Last month, attorney Gary Roberts began placing prominent ads in the Florida newspaper seeking car-wreck victims who may have undergone unnecessary spine operations using one of ArthroCare’s most popular devices. Roberts suspects that personal injury attorneys have been referring clients to doctors who perform the quick procedures — often billed at more than $1,000 per minute — so that they can inflate medical costs and fatten insurance settlements.
Surgeons use ArthroCare’s “wands” when performing percutaneous disc decompression, a minimally invasive outpatient surgery popularly known as PDD. Many health insurance companies refuse to cover the operation because they view it as unproven.
However, thanks to other payers — including car insurance companies on the hook for medical bills — ArthroCare counts its PDD wand franchise among its most successful businesses.
In ArthroCare’s fast-growing spine division, in fact, PDD wands rank as the company’s best-selling device.
But critics such as Roberts are questioning ArthroCare’s sales of the device, zeroing in on the company’s business with Florida-based DiscoCare, in particular. DiscoCare regularly buys wands from ArthroCare for use on car-wreck victims covered by future insurance settlements.
In January, ArthroCare further deepened its ties to DiscoCare by purchasing the company outright.
“There really is a little bit of a shortage of people who are good at this nationwide,” ArthroCare CEO Michael Baker stated, when attempting to justify his company’s $25 million buyout of the billing firm. “But the biggest assets there are the contracts and the relationships they have with providers and the excellent reputation they have with our customers and with the people who are ultimately paying the bills.”
Roberts views those relationships — especially when they involve personal injury lawyers — as far too cozy, however. He is not alone. In recent discussions with TheStreet.com, several Palm Beach physicians had harsh criticisms of the arrangement, with some portraying it as a full-blown scam.
ArthroCare’s public relations firm would not answer a list of questions when contacted by TheStreet.com for this story. However, the company has repeatedly denied any wrongdoing by itself or by DiscoCare in the past.
ArthroCare’s stock continues to suffer nonetheless. Even an aggressive stock repurchase program failed to support the shares. Earlier this month, the company put itself up for sale.
The stock, now trading around $35, has lost nearly half of its value since questions began popping up about DiscoCare late last year.