Reuters article by Alison Frankel and Jessica Dye
In July 2013, California urogynecologist Andrew Cassidenti received an email from an entrepreneur named Otto Fisher, who had a proposition. Fisher was looking for surgeons to perform operations to remove pelvic mesh implants from women.
Intrigued, Cassidenti responded. In a phone call, Fisher said he needed doctors to operate at outpatient centers in California and Las Vegas. Fisher said he could guarantee Cassidenti $2,500 for every surgery the doctor performed, “whether it took five minutes or two hours,” or even if the doctor did not remove any mesh, according to the surgeon’s sworn court statement recounting the conversation.
Cassidenti said the conversation made him suspicious. During the call, Fisher referred to litigation that is pitting tens of thousands of women against the makers of pelvic mesh.
The devices, mostly made of plastic and varying in size and shape, have been surgically inserted into millions of women to treat urinary incontinence and other disorders. They are the target of about 100,000 suits in state and federal courts – the biggest onslaught of personal injury litigation since the asbestos battles of the 1970s, 1980s and 1990s.
Fisher, the surgeon said, claimed that the federal judge overseeing the cases “needs to see key phrases in the operative report,” like “defective mesh” and “mesh erosions.” Cassidenti asked if Fisher was trying to dictate what he should write about his patients.
“No,” Fisher told him. “But it’s just a game, and we have to play the game.”
THE RISE OF A NEW INDUSTRY
Fisher denies making those statements. Cassidenti told Reuters he stands by his affidavit.
Unbeknownst to Fisher at the time of the call, Cassidenti was a consultant to device maker American Medical Systems. And AMS, along with device giants Johnson & Johnson, Boston Scientific and C.R. Bard, was one of the biggest defendants in the mesh cases.
Cassidenti suspected he had stumbled onto a scheme to recruit doctors willing to overstate women’s injuries from implants, thereby driving up awards in cases against mesh makers. He alerted AMS, which persuaded a judge to give it the power to subpoena documents and obtain testimony in an investigation of Fisher and the surgical lending company he was working with, MedStar Funding. The other major mesh makers launched probes, too.
Previously undisclosed deposition transcripts from these investigations and Reuters interviews with mesh patients have provided rare details about a little-known business: investing in surgeries for injured plaintiffs. It’s a practice that has become deeply entangled with medical device litigation.
Medical funders, often working through go-betweens like Fisher or doctors’ billing services, purchase medical bills at a deep discount from physicians, hospitals and others who have provided care to patients involved in personal injury litigation. Some medical funders also provide “concierge care” to these patients, fronting them travel and expense money at a high rate of interest.
Patients who rely on medical funders tend to be poor. They either lack private insurance or can’t afford to pay cash deductibles or out-of-network fees charged by their doctors.
SQUEEZING TRACI RIZZO
When a patient’s lawsuit settles, the medical funder stakes a claim to part of the settlement by placing a lien for the full amount of the surgical bill. The funder’s profit lies in the difference between what it pays the medical provider to buy the bill and what it is able to recover from the patient’s settlement.
These medical liens sometimes spiral to as much as 10 times what private insurers or government programs like Medicaid would pay for the same procedures. The standard insurance reimbursement for mesh removal surgery, for instance, ranges from about $2,000 to $7,000. Medical lenders have demanded as much as $62,000 for surgery and related services from patients whose care they funded.
Mesh patients such as Traci Rizzo, a 42-year-old mother of three from Gulf Shores, Alabama, say they were not adequately informed by their funders, lawyers or physicians that liens could gut their payouts from defendants.
Rizzo said her lender, MedStar, paid her surgeon, John Miklos, $17,000 for a mesh removal operation. A spokeswoman for Miklos declined to comment. Rizzo’s health insurer, Blue Cross and Blue Shield of Alabama, told Reuters it customarily pays doctors between $900 and $1,300 for the same surgery. MedStar and its affiliates then sought to charge Rizzo more than $60,000 for their services, according to documents Rizzo showed Reuters.
