7
8. Instrument adjusting = 3.7
9. Non-thrust/reflex/low force = 3.5
10. Upper cervical = 3.3
Certainly not all DCs utilize the top treatments for LBP nor do all DCs care to treat SRDs in favor of other specialties such as upper cervical, pediatrics, etc. Nor is SMT alone the only treatment required to control pain and stabilize the spine as Dr. Murphy noted in his book. Nonetheless, if a chiropractor wants to qualify as a PSP for LBP, the use of the top adjusting methods along with differential diagnosis including the biopsychosocial (BPS) model, for SRD treatments is a good place to begin.
Certainly today the evidence is on our side. If our profession is vigilant on keeping chiropractic care at the forefront of “conservative care” as the comparative studies agree, this will be great leverage to channel prospective patients with acute LBP into our offices before PT, drugs, shots, and spine surgeries.
Beginning in the days when we were called “rabid dogs and killers who practice an unscientific cult” by the AMA propagandists, after a steep and perilous climb we can now see the light of truth at the top of this Medicare ladder of opportunity.
As Lou Sportelli, DC, noted: “If the doctors of chiropractic only cornered the market on one condition, back pain, there would not be enough now to handle the volume.”
About the author:
The case against Halifax Hospital brought by the DOJ was settled recently, March 13, 2014. Here are three articles:
The Stark Law forbids a hospital from billing Medicare for certain services referred by physicians who have a financial relationship with the hospital. In this case, the government alleged that Halifax knowingly violated the Stark Law by executing contracts with six medical oncologists that provided an incentive bonus that improperly included the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare. The government also alleged that Halifax knowingly violated the Stark Law by paying three neurosurgeons more than the fair market value of their work.
Department of Justice
Office of Public Affairs
FOR IMMEDIATE RELEASE
Tuesday, March 11, 2014
Halifax Hospital Medical Center and Halifax Staffing Inc. (Halifax), a hospital system based in the Daytona Beach, Fla., area, have agreed to pay $85 million to resolve allegations that they violated the False Claims Act by submitting claims to the Medicare program that violated the Physician Self-Referral Law, commonly known as the Stark Law, the Justice Department announced today.
“Financial arrangements that compensate physicians for referrals encourage physicians to make decisions based on financial gain rather than patient needs,” said Assistant Attorney General for the Justice Department’s Civil Division Stuart F. Delery. “The Department of Justice is committed to preventing illegal financial relationships that undermine the integrity of our public health programs.”
In a Nov. 13, 2013, ruling, the U.S. District Court for the Middle District of Florida ruled that Halifax’s contracts with its medical oncologists violated the Stark Law. The case was set for trial on March 3, 2014, on the government’s remaining claims against Halifax when the parties reached this settlement.
“This settlement illustrates our firm commitment to pursue health care fraud," said U.S. Attorney for the Middle District of Florida A. Lee Bentley III. “Medical service providers should be motivated, first and foremost, by what is best for their patients, not their pocketbooks. Where necessary, we will continue to investigate and pursue these violations in our district.”
As part of the settlement announced today, Halifax also has agreed to enter into a Corporate Integrity Agreement with the Department of Health and Human Services Office of Inspector General (HHS-OIG), which obligates Halifax to undertake substantial internal compliance reforms and to submit its federal health care program claims to independent review for the next five years.
“Patients deserve to know that recommendations are based on sound medical practice, not illegal financial relationships between providers,” said Inspector General for the U.S. Department of Health and Human Services Daniel R. Levinson. “Halifax now also is required to hire a legal reviewer to monitor provider arrangements and an additional compliance expert to assist the board in fulfilling its oversight obligations. Both of these independent reviewers will submit regular reports to my agency.”
The settlement announced today stems from a whistleblower complaint filed by an employee of Halifax Hospital, Elin Baklid-Kunz, pursuant to the qui tam provisions of the False Claims Act, which permit private persons to bring a lawsuit on behalf of the government and to share in the proceeds of the suit. The Act also permits the government to intervene and take over the lawsuit, as it did in this case as to some of Baklid-Kunz’s allegations. Baklid-Kunz will receive $20.8 million of the settlement.
This settlement illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by Attorney General Eric Holder and Secretary of Health and Human Services Kathleen Sebelius. The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $19 billion through False Claims Act cases, with more than $13.4 billion of that amount recovered in cases involving fraud against federal health care programs.
