Arthrocare Unit Keeps Troubling Company

Editor's note: This article was corrected after its original publication on May 21. Please see Corrections and Clarifications.

OKLAHOMA CITY -- Arthrocare (ARTC Quote) might want to examine its business partners a little more carefully.

Steven Woods, a South Florida attorney who handles cases on behalf of car insurance companies, has linked Arthrocare to several suspected con artists. Going forward, Woods hopes to question company executives under oath about these potentially troubling relationships.

Woods has been trying for months to arrange depositions of key Arthrocare leaders -- including CEO Michael Baker -- as he challenges payment for surgeries involving the company's SpineWand devices. Woods has expressed particular interest in SpineWands sold by DiscoCare, ArthroCare's South Florida billing division that's suspected of supplying the devices for questionable surgeries performed on car-wreck victims covered by pending insurance settlements. (Click here for more on the increasing scrutiny facing DiscoCare.)

Arthrocare flatly dismisses such suspicions.

Still, Arthrocare has seen sales of its SpineWands skyrocket since DiscoCare first came along. Indeed, Arthrocare considered DiscoCare so valuable that it spent $25 million -- more than half its 2007 profit -- to gain complete control of the two-year-old company late last year.

"The biggest assets there," Baker explained at the time, "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."

But Arthrocare is now facing uncomfortable questions from car insurers who have grown increasingly suspicious of DiscoCare. From the start, critics claim, DiscoCare has relied on two key sources -- Palm Beach Lakes Surgery Center and the Palm Beach, Fla., personal injury law firm of Steinger, Iscoe & Greene -- for a huge chunk of business. In court filings, Woods has expressed clear interest in questioning Arthrocare about the surgery center and the personal injury law firm alike.

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