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DOJ Brings Fraud Charges Against Reliance Medial Solutions

— July 19, 2022

The government allegations medical solutions company, Reliance, engaged in an illegal kickback scheme with physicians.

Reliance Medical Systems LLC, a distributor of spinal implant devices headquartered in Bountiful, Utah, its owners, Bret Berry and Adam Pike, and two of their physician-owned distributorships are set to pay out $1 million to resolve allegations that they violated the False Claims Act by paying doctors to use Reliance’s medical devices in spinal surgeries on their own patients.

The False Claims Act, also known as the “Lincoln Law,” imposes liability on any party who defrauds government programs. It prohibits anyone (an individual, group of people or companies of any kind) from knowingly submitting a fraudulent claim for payment from the government. (This most commonly includes false claims for Medicare and Medicaid reimbursement.)

The Department of Justice (DOJ)’s lawsuit claimed the Reliance operated physician-owned distributorships (PODs) that, in reality, simply allowed them to collect kickback payments to persuade physicians to use Reliance Medical’s devices in their surgeries. The Anti-Kickback Statute of the False Claims Act forbids the offering of anything of value to entice the referral of items or services covered by federal health care programs. Violations of this statute commonly result in criminal penalties, including fines and imprisonment, as well as civil penalties, including exclusion from participating in federal health care programs in the future.

DOJ Brings Fraud Charges Against Reliance Medial Solutions
Photo by Anna Shvets from Pexels

The DOJ said that the defendants compensated doctors based on their referrals, “made false statements to health care providers, and terminated physicians who did not refer enough patients,” according to court documents. The complaint also alleged, “Berry and Pike were recorded attempting to induce a spine surgeon to join Kronos Spinal Technologies, one of Reliance’s PODs, by offering to pay him a share of the profits he generated for Kronos after he proved his loyalty to Kronos.”

“As today’s settlement demonstrates, we will look to the substance, not just the form, of an arrangement to determine whether the payment of remuneration constitutes an illegal kickback,” said Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division. “The department is committed to redressing the corrupting influence of kickbacks on federal health care programs, regardless of how companies seek to characterize such payments.”

“When health care companies try to boost their profits through kickbacks arrangements, they compromise the integrity of medical decision-making while increasing health care costs for everyone,” said Special Agent in Charge Timothy B. DeFrancesca of the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG). “Working with our law enforcement partners, our agency is committed to thoroughly investigating such schemes.”

HHS-OIG has issued guidance on the application of the Anti-Kickback Statute to various arrangements, including those involving electronic health records and other health information technology. When the Anti-Kickback law is violated, it can lead to increased health care costs, lower quality of care, and fraud, as in Reliance’s case.

The federal False Claims Act and the Anti-Kickback Statute are two important tools for combating fraud and abuse in the healthcare system. They compliment each other in the government’s pursuit of justice against those who commit fraud.

The claims asserted against the defendants in this case have not yet been proven and there has been no determination of liability.


Department of Justice Settles Lawsuit Against Spine Device Distributor and its Owners Alleging Illegal Kickbacks to Physicians

United States Pursues Claims Against Neurosurgeon, Spinal Implant Company, Physician-Owned Distributorships and Their Non-Physician Owners for Alleged Kickbacks and Medically Unnecessary Surgeries

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