Arthrocare’s Credibility Crisis Deepens

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Over the past two months, Citron Research has published numerous articles detailing Arthrocare’s toxic relationship with its billing subsidiary Discocare. Citron has received an incredible amount of unsolicited feedback from the medical community expressing outrage at the business practices of Arthrocare. Furthermore, these reports, reinforced with Arthrocare’s own documentation, have proven that:

  • Discocare had an insider relationship to Arthrocare from its inception.
  • Discocare doesn’t operate a mysterious and highly technical “algorithm” as claimed by CEO Baker.
  • In fact, it organizes a network of personal injury attorneys and high-volume surgery centers to create a stream of high-priced spine procedures executed primarily for financial rather than medical reasons.
  • These procedures are compensated based on a Letter of Protection executed with a personal injury attorney of an injured client.
  • It explicitly advocates doctors to “upcode” those procedures into an “open” surgical procedure, with dubious medical benefit, but a higher value in an injury lawsuit

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EVERY DAY THIS STORY GETS WORSE… Arthrocare.

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In the starkest news to date that the “Discocare model” is rupturing, the first insurance company defense in a “Discocare model” auto accident case rendered its verdict last week on February 15 in the case of Sosa vs. Freedman.

In what can only be seen as a stunning rebuke for the Letter of Protection scheme at the heart of the “Discocare model”, a Broward County jury awarded the plaintiff a damage claim of only $10,000 in a $1.4m “Discocare model” suit.

This time the insurance company was no less than AIG.  So now we have State Farm, Progressive Insurance, and AIG all stepping up to confront this scheme. Read more

Citron Research Updates on Arthrocare (ARTC)

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“The truth will set you free. But first, it will piss you off.”
Gloria Steinem

The backlash against Citron from Arthrocare and its analysts regarding our analysis of the company has been understandable; sometimes the truth is a hard pill to swallow.  While everyone is entitled to their own opinions, no one is entitled to their own facts.  The facts surrounding Arthrocare, documented through their own sales materials plus court testimonies and subpoenas, have so explicitly reflected the company’s suspect sales practices that the stock has reacted accordingly.  Unfortunately for shareholders, we believe there is much more reacting to come in the future. Read more

WHAT ARTHROCARE HOPES YOU NEVER READ

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Over the past 2 months, Arthrocare and its management have acted like nothing is wrong with their company and all criticisms have been nothing more than noise from short sellers.  If you read the stories quoting Arthrocare officials, you get the impression of a company just minding its own business, conscientiously selling its surgical devices to willing surgeons like a hot dog vendor at the ballpark.

CEO Baker has gone as far to say only a few days ago that he spends his day fighting web stories about soured relationships with insurance companies and business practices.  Mr. Baker continued, calling Citrons criticisms as “are “the most salacious kind of garbage you can possibly find.” Read more