The investigation and litigation was conducted by the Justice Department’s Civil Division, the U.S. Attorney’s Office for the Middle District of Florida and HHS-OIG. The claims settled by this agreement are allegations only, and there has been no determination of liability, except as determined by the court’s Nov. 13, 2013, ruling.
The lawsuit is captioned United States ex rel. Baklid-Kunz v. Halifax Hospital Medical Center, et al., No. 09-cv-1002 (M.D. Fla.).
Daytona, Fla.-based Halifax Hospital Medical Center and Halifax Staffing have agreed to pay $85 million to resolve allegations they violated the False Claims Act by submitting claims to Medicare that were in violation of the Stark Law, according to the Department of Justice.
The government alleged Halifax knowingly violated the Stark Law by executing contracts with six medical oncologists that included an incentive bonus that improperly included the value of prescription drugs and tests that the oncologists ordered and Halifax billed to Medicare.
The government also alleged Halifax knowingly violated the Stark Law by paying three neurosurgeons more than fair market value for their work, and that the hospital admitted patients who didn't need to be admitted, then billed Medicare for their care.
Because of the complexity and breadth of the lawsuit, U.S. District Judge Gregory Presnell agreed to split the case into two trials. One trial focusing on bonuses paid to the oncologists and on the alleged excessive compensation paid to the three neurosurgeons, and a second trial focusing on the fraudulent billing for the patients who were unnecessarily admitted to the hospital.
The first trial was scheduled to begin on March 3, but just before the jury was seated Halifax and prosecutors came to a settlement agreement for $85 million.
"This settlement illustrates our firm commitment to pursue healthcare fraud," said U.S. Attorney A. Lee Bentley III, in a news release. "Medical service providers should be motivated, first and foremost, by what is best for their patients, not their pocketbooks."
This settlement stems from a whistle-blower complaint filed by an employee of Halifax pursuant to the qui tam provisions of the False Claims Act. The Act permits the government to intervene and take over the lawsuit, as it did in this case.
The second trial is scheduled to begin in July.
Daytona, Beach. Fla.-based Halifax Health settled the first portion of a whistle-blower suit today just as its trial was slated to begin in Orlando, according to an Orlando Sentinel report.
Neither Halifax nor the U.S. Department of Justice would disclose the monetary amount of the settlement, but a "source close to the case" said the amount was near $85 million, according to the report.
The qui tam suit was brought by Elin Baklid-Kunz, who currently works at Halifax as director of physician services, in 2009. It accuses the public system of allegedly inappropriately admitting patients, allegedly billing Medicare for their services and having financial relationships with physicians that allegedly violated federal anti-kickback laws.
The suit alleges the fraudulent billings spanned more than a decade.
The DOJ joined the case in October 2011, supporting some of the allegations.
Because of the complexity and breadth of the lawsuit, U.S. District Judge Gregory Presnell agreed to split the case into two trials, according to the report. The one beginning Monday was to be focused on bonuses paid to six of the Halifax Health Medical Center's oncologists and on the alleged excessive compensation paid to three of its staff neurosurgeons.
Before a jury was seated for the hearing Monday, however, Halifax and the prosecutors agreed in principle that Halifax would pay the settlement amount plus attorneys' fees to resolve the allegations. Judge Presnell agreed to the settlement.
Potential damages and penalties in the suit were expected hit $1 billion, making it one of the largest Medicare fraud cases of its kind and one closely watched by hospitals and legal experts. Even a $90 million settlement is far less than the more than $400 million the government was seeking for the allegations involved in the first trial.
Last November, Judge Presnell ruled on one piece of the suit, finding Halifax's contracts with six oncologists violated Stark law. The ruling carries a minimum penalty of $27 million. During the trial, the jury was to decide whether the hospital knew it was breaking the law when it paid the bonuses. If the jury decides the hospital knew, the $27 million damages would triple to more than $80 million, not including penalties, according to the report.
Also during the first trial, the jury was slated to hear arguments about three neurosurgeons who were each paid between $1 million and $2 million per year. The government claims those compensation packages were excessive, but Halifax contends they fell "within fair market value" considering the importance of neurosurgery in the Daytona market, according to the report.
The government claims that the neurosurgeons' false claims exceed $37 million. Those damages would near $111 million if the jury found the hospital knew it was breaking the law, according to the report.
On top of that, for every patient referred to the hospital who shouldn't have been, the hospital would be fined an additional $5,500 to $11,000 for each instance under the False Claims Act.