“I don’t begrudge anybody their share,” said Rizzo. “But when businesses are abusing already injured people, it is greedy, it is wrong and it shouldn’t be allowed.”
MedStar owner Daniel Christensen did not respond to requests for comment.
A HISTORIC WAVE OF LITIGATION
The medical funding industry is opaque and fragmented. It is composed almost entirely of small firms that guard such operational details as the identity of their investors, their revenue and the number of medical bills they buy each year.
Most funders buy bills owed by uninsured or underinsured patients with slip-and-fall, car accident and workers compensation suits. But over the last several years, the business has evolved to include funding surgeries for patients involved in mass litigation over drugs and medical devices.
Reuters could find no independent organization that tabulates the money spent on such lending. Faith Larson, managing director at litigation financier Javlin Capital in Omaha, Nebraska, estimated that lenders have invested as much as $100 million in health care for mass torts plaintiffs. These include patients suing over hip and knee replacements, intrauterine birth control devices and the anti-psychotic drug Risperdal.
The sheer size of the litigation over pelvic mesh has lent momentum to the burgeoning business. Since 2008, women and their sexual partners have filed an estimated 100,000 suits against seven mesh manufacturers, alleging that dozens of devices were poorly designed and made from materials not intended to be implanted in the vaginal area.
Plaintiffs blame mesh implants for injuries ranging from pain and bleeding during sex to organ damage and, in rare cases, death. Women with mesh have won multimillion-dollar verdicts in 10 of the 13 suits that have gone to trial against manufacturers since 2012.
The vast majority of mesh cases, however, will never reach a jury. Defendants facing mass litigation almost always reach global settlements, in which they resolve hundreds or thousands of suits at a time.
The first major mesh manufacturer to agree to a multi-case settlement, AMS, has put up about $1.6 billion to resolve claims by about 45,000 mesh patients. More recently, Boston Scientific agreed to pay $119 million to settle nearly 3,000 of the 26,000 mesh claims it faces. Based on those figures, the average mesh settlement is about $40,000 per patient. Boston Scientific says settlements vary, and averages shouldn’t be extrapolated to all cases.
Generally, plaintiffs lawyers and defendants in mass settlements establish a matrix to compensate patients, based on the extent and severity of their injuries. That system, according to defendants in many mass cases, gives a financial incentive to plaintiffs lawyers working on a contingency basis: It’s in their interest to claim that their clients’ injuries are severe enough to require corrective surgery.
THOUSANDS OF SURGERIES
Based on court records and interviews with funders, at least several hundred women with claims against mesh makers appear to have used medical lenders to fund surgery to remove their implants. And at least “a couple hundred” of those surgeries were funded by MedStar, the surgical lending company that spoke with Orange County surgeon Cassidenti about joining its network.
That figure is contained in a 2014 deposition by MedStar founder Christensen, who is also a lawyer for plaintiffs in personal injury suits.
The total number of mesh-removal surgeries involving medical funders could be much higher. In a different court filing, Christensen said that as many as 3,750 of the 125,000 medical bills MedStar purchased between 2008 and 2014 were related to mesh surgery. At his deposition he declined to provide more specific information.
The mesh makers’ investigations of Christensen also showed the range of “concierge” services, in addition to surgical funding, that he provided to plaintiffs and eventually charged as liens against their settlements.
A Christensen company called Pharmacom Injury Meds paid for patients’ drugs.
His litigation lending company, Beacon Legal Funding, advanced cash to plaintiffs at high interest. Tracy Rizzo, for instance, borrowed $1,200 in April 2014. Beacon’s term sheet on her loan said her debt would be $1,800 in a year and $2,650 in two years, putting the compound interest rate at about 50 percent a year.
Yet another Christensen company, MedCare Managers, helped shepherd patients through the surgical funding process, tracking cases, filling out paperwork and collecting payments.
