Reliance Medical Systems Files Federal Court Lawsuit Challenging U.S. Government's Crusade Against Physician-Owned Businesses That Reduce Healthcare Costs And Promote Medical Innovation

LOS ANGELES, Oct. 9, 2013 /PRNewswire/ -- Reliance Medical Systems, LLC has brought suit in the United States District Court for the Central District of California against the U.S. Department of Health and Human Services. Reliance is a small business that collaborates with spine surgeons to design highly customized spinal implant devices and surgical tools. Reliance's federal lawsuit seeks to halt the efforts of the U.S. government -- supported by the nation's largest and most influential medical device manufacturers -- to wipe out physician-owned companies that have stimulated medical innovations and reduced healthcare costs.

According to the Reliance lawsuit, "at the core of the federal government's crusade is its recent declaration that physician-owned companies are 'inherently suspect.' This declaration not only clashes with court decisions and government guidance affirming the legality of physician-owned companies, but signals that any person wishing to speak about the formation of a physician-owned company will be 'inherently suspect[ed]' of violating laws that carry severe criminal and civil penalties. This unfairly and unconstitutionally burdens First Amendment rights of free speech and due process rights."

Reliance Medical Systems is a design company that specializes in making customized implants and surgical tools. According to the federal lawsuit, "the key element of Reliance's business model is harnessing the design insights of physicians, whose expertise in spinal surgeries enables Reliance to design implants and surgical tools that lead to better patient outcomes."

From its inception in 2006 through 2012, Reliance and its related companies included physicians as owners. The federal lawsuit says that "Reliance has found that physician ownership is the model that maximizes and optimizes physician design input."

The Reliance lawsuit details the origins of the federal government's attempt to squash physician-owned businesses: "Because the law . . . allows physician-owned entities to do business and manufacture medical devices, large corporations that are also in the business of manufacturing medical devices (the 'Big Corporations') were forced to compete in the marketplace against smaller physician-owned entities like Reliance. That competition diminished the Big Corporations' market share. Unable to win in the marketplace, the Big Corporations embarked on a multi-year effort to win at the legislative/agency level through substantial lobbying efforts."

In particular, according to the lawsuit, the Big Corporations:

• Formed and financed lobbying entities;
• Made substantial campaign contributions;
• Hired a major international law firm to advocate on their behalf "for stronger legislative and regulatory action to halt the proliferation of" physician-owned entities;
• Lobbied successfully for congressional hearings in 2011; and
• Successfully urged the Office of the Inspector General at the Department of Health and Human Services to issue a special order in March of 2013 stating that physician-owned businesses are "inherently suspect."

This Big Corporation-inspired crusade against physician-owned entities, according to the Reliance lawsuit, "has caused a substantial number of hospitals to stop doing business with physician-owned businesses." The lawsuit also contends that "inappropriately leaked details of" the federal government's crusade have generated inaccurate media reports that have negatively impacted the businesses of Reliance and other physician-owned businesses.

Reliance is represented by Matthew D. Umhofer, Esq. and Ezra D. Landes, Esq. of the Los Angeles law firm of Spertus, Landes & Umhofer, LLP. A copy of Reliance's lawsuit may be found at http://spertuslaw.com/wp-content/uploads/2013/10/Complaint-v5.pdf.

Lisa Cohen, 1-310-395-2544, [email protected]

SOURCE Reliance Medical Systems, LLC