Charlie Stokes found out his upcoming spine surgery was canceled when he received an email from the hotel he had booked for his recovery.
“I got a message from the Homewood Suites asking if I wanted to cancel my reservation now that Laser Spine was closed,” said Stokes, who planned to travel to Tampa from his home in West Point, Miss., next week for the procedure. “I had no idea.”
Like hundreds of other patients, Stokes was stunned when the Laser Spine Institute suddenly closed March 1, leaving a trail of questions.
Among them: How could such a formidable player in the health care world have fallen so far, and so fast?
While the answer remains cloudy, a series of developments — including a statement this week by the company’s CEO — suggest Laser Spine suffered a number of hits that eventually brought financial calamity.
PREVIOUS COVERAGE: The fallout spreads after Laser Spine Institute’s sudden closing
The statement by CEO Jake Brace said the institute’s banks “precipitously and surprisingly made the decision to freeze the company’s accounts and strip the cash out of these accounts.” The action, he added, took away the institute’s “operating flexibility,” and efforts to find other financing failed.
The scenario he described unfolded over a handful of days before the closure, when Laser Spine was “forced to wind-down and cease operations and liquidate the collateral for the benefit of the banks.” (See the full statement below.)
The statement makes no mention of what might have caused the banks to take action, but court records and analysts provide some clues.
Laser Spine was embroiled in several lawsuits, including an expensive and drawn-out appeals case with a possible payment of at least $264 million on the line.
And more fundamentally, it’s business model wasn't sustainable in the current, evolving health care landscape, said Jay Wolfson, a professor at the University of South Florida who specializes in health care issues.
"This franchise-type model was bound to fail," Wolfson said. "Laser Spine didn't own their real estate or their medical equipment. They leased them. They had no assets to fall back on when cash flow became a problem."
The institute operated as “more of a business than a doctors office,” said Laura Henderson, the administrator at BioSpine, a competing spinal surgery practice located just down the road from Laser Spine in Tampa.
Laser Spine was known for not taking most insurance policies, which forced many patients to pay thousands of dollars out of pocket for procedures in payments made over time.
"There was this mind-set in the industry that if you were accepting insurance, you were leaving a lot of money on the table. That you would never survive being 'in network,'" Henderson said.
BioSpine expanded into Tampa from Citrus County in 2014, the same year Laser Spine opened its new facility. But unlike Laser Spine, BioSpine spent a year making inroads with insurance companies and continues to accept Medicare and most commercial plans.
"Then things started to shift as the Affordable Care Act was being implemented,” Henderson said. “Everyone was really starting to see a big change in how things worked with the insurance companies. But Laser Spine still wasn't accepting most insurance plans."
Before its downfall, Laser Spine had many years of success.
The company topped the Tampa Bay Times' annual Top Workplaces list year after year, and regularly made appearances in Florida Trend magazine's top private companies lists.
In 2017, Laser Spine reported $220 million in revenue, up from $216.9 million the year before. At the time, the institute employed more than 1,000 people, nearly 600 of those in Tampa.
When Laser Spine announced the opening of its 176,000-square-foot surgical center in Avion Park in 2014, the company boasted that it was bringing 100 new high-paying jobs to the market. Its new $56 million space could accommodate 25 percent more patients than the 425 it treated a month at its former Rocky Point facility.
Local leaders touted Laser Spine as a big economic driver, with an overall impact of $230 million in “medical tourism” as it drew patients from around the nation. The company also was known for its robust marketing, with billboards and television ads appearing all over America.
"The truth is, we benefited from them,” Henderson said.
“Our models were a little different, but they'd draw patients from all corners of the country and a handful would pull in to our parking lot and ask for a second opinion.”
She added: “We were being fed from their crumbs. When we heard the news they were closing, people congratulated us like it was a David and Golaith story, but we don't think that's fair. People lost their jobs. And Laser Spine's reach helped spread the word about minimally invasive spinal procedures everywhere that don't have to be done in a hospital. That helped spread the word for all of us."
