Martin Luther King Jr./Drew Medical Center has paid nearly $1 million in the last five years to a surgical instrument company owned by one of its orthopedic surgeons -- a clear violation of Los Angeles County’s conflict of interest laws, according to documents obtained by The Times.
“That’s verboten,” Joe Sandoval, the county’s top purchasing manager, said of the arrangement.
In addition, the county-owned hospital often paid more than twice as much for surgeon James K. Brannon’s devices as it would have for more conventional instruments used by most hospitals, experts said.
The county initially canceled its contract Tuesday with Orthopedic Sciences Inc., hours after a Times reporter inquired about Brannon’s dual roles at the company and the hospital. On Wednesday, county officials decided instead to suspend the contract while the county health department investigates.
A Times review of 170 invoices submitted by Orthopedic Sciences shows that Brannon routinely used his company’s products during operations.
In at least five hip surgeries he performed, King/Drew spent more than $17,000 buying instruments and implantable devices, invoices show. That cost alone was more than triple what the county was paid by Medi-Cal for each surgery plus two subsequent days in the hospital. (Medi-Cal is the state’s health insurance system for the poor.)
When patients had no health insurance, county taxpayers footed the entire bill for the instruments.
The vast majority of the Brannon devices, used to stabilize degenerating hips or extract bone for grafts, were disposable.
By contrast, some of Brannon’s colleagues at King/Drew and most hospitals around the country use either reusable metal devices or bone substitutes that cost far less.
“The thing that’s the most troubling here is the cost involved,” said Dr. George Muschler, an orthopedic surgeon at the Cleveland Clinic Foundation. “Why on earth would a hospital administrator allow a surgeon to order a whole bunch of disposable equipment that is resulting in a loss on every case? ... It would not pass muster in my hospital.”
Conflict-of-interest rules are intended to ensure that there is no incentive for doctors to have patients undergo inappropriate or costly procedures, medical experts say.
Brannon, 43, defended his products and the propriety of his actions. “We followed the rules to the T,” he said and contended that he notified the county and his patients of his financial ties to the company.
Some of Brannon’s patients said they were never told the surgeon made a profit when the devices were used.
“I was not informed,” said Pamela Carlton, 46, a student whom Brannon operated on last July. “They didn’t even hint that a tool that was being used was developed by one of the doctors.”
Sandoval said county law prohibited contracts with firms in which county employees served as “officers, principals, partners or major shareholders.” Brannon is co-owner, president and chief executive of Orthopedic Sciences.
It appears that the company misrepresented itself in paperwork filed with the county in January, Sandoval said.
An officer in the company wrote that the products were “patented by a former resident of the county who is now a current employee.” Nowhere does the January letter say Brannon used the devices in surgeries at King/Drew.
Sandoval said he inferred from the letter that the inventor was an employee of Orthopedic Sciences, not of the county. The letter “is so ambiguous” it appears deceptive, Sandoval said.
The county’s contract with Orthopedic Sciences took effect in March and ends at the end of the year. Before that, the hospital approved of the purchases on its own, without seeking authorizations from higher-ranking officials.
Auditors from the county’s Department of Health Services have been investigating Brannon’s dual roles since May but have taken no action against him, agency spokesman John Wallace said.
“Basically, when we deny a physician’s order for a particular piece of equipment, we are in the way of a patient-doctor relationship,” Wallace said. “And that’s one of the reasons why this investigation has taken as long as it has.”
The Times found that Brannon’s firm not only violated county policy, but that it also appeared to be operating illegally in California. Orthopedic Sciences was suspended by the secretary of state’s office in April after it failed to file required corporate information for three years.
Brannon said he was unaware of the suspension.
Orthopedic surgeons around the nation said that they were intrigued by Brannon’s bone graft and hip stabilization devices and that they might have some advantages over traditional, reusable products. For instance, they require only a minimal surgical incision. But those advantages, they said, appeared to be outweighed by the costs.
Dr. Robert Bucholz, president of the American Academy of Orthopaedic Surgeons, said his hospital in Dallas probably wouldn’t buy the equipment. “This seems pretty expensive to me,” he said. “I think I personally would have a difficult time justifying those increased costs.”
Brannon, who works part time at King/Drew, earned a salary of $120,342 in the last fiscal year. He earned from $143,532 to $184,288 from the county in each of the three preceding years, according to county documents. In the last fiscal year, his company made more than $443,000 off King/Drew alone.
Other doctors who have invented orthopedic surgery products say they are careful not to profit from the devices when they use them on their own patients. Dr. David S. Hungerford of Johns Hopkins University earns royalties every time the implant he invented is used. But when he uses them on his patients, he foregoes the royalty.
Brannon says he does not have a problem profiting from devices he uses on his patients because patients are aware of his business ties. He acknowledged, however, that he did not know whether physician trainees he oversaw kept patients as well informed as he did.
As for ethics, he said, “I’m not sure any one single view is the ultimate true view that everyone should follow.
“The products I’ve provided to King/Drew Medical Center ... you can’t get from anywhere else in the country unless I manufacture and sell them. That’s what American ingenuity is all about.”
Brannon said that his outcomes with the devices had been “excellent” and that the products were used at “hundreds of hospitals.” In a follow-up fax, his company listed 78 customers.
But other orthopedic surgeons said the success was unproven because Brannon had not published any studies about the devices’ effectiveness in peer-reviewed medical journals.
Brannon’s ties to Orthopedic Sciences are well known at the hospital.
Black Enterprise magazine this May named him a finalist for its Business Innovator of the Year award. Doctors at King/Drew took note, passing the article around.
(BEGIN TEXT OF INFOBOX)
The amount Dr. James K. Brannon has earned as an employee of Martin Luther King Jr./Drew Medical Center in recent years, and how much his company, Orthopedic Sciences Inc. (OSI), has been paid by the hospital:
*--* Fiscal King/Drew Payments year* salary to OSI** 1999-2000 $49,219 $82,703 2000-2001 $152,434 $126,642 2001-2002 $184,288 $160,531 2002-2003 $143,532 $139,481 2003-2004 $120,342 $443,273
*July through June
** Based on hospital payment vouchers provided to The Times
Source: L.A. County Department of Health Services