Innovasis, Top Execs Settle Kickback Case for $12 Million

Innovasis and two of its top executives are paying for their past mistakes.

The spinal device manufacturer, along with brothers Brent and Garth Felix, have agreed to shell out $12 million to resolve False Claims Act allegations—specifically, that the company paid surgeons to use its spinal implants on Medicare patients. Brent Felix is the founder, president and Innovasis board chairman; Garth Felix assumed various roles in the Salt Lake City-based firm, including chief financial officer.   

“Payments from medical device manufacturers intended to influence a physician’s judgment about which medical devices or supplies to select are illegal,” Principal Deputy Assistant Attorney General Brian M. Boynton, head of the Justice Department’s Civil Division, said in a news release. “When medical devices are used in surgical procedures, patients deserve to know that their device was selected based on quality of care considerations and not on improper payments from manufacturers.”

The alleged kickbacks by Innovasis occurred over a nine-year span (Jan. 1, 2014 through Dec. 31 2022), according to the settlement agreement. During that time, Innovasis paid 17 orthopedic surgeons and neurosurgeons to use the company’s spinal implants, devices and other equipment in procedures on Medicare patients. The payments came in various forms: consulting fees, intellectual property (IP) acquisition and licensing fees, registry payments and performance shares in Innovasis, as well as travel to a luxury ski resort, lavish dinners and holiday parties for surgeons, their office staff and family members. “Each year, defendants paid for subject physicians to attend an Innovasis conference held at a luxury resort in Deer Valley, Utah,” the settlement agreement states. “In addition to paying for the subject physicians’ cost of travel (including—for certain high-volume subject physicians—first class airfare), lodging, and high-end meals at the conference, defendants provided attendees with welcome gift baskets and Innovasis-branded ski jackets.”

That conference is the Spine Surgery Symposium, which Innovasis publicizes on its website.

The government claims Innovasis also allegedly compensated physicians well for consulting services or, in some cases, for work that was never actually performed. Similarly, the company paid doctors big bucks to acquire or license purported IP for which Innovasis never obtained any valuation before the purchase and thereafter never used for meaningful product development. Brent and Garth Felix were the alleged masterminds of the kickback scheme, as they directed Innovasis’s operations, strategic decisions, and the financial agreements with surgeons, the settlement agreement contends.
 
“The integrity of our healthcare system is dependent upon physicians’ recommendations being motivated by patient health,” U.S. Attorney Leigha Simonton of the Northern District of Texas stated. “Any time we learn that physician recommendations are being corrupted by improper financial inducements, we will seek to hold those involved accountable.”
 
The Federal Anti-Kickback Statute prohibits offering or paying anything of value to induce referrals of items or services covered by Medicare and other federally funded programs. The statute is intended to ensure that medical providers’ judgments are not compromised by improper financial incentives. Innovasis’s former Regional Sales Director Robert Richardson alerted the government to the kickback scheme (United States ex rel. Richardson v. Innovasis Inc., et al.), and is entitled to a $2.2 million share of the settlement.   

“Improper financial arrangements can compromise medical judgment and adversely influence the medical decision-making process,” said Special Agent in Charge Jason E. Meadows of the Department of Health and Human Services Office of Inspector General (HHS-OIG). “These arrangements have no place in our healthcare system, and we will continue working with our federal partners to pursue such allegations.”

The settlement resulted from a coordinated effort between the U.S. Justice Department’s Civil Division, Commercial Litigation Branch, Fraud Section and the U.S. Attorney’s Office for the Northern District of Texas, with assistance from HHS-OIG. Trial Attorneys Jessica E. Krieg, Olga Yevtukhova and Adam J. DiClemente of the Justice Department’s Civil Division and Assistant U.S. Attorneys Andrew S. Robbins and George M. Padis for the Northern District of Texas handled the matter.
 
The claims resolved by the settlement are only allegations. There has been no determination of liability.