A PUBLIC SERVICE
Medical funders say they perform a valuable public service. They say they facilitate surgery and other treatment for patients who otherwise couldn’t afford it. By guaranteeing surgeons revenue, they say, they give patients access to good doctors who don’t want to wait years for bills to be paid from settlement proceeds.
Lenders also say patients are fully informed that medical liens charged against their settlements may exceed what insurers would reimburse. They say their profits are a fair return for the risk they take in advancing money against a settlement that might never come.
“Where else is the patient going to go?” Otto Fisher, the broker who connects lenders with physicians and medical centers, told Reuters. “The only way to get surgery with top doctors is medical funding.”
Foes of the medical lending industry, including AMS and other device makers, have said in court filings that they believe funders may promote unnecessary surgery. They also claim lenders may be taking advantage of desperate and unsophisticated patients.
“The plaintiff is the only one who cares” about the size of the lien, “and by the time she finds out, it’s too late,” said Mark Fischer, a Kentucky lawyer who represents insurers. “It’s outrageous.”
Some aspects of this funding fall under state lending laws, but unlike banks or credit agencies, medical funders are not licensed or subject to industry-wide rules.
REFERRED BY LAWYERS
Traci Rizzo said she had never heard of medical funding until her lawyer suggested it.
Rizzo received three mesh implants in 2007 to treat urinary incontinence and pelvic organ prolapse, a condition in which her pelvic muscles could not hold her uterus in place. After the devices were implanted, she said, she suffered chronic bladder infections, pain in her lower back and hips, and pain during sex.
In 2011, after seeing television ads targeting women with pelvic mesh, she signed a retainer agreement with Lee Murphy, a Texas-based law firm.
Rizzo said a lawyer at Lee Murphy told her the standard treatment for her symptoms was surgery to remove the implants. The lawyer said that a famous mesh removal surgeon, Miklos, had an office near Rizzo’s hometown of Atlanta. Rizzo asked if the doctor would accept the private health insurance she received through her husband’s job as a yacht engine technician.
The lawyer, according to Rizzo, suggested a different way to pay. Rizzo could work with a medical lending company. The lender would pay all of the surgical bills and let her avoid the deductible on her husband’s insurance. It would even pay for Rizzo and her daughter to travel to Atlanta and stay in a hotel for a few days after the procedure.
According to Rizzo, the lawyer told her she had such a strong claim that she would hardly notice when the funder took a cut of her eventual settlement.
“It probably should have seemed suspicious, but it didn’t,” Rizzo said. “I felt like, ‘I’m going to the best doctor ever, and I’m not even going to dip into my settlement much because I have such a good case.'”
James Lee of Lee Murphy declined to comment on Rizzo’s case, citing attorney client confidentiality. Speaking generally, he said many women with mesh implants have no alternative but to use third-party funding.
“None of the defective product manufacturers offer assistance for removal or revision of their defective products when it fails,” he said in an email. “Even today, with multiple verdicts finding these mesh products defective and the manufacturers liable, not one of the mesh defendants have helped any of the women absent a lawsuit and a settlement.”
It isn’t clear what direct benefit, if any, plaintiffs lawyers get from referring clients to medical lenders. But patients who undergo surgery can generate higher fees for their lawyers, because they typically receive larger settlements than plaintiffs who don’t have devices removed or replaced.
A lawyer who represents patients with Boston Scientific mesh devices said at a hearing in February that nearly half of the plaintiffs who received implants to treat incontinence did not have surgery to remove or repair the devices. But their suits account for just 10 percent of the estimated value of the litigation overall, the lawyer estimated.
Rizzo talked to the company her lawyer recommended – MedStar affiliate MedCare Managers. She signed a contract giving her surgeon permission to sell his bill to a medical lender. In turn, the lender got the right to recover the entire cost of her care from any settlement Rizzo would receive.
