On Friday, May 22, a Detroit-area neurosurgeon accused of performing medically unnecessary spinal surgeries pleaded guilty to health care fraud in two federal criminal cases. Dr. Aria Sabat, 39, admitted Friday before U.S. District Judge Paul Borman that his participation in a physician-owned device distributorship (“POD”) caused him to compromise his medical judgment and to seriously injure some patients by performing unnecessary spine surgeries.

Sabit pleaded guilty to four counts of health care fraud, one count of conspiracy to commit health care fraud, and one count of unlawful distribution of a controlled substance, resulting in approximately $11 million in losses to Medicare, Medicaid, and various private insurance companies.

During his guilty plea, Sabit admitted that he convinced patients to undergo spinal fusion surgeries with specific medical devices designed to stabilize the spine, but in fact implanted cortical bone dowels. He then fraudulently billed public and private health care programs for instrumentation, according to a Department of Justice Press Release.

Prior to moving to Michigan, Sabit resided in Ventura, California and was a licensed California neurosurgeon. Sabit admitted that, in exchange for the opportunity to invest in Apex Medical Technologies LLC (“Apex”), a California POD, he agreed to convince a California hospital where he worked to purchase spinal implant devices from Apex. He further stated that he and Apex’s co-owners used Apex to operate an illegal kickback scheme, which involved paying neurosurgeons “lucrative illegal kickbacks tied directly to the volume and complexity of the surgeries … performed, and the number of Apex spinal implant devices … used in their spine surgeries.” This arrangement led Sabit to occasionally refer patients for spine surgeries that they either did not need, or that were more complex than necessary. Sabit further admitted that he used more devices than were medically necessary to treat his patients, in order to generate additional sales revenue for Apex.

Sabit’s case illustrates the potential dangers of PODs. On March 26, 2013, the HHS’ Office of Inspector General (“OIG”) issued a Special Fraud Alert, which expressed concern about the proliferation of PODs. In this Alert, the OIG outlined a non-exhaustive list of “suspect” characteristics for PODs, but cautioned that such criteria “are not intended to serve as a blueprint for how to structure a lawful POD, as an arrangement may not exhibit any of the … suspect characteristics and yet still be found to be unlawful.”. The OIG recognized that the lawfulness of any particular POD depends on the intent of the parties, but ultimately characterized PODs as “inherently suspect under the anti-kickback statute.”

Sabit returns to court for sentencing on September 15, 2015. He is also a defendant in two civil False Claims Act cases brought by the Department of Justice in the U.S. District Court of the Central District of California.