Laser Spine Surgery Marketing through Google Sees Malpractice Complaints
May 5, 2011
side note: This is an interesting article on a new phenomena -- physicians and surgeons marketing their services online. How hard -- and in what manner -- should physicians market their services? Why are we moving away from the traditional model of medicine where physicians refer their patients to specialists? And how much should the marketing of healthcare services be regulated?
By David Armstrong - May 4, 2011
Bonnie Balch searched online for a back surgeon and found a pitch she called irresistible: Laser Spine Institute LLC promised to ease her pain and have her out the door in a few hours.
Instead, her October 2008 surgery at the Tampa, Florida- based center left Balch incontinent, with a dangerous spinal fluid leak, she said. Still in pain, she was off work for almost a year and needed a second surgery elsewhere to get relief.
“They should have told me they couldn’t help me,” said Balch, 63, a Longmont, Colorado, flight attendant. “They are in it to make money.” Her insurer paid Laser Spine $90,176 for the operation, a follow-up procedure and some subsequent care.
Balch sued Laser Spine, alleging malpractice, in December 2009, one of 15 cases filed against the company in the past 18 months.
The lawsuits reflect growing complaints about a new area of medicine: high-volume, doctor-owned spinal surgery centers that market directly to patients on Google Inc.’s search site and others. For Laser Spine, the business model generated a 34.3 percent net profit margin from 2006 through 2009 -- eclipsing even the Internet giant’s 24.8 percent for that period.
Laser Spine and its competitors, part of a boom in outpatient clinics operated by entrepreneurial physicians, sell a high-tech version of procedures that have been around for years -- despite a lack of independent research to show that their variations lead to better outcomes. The company commands higher prices than laser-less rivals, driving up the cost of health care. Its number of malpractice claims per 1,000 surgeries is several times the rate for all U.S. outpatient surgery centers, based on insurance industry data.
“It strikes me as somewhat of a scam,” says Jeffrey Arle, a neurosurgeon at the Lahey Clinic near Boston who has treated former Laser Spine patients. He’s one of nine surgeons from across the U.S. who told Bloomberg News that the company’s laser surgery was either unnecessary or inappropriate for many patients who get it. “My conclusion is they are offering patients a version of what is already available in the regular medical care system.”
Laser Spine’s in-house surveys show positive outcomes for more than 87 percent of patients, though the institute has had trouble recruiting academics to examine those results, said Jimmy St. Louis, the company’s chief operations officer. Its staff screens those who respond to its ads rigorously, he said, and only 10 percent of them end up getting an operation. The company’s standards for safety and quality of care help determine its pricing, said Dotty Bollinger, its chief medical operations officer.
Works Every Day
“We know it works,” Bollinger said of the surgery. “We see it every day.” Laser Spine declined to discuss Balch’s claims, which it has denied in court filings.
Laser Spine often charges $30,000 for each procedure, according to interviews with several patients and copies of billing records. That’s twice as much as Aetna Inc., the third- largest U.S. health insurer, will pay for laser-less surgery. It’s more than twice the average reimbursement for spine procedures at Regent Surgical Health, a Westchester, Illinois- based company that operates 15 outpatient centers, according to Matt Lau, Regent’s corporate controller.
Laser Spine’s surgeons, some of whom are investors in the 6-year-old company, perform as many as 5,000 operations a year, using small tubes called endoscopes that are equipped with video cameras. They insert the lasers separately, through catheters.
Out of Bankruptcy
Founder James St. Louis, 56, was just a year out of personal bankruptcy when he began seeking investors for the company in 2003, court records show. Now he owns multimillion- dollar homes in Pinellas County, Florida and Aspen, Colorado. He declined an interview request.
The institute, which rewards employees with trips to the Bahamas when they hit sales and customer-satisfaction targets, has established surgical centers in Scottsdale, Arizona; Philadelphia; and Oklahoma City as well as Tampa. It now bills itself on the web as “the largest spine center in the world” and it had sales last year of $109 million, says Jimmy St. Louis, the COO and the founder’s son.
From 2006 through 2009, Laser Spine earned net income of $98.9 million on revenue of $288 million, a 34.3 percent profit margin, according to testimony that chief executive officer Bill Horne provided last year in a lawsuit. In that case, Joe Samuel Bailey, an Arkansas businessman and the chairman of a rival spine center, alleges that St. Louis stole his business plan. St. Louis and Laser Spine have denied that allegation in court.
Distributions to Investors
The company has distributed at least $77 million to a small group of shareholders, according to an opening statement made by Bailey’s lawyer in the same court case. Another document in the case indicates that James St. Louis was slated to receive a 25 percent interest. That would entitle him to $19.25 million from the distributions. Bollinger said the 25 percent figure is not accurate. She would not disclose individual stakes.
Other investors include the private equity unit of Dallas investment firm EFO Holdings LP, managed by William Esping, and two founders of OSI Restaurant Partners LLC, whose properties include Outback Steakhouse.
In 2009, Goldman Sachs Group Inc. valued Laser Spine at as much as $428 million, as part of the company’s consideration of an initial public offering, Horne testified in Bailey’s lawsuit. Bollinger said in an e-mail that this estimate and others provided by bankers were “rough guesses” and not reliable.
Aetna won’t cover operations at Laser Spine and some of its competitors, citing a lack of research to confirm their safety and effectiveness. Cigna Corp., the seventh largest U.S. insurer, won’t pay for the laser portion of the surgery. Other insurers provide less than full coverage.
Some patients, desperate for pain relief and a short recovery period, say they’ve tapped retirement accounts or taken out second mortgages to pay Laser Spine.
They’re not always satisfied with the results. Fifteen former Laser Spine patients -- whose cases came up in court records, in the institute’s materials and in online back-pain forums -- said in interviews that their operations provided only fleeting relief, or no relief at all, from their back pain.
The 15 malpractice claims since October 2009 came during a period in which the company performed about 7,500 procedures, based on its 2010 estimates. Nationally, outpatient surgery centers received about six malpractice claims for every 20,000 surgeries, according to data from Zurich North America, a commercial property and casualty insurer.
Balch and others say that after their operations at Laser Spine they were told to get dressed and leave -- though Balch had suffered a spinal fluid leak and another patient was bleeding internally from two lacerated arteries, according to records in two malpractice suits. A third went to a hospital in need of emergency surgery just hours later, according to a state inspection report.
Laser Spine executives say they meet state regulatory requirements. The company is a target for malpractice suits because it’s fully insured, said Bollinger, the medical operations officer. With regard to the claims in those suits, the institute gave Bloomberg News a statement that said: “We do not believe it is appropriate to dispute the facts at issue with a patient in the public forum.”
Since July 2009, the institute has paid at least $2.8 million to seven patients to settle cases, according to the Florida Office of Insurance Regulation. Some of the cases were settled at the behest of Laser Spine’s insurer, Lexington Insurance Co., even though institute officials believed the care they provided was appropriate, Bollinger said.