RST-Sanexas, Inc. and Its Owners Agree to Pay $1.5 Million to Resolve Allegations That They Caused False Claims and Accepted and Paid Illegal Kickbacks

PHILADELPHIA - United States Attorney David Metcalf announced that RST-Sanexas, Inc. (Sanexas), a Las Vegas, Nevada-based manufacturer and marketer of electric stimulation devices, and its principal owners, Richard Sorgnard, Lisa Sorgnard, and Morhea Sorgnard ("the Settling Defendants"), along with certain related entities, have jointly agreed to pay $1.5 million to resolve allegations that they violated the False Claims Act ("FCA"), 31 U.S.C. §§ 3729-3733, by causing the submission of false claims to Medicare for electrical muscle stimulation, vitamin injections, and other related services that were not medically reasonable or necessary and for services that were tainted by impermissible kickbacks. The settlement amount is based on the Settling Defendants' ability to pay.

"Our office continues to lead the national charge to hold alleged fraudsters accountable for improper Sanexas billing," said U.S. Attorney Metcalf. "We will continue working closely with our partners at CMS's Center for Program Integrity, the Department of Health and Human Services Office of Inspector General, the Justice Department's Civil Division, and U.S. Attorney's Offices around the country to hold accountable any other providers who inappropriately billed for these devices and caused false claims to be submitted."

"Accurately billing for services provided to Medicare enrollees is required of all health care providers participating in the program," said Maureen R. Dixon, Special Agent in Charge for the U.S. Department of Health and Human Services, Office of Inspector General (HHS-OIG). "Alongside our law enforcement partners, HHS-OIG will continue to evaluate and pursue allegedly inaccurate billings of Sanexas and similar devices."

Sanexas manufactures and markets a medical device called the "RST Sanexas neoGEN-Series," which the Food and Drug Administration (FDA) cleared for electrical nerve stimulation to treat neuropathy and other forms of chronic pain, in certain limited circumstances. The United States contends that between September 2017 and May 2022, the Settling Defendants improperly marketed the Sanexas device for indications that were outside its FDA clearance and not reasonable and necessary, including for treatment of acute pain, improving nerve health, regrowing nerves, and as a combination product with vitamin injections.

Further, Medicare did not cover some Sanexas treatments, or vitamin injections used in conjunction with Sanexas treatments, as marketed by the Settling Defendants and performed by Sanexas customers. In particular, National Coverage Determination 160.7.1 states that "[e]lectrical nerve stimulation treatments furnished by a physician in his/her office, by a physical therapist or outpatient clinic are excluded from coverage..." Multiple local coverage determinations contain similar statements and further provide that vitamin injections are not medically reasonable and necessary when used to perform a nerve block function.

The United States further contends that the Settling Defendants caused provider customers to submit false claims to Medicare for epidermal nerve fiber density (ENFD) testing. ENFD testing involves performing a "punch biopsy" on patients to evaluate nerve damage that purportedly could be treated with the Sanexas device. Sanexas allegedly encouraged providers to conduct ENFD testing following treatment with the Sanexas device to evaluate any improvement in nerve health. However, the Sanexas device is not cleared for healing or regrowing nerves and procedures using the device for those purposes are not covered, and therefore it was not medically reasonable or necessary to conduct such additional testing.

Finally, the United States alleges that the Settling Defendants violated the Anti-Kickback Statute (AKS), 42 U.S.C. § 1320a-7b(b), by paying and accepting illegal inducements in exchange for customer referrals. The AKS prohibits anyone from offering or paying, directly or indirectly, any remuneration - which includes money or any other thing of value - to induce referrals of items or services covered by federally funded healthcare programs. The United States alleges that the Settling Defendants violated AKS in two ways. First, the Settling Defendants offered volume-based discounts to distributorships owned and operated by medical providers who performed procedures using the Sanexas device, and paid commissions that were conditioned upon and directly tied to the value of business that the distributors generated on behalf of Sanexas. Second, the Settling Defendants received commissions from a diagnostic laboratory for referring medical providers to perform ENFD testing in conjunction with Sanexas treatment.

This settlement resolves certain allegations in lawsuits filed in the Eastern District of Wisconsin and Western District of Pennsylvania under the whistleblower provisions of the False Claims Act. Those provisions allow private individuals known as "relators" to sue on behalf of the United States and to share in the proceeds of any settlement or judgment that may result. The relators in these cases will receive statutory awards from this recovery, and also may be entitled to shares of future recoveries from other defendants named in the lawsuits.

The resolution obtained in this matter was the result of a coordinated effort between the Justice Department's Civil Division, Commercial Litigation Branch, Fraud Section, and the United States Attorney's Offices for the Eastern and Western Districts of Pennsylvania and the Eastern District of Wisconsin. Investigative support and assistance were provided by the Department of Health and Human Services, Office of Inspector General. The matter was handled in the Eastern District of Pennsylvania by Assistant U.S. Attorney Eric S. Wolfish and Civil Chief Gregory B. David, Eastern District of Wisconsin by Assistant U.S. Attorney Lisa Yun and Michael Carter, and Western District of Pennsylvania by Assistant U.S. Attorney Jacqueline Brown and Paul Skirtich, along with Civil Fraud Section Senior Trial Counsel Kelley C. Hauser and Trial Attorney Evan J. Ballan.

Prior DOJ press releases related to the Sanexas national initiative include:

https://www.justice.gov/usao-edpa/pr/two-doctors-and-their-medical-practice-pay-more-181000-resolve-false-claims-act

https://www.justice.gov/usao-edpa/pr/us-attorney-announces-two-additional-civil-settlements-part-national-effort-combat

https://www.justice.gov/usao-edpa/pr/us-attorney-announces-additional-civil-settlement-chiropractor-and-his-practice-part

In addition, the United States District Court for the Eastern District of Pennsylvania recently entered a Consent Judgment to resolve the action that this Office filed against Joseph M. Childs, DC, Charles H. Durr, DC, and Active Integrated Medical Centers, PC, for breaching their payment obligations under the parties' $1.9 million settlement agreement relating to Sanexas billing.

The investigation and pursuit of this matter illustrate the government's emphasis on combating healthcare fraud, including in the healthcare technology arena. One of the most powerful tools in this effort is the FCA. Tips and complaints from all sources about potential fraud, waste, abuse, and mismanagement, can be reported to the Department of Health and Human Services at 800-HHS-TIPS (800-447-8477).

The claims above are allegations only and there has been no determination of liability.