Laser Spine first opened in 2005 with a promise of giving patients suffering with neck and back pain an alternative to traditional surgery. Three doctors — James St. Louis, Glenn Hamburg and Michael Perry — started the practice with nine employees and one operating room.
By 2007, the company opened another location in Arizona. Then Philadelphia and Oklahoma City. But the lawsuits started rolling in.
One accused Laser Spine of offering illegal incentives to lure patients, including paying for airfare, hotels and other out-of-pocket expenses.
In 2013, professional wrestler Terry “Hulk Hogan” Bollea sued the practice, alleging it performed a series of ineffective procedures that cost him $50 million in medical costs and lost opportunities.
More recently, the 2nd District Court of Appeal ruled Dec. 28 that Laser Spine owed a competing laser spinal surgical center at least $264 million in damages — not the $1.6 million award set by the trial judge. The 2006 lawsuit had accused the institute’s founding doctors of breach of fiduciary duty, conspiracy, defamation, slander, tortious interference and violation of the Florida Deceptive and Unfair Trade Practices Act.
Also last year, the institute was ordered by a Pennsylvania court to pay $20 million to the estate of an Ohio woman who sued after her 2014 death, according to news reports.
And Florida’s Office of Insurance Regulation has recorded millions more in malpractice claims.
In addition to its Tampa office, the institute also has closed its locations in Ohio, Arizona and Missouri.
Meanwhile, people like Stokes, the Mississippi patient, are on their own to find out what happens next.
"I'm checking out new doctors," said Stokes, who managed to get a refund on a $250 deposit he put down with Laser Spine.
Jeanette Thorpe Lorensen became a patient at Laser Spine through a clinical trial opportunity.
The New Port Richey resident saw an advertisement for a spinal device clinical trial on Facebook and filled out the online form.
“I’ve had back and neck trouble after a car accident,” she said. “My vertebrae is fused in my neck but I didn’t want the traditional rods and screws surgery on my back, where the vertebrae are sliding past each other.”
Some days are more painful than others. But a new noninvasive procedure that Laser Spine surgeons were testing in an approved clinical trial sounded hopeful, Lorensen said.
“My next appointment was assigned for March 11 and my research coordinator had no idea they were closing,” she said. “No one else in Florida is participating in the trial. So I don’t know what happens next, if anything."
The statement by Brace, the Laser Spine CEO, said the company planned by the end of the week to reach “all 1,500” patients who still need to complete their “care plans.”
Contact Justine Griffin at [email protected] or (727) 893-8467. Follow @SunBizGriffin.
In their own words
Below is an unedited version of the statement released this week by Laser Spine Institute CEO Jake Brace explaining the company’s sudden closing.
“March 6, 2019 — On Friday, February 22, 2019, Laser Spine Institute’s banks precipitously and surprisingly made the decision to freeze the company’s accounts and strip the cash out of these accounts. When this happened, we lost our operating flexibility. On February 25, 2019, after working diligently over the weekend, management was able to reach a standstill agreement with the banks in which they we were allowed to fund previously accrued payroll and make limited other critical payments. The banks gave us until the afternoon of Friday, March 1, 2019 to locate an investor to satisfy their requirements. If we were not able to find an investor by then, we would be forced to wind-down and cease operations and liquidate the collateral for the benefit of the banks.
The Company worked feverishly to secure financing up and until Friday afternoon. However, we were unable to secure financing to meet the banks’ requirements. Thus, we had no choice other than to close our doors that afternoon. We deeply regret that, as a result, we were forced to release our employees that afternoon.
Despite last Friday’s sudden closure, forced by the precipitous freezing of LSI accounts, a small group of LSI staff continues to work strenuously on assuring that our patients maintain continuity of care. It is LSI’s plan that by the end of the week, we will have reached all 1,500 of patients and their new care plans will be in process.”