The second trial is scheduled for July. That trial will focus on allegations that for more than a decade the hospital made a practice of admitting patients to the hospital who didn't need to be admitted, then billed government payers for their care. That part of the case could result in damages plus penalties that could reach $400 million, according to the report.
 US Spine Care System in a State of Continuing Decline?, The BACKLetter, vol. 28, #10, 2012, pp.1
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 Program for Evaluating Payment Patterns Electronic Report (PEPPER) SCORECARD, A Whitepaper Prepared by: Moore Stephens Lovelace, CPAs & Advisors, October, 2013
 Bigos et al. US Dept. of Health and Human Services, Public Health Service, Agency for Health Care Policy and Research, Clinical Practice Guideline, Number 14: Acute Low Back Problems in Adults AHCPR Publication No. 95-0642, (December 1994)
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 Todd Schuck, The Future of Spine Surgery: Pervasive Scrutiny & Shifting Trends Create Uncertainty for Inpatient Spine Procedures, Senior Director-Business Development, Specialty Healthcare Advisers | Monday, 13 January 2014
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 Spinal Fusion Is New PEPPER Target, With Focus on Medical Necessity of Procedures, Volume 21, Number 5 • February 6, 2012 Copyright © 2012 by Atlantic Information Services, Inc.
 U.S. Nonprofit Hospital CEO Annual Pay Averages $600,000, Bloomberg News, Oct 14, 2013
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 7 Notable Developments in Hospital Fraud & Abuse Enforcement, Becker’s Hospital Review, August 12, 2013
 Whistleblower: Halifax Health sent patients to unnecessary surgeries like 'sending lambs', WFTV.com, Monday, Oct. 28, 2013
 The BACKPage editorial vol. 27, No. 11, November 2012.
 “Top Spine Surgeons Reap Royalties, Medicare Bounty,” by John Carreyrou And Tom McGinty, Wall St. Journal, Dec. 20, 2010
 Bigos et al. US Dept. of Health and Human Services, Public Health Service, Agency for Health Care Policy and Research, Clinical Practice Guideline, Number 14: Acute Low Back Problems in Adults AHCPR Publication No. 95-0642, (December 1994)
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 Ibid. p. 7.
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 PB Bishop et al., “The C.H.I.R.O. (Chiropractic Hospital-Based Interventions Research Outcomes) part I: A Randomized Controlled Trial On The Effectiveness Of Clinical Practice Guidelines In The Medical And Chiropractic Management Of Patients With Acute Mechanical Low Back Pain,” presented at the annual meeting of the International Society for the Study of the Lumbar Spine Hong Kong, 2007; presented at the annual meeting of the North American Spine Society, Austin, Texas, 2007; Spine, in press.
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7 Jarvis KB, Phillips RB et al. (1991) Cost per Case Comparison of Back Injury of Chiropractic versus Medical Management for Conditions with Identical Diagnosis Codes, J Occup Med, 33:847-52.
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 Testimony before The Institute of Medicine: Committee on Use of CAM by the American Public on Feb. 27, 2003.
 Samuel R. Sherman, letter from H. Doyl Taylor, director, AMA Dept. of Investigation, 20 February 1968, Wilk. PX-332
 Michael Devitt, “Landmark Decision in ACA Lawsuit Against HHS,” Dynamic Chiropractic 24/02 (January 15, 2006)
 Louis Sportelli, DC A New Revelation - A Renewed Hope for Resolution, Dynamic Chiropractic – January 15, 2006, Vol. 24, Issue 02
 Michael Devitt, Landmark Decision in ACA Lawsuit Against HHS, Dynamic Chiropractic – January 15, 2006, Vol. 24, Issue 02
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 Judge Rules on Trigon's Motion to Dismiss ACA Lawsuit, Dynamic Chiropractic, August 6, 2001
 Michael Devitt, Landmark Decision in ACA Lawsuit Against HHS, Dynamic Chiropractic – January 15, 2006, Vol. 24, Issue 02
 Donald R Murphy and Eric L Hurwitz, Application of a diagnosis-based clinical decision guide in patients with neck pain, Chiropractic & Manual Therapies 2011, 19:19
 Donald R Murphy and Eric L Hurwitz, “Application of a diagnosis-based clinical decision guide in patients with low back pain,” Chiropractic & Manual Therapies 2011, 19:26
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 Louis Sportelli, DC, “AHCPR: It Did Not Happen By Accident,” Dynamic Chiropractic 13/2 (January 16, 1995).