DOJ accuses Arizona-based Modern Vascular of $50M fraud scheme

Victoria Garcia lost one of her legs after a procedure by Dr. Scott Brannan. He later convinced her to have another procedure, which resulted in her other leg being amputated. ANDREW FORD / THE REPUBLIC
By Andrew Ford Published Dec. 14, 2022 by The Arizona Republic.

The U.S. Department of Justice filed a complaint Tuesday in a lawsuit against Modern Vascular, claiming the company and its founder ripped off Medicare to the tune of $50 million. The claims made by the government partly corroborate and quote from an investigation by the Arizona Republic that sheds light on the company’s profit-driven practices.

Modern Vascular quickly spread from the Phoenix area across the country, touting cutting-edge treatment of a narrowing of arteries in the legs known as “peripheral artery disease.” But they’ve been plagued by claims they hurt patients with unnecessary procedures, according to interviews by the Republic and lawsuits the company contested in court.

The federal complaint filed Tuesday says the company and founder Yury Gampel “designed and implemented a fraud scheme … at the expense of patients and federal payors.” The company made illegal payments to prompt other doctors to send them patients, the complaint says, allowing Modern Vascular to bill federal healthcare programs for claims that were “tainted by kickbacks and should not have been paid.”

The complaint also says Gampel and his company placed “enormous pressure” on their staff to perform invasive procedures: “As Modern Vascular Corporate’s Chief Medical Officer Steve Berkowitz told a reporter for the Arizona Republic, ‘If you run a pizza joint and you’re not selling enough pizzas, you’re not going to stay in business.’”

Gampel declined to comment Tuesday, saying in a text message to a reporter his legal team needed time to review the claims by the Department of Justice.

Wednesday, an attorney for Modern Vascular denied the claims by the Department of Justice. 

“Modern Vascular believes that the government’s complaint lacks merit and that its business practices are compliant with the spirit and the letter of the law,” attorney Jed Dwyer wrote in an email. His entire statement is available here.

In a previous text message exchange, Gampel said anyone can allege anything in a lawsuit. Asked for a response to the Republic’s investigation, Gampel said in a text message: “With your ability to report false claims, twist words, and make up scandalous stories, I’m sure you’ll be a top notch national news reporter one day. Even small cockroaches grow up to become larger cockroaches.”

After the Republic’s investigation was published, Modern Vascular bought at least six half-page ads in the newspaper. 

On its website, the company posted that “A Modern Vascular Patient Story was Published by Arizona Central,” with a copy of the newspaper page. But the portion of that ad identifying it as a “paid advertisement” was removed. The “story” the company refers to was a paid advertisement and not a reported article by the Republic newsroom. After the Republic asked Gampel about the post, it was updated to include the “paid advertisement” identification.

The Republic would like to hear from anyone who can share more about Modern Vascular. Here’s how to get in touch.

The Department of Justice’s complaint meshes with earlier lawsuit claims filed by outside doctors and an employee of the company. Now joined as one, the federal complaint echoes some findings in the Republic’s investigation of the company, as well as reporting by Searchlight New Mexico. 

The Republic illuminated Modern Vascular’s high billing and questionable investment practices. The Department of Justice made similar claims, describing the company’s “illegal scheme to profit.”

One of the main findings in the Republic’s investigation, and in the complaint filed by the Department of Justice, regards the way Modern Vascular courted referring doctors. 

The company exploited a loophole to get around a ban on paying doctors referrals, the Republic reported. Modern Vascular signed up some referring doctors as investors. 

As one doctor told the Republic: “It just was a perfect marriage for a lot of podiatrists, like shoot, why wouldn’t we want to invest in something that’s good for our patients, but also on the back end kind of get a little somethin’ somethin’,” said podiatrist Dr. Randall Brower, who said he made $100,000 on a $7,500 investment. He said what he did was ethical and his patients got good care.

Brower told the Republic about calls in which Gampel would tell investing doctors that if they wanted the company to do well, they needed to send more patients. 

A similar point is made in the complaint filed Tuesday, which quotes Gampel telling investor doctors of their Fairfax, Virginia location to send three to five patients for a vascular workup each week.

“This commitment to refer is the key to the success of the lab,” Gampel wrote, according to the complaint.

Brower told the Republic he attended a pitch meeting in which potential investors were told the company would be sold in a few years and they’d make a fortune, another selling point echoed in the Department of Justice complaint. 

The executive who defended their practice in pizzeria terms said in an April interview the company had a target number of procedures for each clinic, saying their Glendale location shot for 15 a week. The complaint filed Tuesday claims they were doing even more procedures at other locations. Company emails cited in the complaint claim in June 2020 they did 44 procedures at their Tucson location and 46 in Sun City. The company declared a $100,000 payout to investor doctors at the Tucson location and $150,000 for the Sun City investor doctors. 

The Republic revealed several of the company’s doctors rank highly for billing Medicare, which suggested the company was “encouraging high billing practices,” according to Dr. Caitlin Hicks, an associate professor of surgery at the Johns Hopkins University School of Medicine who has studied overuse of vascular interventions. 

The complaint filed Tuesday corroborated that point, saying Gampel and his company pushed for more invasive procedures to drive up profits. Denver employees were pressured to put more patients “on the table,” the complaint says, and they got a $500 bonus if they performed 16 surgeries in a week. 

The Department of Justice’s Tuesday filing marks their opening salvo as they join a legal battle started by claims by a few people known as “relators.” Federal authorities chose to join the claims that were then unsealed in September. If they prevail, the relators get a cut of money that Modern Vascular could be required to pay.

Whether they prevail might come down to whether Modern Vascular was operating in what’s known as a “safe harbor.” Some health care business arrangements that would induce referrals can be protected from kickback prosecution.

Gampel previously referred a reporter to a PR firm, whose representative wrote in an email: “To be clear, the simple fact of physician investment in another medical practice is not problematic or against the law.”

The complaint filed Tuesday says Modern Vascular’s locations fail to qualify under safe harbor provisions because the terms of the investments related to an expected volume of referrals and investors were required to refer to Modern Vascular as a condition of remaining as investors. And many of their locations exceeded a cap that says safe harbor businesses can’t use investors to generate more than 40 percent of their business – the St. Louis location got 90 percent of its revenue from referrals from investor doctors. 

While the federal complaint is primarily concerned with claims of Modern Vascular’s ill-gotten gains, the Republic investigation also revealed allegations in interviews and lawsuits that the company’s profiteering approach caused injury and death after unnecessary surgeries. Mike Bonebrake and Victoria Garcia each lost a leg after Modern Vascular surgeries that another doctor said they didn’t need.

“You know, just knowing what they do really makes me upset,” Bonebrake previously told the Republic. “And it makes me mad, you know, it makes me mad. It makes me want to fight these people.”