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Arthrocare Device Use Draws More Scrutiny

Lately, however, the nation's largest car insurance companies -- including AllState (ALL - Get Report), AIG (AIG - Get Report), Progressive (PGR - Get Report) and State Farm -- have started to fight back. They feel that some surgery centers, such as Palm Beach Lakes, have been charging excessive payments for percutaneous discectomies that patients don't even need. They routinely challenge the cases in court as a result.

Now, the FBI is asking Florida insurers to turn over the "demand packages" and "demand letters" they received for those operations. The agency is requesting questionable claims submitted by several law firms for procedures performed at one surgery center in particular.

In the NICB notice obtained by TheStreet.com -- which announces a "high-exposure, multi-carrier, multi-claim investigation" -- the names of the law firm and the surgery center have been redacted. However, outside sources have confirmed that Palm Beach Lakes is indeed the surgery center under review.

Palm Beach Lakes has close ties to Arthrocare: It ranks as a major Arthrocare customer that buys large volumes of the company's $7,500 SpineWands. But the surgery center has helped the company out in other important ways as well.

One of the surgeons there trains doctors wanting to use Arthrocare's SpineWands, and another sold Arthrocare a firm that secures reimbursement for the devices.

"I wrote their (Arthrocare's) protocol, or I revised most of their protocol," Palm Beach Lakes spine surgeon Jeffrey Kugler has explained in the past. "Anyone who wants to do this procedure in the country needs to basically come here and make sure they are doing it appropriately ... We have written the training documentation."

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