A VAGUE DISCLOSURE
The three-page contract comprises about 2,000 words of legalese in small type. The only mention that Rizzo might have to hand over an outsize chunk of her settlement is an indirect one, a few paragraphs in:
“PATIENT acknowledges that fees paid to medical providers vary depending upon the method of payment…. PATIENT further acknowledges that medical providers typically receive more for their services when paid by contractual arrangements, such as this, than if they were paid by health insurance companies, government programs such as Medicare or Medicaid, or by the patient in cash.”
In separate contracts, Rizzo granted additional recovery rights to the MedStar affiliate Beacon Funding, which lent her money for travel and meals, and to Pharmacom, which paid for her medication. At the time, Rizzo said, she was not aware that all of these companies were owned by MedCare Managers’ owner Christensen.
She found out in early 2015, when she received notice that MedStar and its affiliates planned to bring liens totaling more than $60,000 against her.
After pushing for details on the claims, Rizzo says, she calculated that the funder and its affiliates had spent about $21,000 for her surgery, drugs and related expenses.
Documents reviewed by Reuters show MedStar’s lien of about $60,000 was based on a bill Miklos submitted for Rizzo’s surgery – nearly $37,000 – and an additional bill of nearly $20,000 from a company called Mayo Surgical LLC of Kennesaw, Georgia. It is not clear how MedStar acquired the Mayo Surgical bill. Mayo Surgical did not respond to requests for comment.
As Rizzo saw it, MedStar’s lien would generate nearly $40,000 in profit for the lender.
MedStar and its affiliates ultimately agreed to cut their claim in Rizzo’s case from more than $60,000 to about $32,500. Rizzo, whose health problems have worsened since her mesh revision surgery in 2013, said that is still too much.
“BUY LOW, SELL HIGH OR HIGHER”
The mesh makers’ investigation of Fisher, MedStar and the surgeons showed how their surgical lending network operated.
Fisher’s role was to sign up doctors and surgical centers. He received a finder’s fee when those physicians sold a bill to MedStar, according to his deposition.
A medical billing company called Physicians Surgical Group supplied mesh removal patients to the doctors Fisher lined up. PSG paid the physicians a flat fee of about $2,500 per surgery, according to Fisher’s deposition.
But the surgical bills PSG subsequently sold to MedStar were for a much higher amount – $20,000 or more, according to a court filing by mesh defendant Boston Scientific.
MedStar purchased those bills from PSG at a discount with the intention of asserting the full amount as a lien against the patient’s eventual settlement.
“That’s the game plan: Buy low, sell high or higher,” Fisher said during his deposition.
PSG, based in Boca Raton, Florida, did not respond requests for comment. The company was indicted in December on charges unrelated to medical funding. Federal prosecutors in Ohio accused PSG of participating in a conspiracy to dupe private insurers into paying for an experimental chiropractic treatment. The company has pleaded not guilty.
A $500,000 SURGEON
The mesh business was lucrative for Fisher and other members of the network. During his deposition, mesh manufacturers asserted that Fisher earned about $100,000 in fees just in MedStar-funded cases. Fisher didn’t dispute that figure.
Meanwhile, Georgia-based gynecologist Michael Hulse, who performed mesh removal surgeries funded by MedStar and two other medical lenders, said in a deposition that mesh surgery garnered him about $500,000.
Hulse said in an interview that while he no longer works with Otto Fisher, he still works with other surgical funders as well as traditional insurers to perform mesh removals. “The funding allows patients who would never get help otherwise to get help,” he said.
In an interview, Fisher said the mesh makers never proved their allegations that he encouraged unnecessary surgeries or coached physicians.
“I never even knew the patients’ names until after surgery,” he said. Fisher also said he doubted that patients would subject themselves to unnecessary surgeries or that physicians would perform them.
Fisher said he is out of the mesh business. So is MedStar, according to Christensen’s 2014 deposition.
“Who’s going to send me a case now?” Christensen said.
Source: http://www.reuters.com/
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