A Midwestern grocery chain, Hy-Vee, is taking an unusual — and highly controversial — approach to reducing health care costs.

Before employees in certain cities can undergo knee replacement, they first must visit a stem cell provider. Hy-Vee has contracted with one of the United States' leading stem cell companies — Regenexx, based in Des Moines, Iowa — that claims injections of concentrated bone marrow or platelets can help patients avoid expensive joint surgery.

Regenexx has persuaded over 100 employers to include its services in their health insurance plans. In a marketing booklet, Regenexx, whose injections range in price from $1,500 to $9,000, notes that its treatments cost a fraction of major surgery. A single knee replacement, for example, ranges from $19,000 to $30,000 in the U.S.

The benefits of stem cells are hotly debated in the medical community, and federal regulators have warned the public to beware of clinics that peddle unapproved injections as a cure-all. Many doctors and ethicists say they fear the public is being misled about how well stem cells work — and whether the procedures save their money or waste it.

“This definitely is not a high-quality, proven treatment,” said Dr. Freddie Fu, chairman of orthopedic surgery at the University of Pittsburgh Medical Center.

Knee pain and the bottom line

Health insurance typically doesn't cover stem cell injections, with the exception of certain accepted treatments, such as bone-marrow transplants for cancer and aplastic anemia. Aetna, the United States' third-largest health insurer, dismisses stem cells and platelet injections as experimental; Anthem, the country's second-biggest health insurance provider, classifies the injections as “not medically necessary.” Without insurance coverage, patients are forced to pay out-of-pocket or forgo treatment.

So instead of dealing with disapproving insurance executives, Regenexx appeals directly to employers large enough to fund their own health plans. These businesses have the freedom to customize their plans, covering services that aren't part of a standard insurance package. Over half of U.S. workers insured through their jobs belong to such plans, according to the Employee Benefit Research Institute, a D.C.-based nonprofit.

Perhaps Regenexx's best-known corporate client is Des Moines-based Meredith Corp., which owns multiple TV and radio stations, as well as magazines such as Better Homes & Gardens. (Meredith owned Time magazine until September 2018.)

In a statement, Regenexx said its goal is to “replace more invasive surgical orthopedics” with nonsurgical options, noting that recent research has found many joint operations are ineffective. On its website, Regenexx claims its procedures “repair and regenerate damaged or degenerated bone, cartilage, muscle, tendons, and ligaments.” In a bone marrow stem cell procedure, for example, a doctor withdraws bone marrow cells from a patient's hip, concentrates them, then reinjects them into a problem area, such as an arthritic knee. Doctors target the exact location in the joint using ultrasound. For a “platelet-rich plasma” treatment, doctors draw blood, concentrate the platelets, then inject them into the target area.

Regenexx, previously known as Regenerative Sciences, is one of the oldest stem cell companies in the U.S. When it opened its doors in 2005, it had only a handful of competitors. Today, there are more than 1,000 stem clinics in the U.S., said Leigh Turner, an associate professor at the University of Minnesota's Center for Bioethics, who has published a series of articles describing the stem cell market.

At times, Regenexx has clashed with the Food and Drug Administration. In 2010, for example, Regenexx sued the FDA, claiming the agency lacked the authority to regulate its procedures, which involved culturing stem cells before reinjecting them into patients. Regenexx lost its case and was countersued by the FDA, which charged that Regenexx was marketing an unapproved drug. In 2014, the U.S. Court of Appeals in Washington sided with the FDA, forcing Regenexx to stop performing the controversial procedures. Today, Regenexx performs this procedure only in the Cayman Islands, where the government allows it. The Cayman Islands, where there is less government regulation of health care, has become known as a medical tourism destination, Turner said.

Regenexx says that the treatments offered at its U.S. clinics comply with FDA regulations, which require that cells injected into patients undergo no more than “minimal manipulation.”

On its website, Regenexx lists more than two dozen studies led by its doctors. For example, its chief medical officer, Dr. Chris Centeno, published a small study last year that found patients with knee arthritis who received bone marrow and platelets fared better than those randomly assigned to exercise therapy. Regenexx says it tries to be transparent about its results, noting that it posts data on patient results. In a statement, the company said most patients it treats for knee pain have good functioning five years later.

A Regenexx marketing booklet says 70% of orthopedic surgeries “can be completely avoided with a Regenexx procedure” — a claim Fu called “silly.”

“There is zero evidence that you can replace 70% of surgeries with stem cells,” he said.

Recent research suggests stem cells and platelets may work no better than placebos, Fu added. In a recent analysis, over 80% of patients with knee arthritis experienced a noticeable improvement in pain after receiving simple saltwater injections, writes Dr. Benjamin Rothrauff, a postdoctoral fellow who works with Fu at the University of Pittsburgh.

There's also no definitive evidence stem cells and platelets can regrow lost cartilage, Fu said. A 2018 review concluded platelets have “marginal effectiveness,” and experts note that most published studies are so small or poorly designed that their results aren't reliable.

Is Regenexx actually saving employers money?

If Regenexx treatments worked as well as the company claims, insurance companies would rush to cover them, Turner said. But the notion that Regenexx will save employers money hasn't been proven and is “a boastful claim with no clinical merit,” said Henry Garlich, director of health care value solutions and enhanced clinical programs at Blue Shield of California, who has reviewed Regenexx's publications.

“The problem is that we don't have enough data. When a company does not have this type of evidence, then they will go direct to the consumer market,” Garlich said. “Some vulnerable individuals, including companies that want to reduce their health care costs, may buy what they're selling.” If Regenexx procedures don't work, Garlich said, an employer could end up paying twice — once for stem cells and once for knee replacement.

Some employers are, in fact, skeptical. The Des Moines Public Schools has opted not to add Regenexx to its employee health plan, said Catherine McKay, director of employee services for the school system. She said a salesman for a local stem cell clinic, which has since merged with Regenexx, told her the treatments could save the school system lots of money. McKay wasn't sold.

“My experience with them has not been great, in terms of marketing and sales. They're very, very pushy,” McKay said. “They claim they can get people back to work earlier” than surgery. “But if I still need knee surgery a year down the road, that doesn't cut my costs.”

The Des Moines school system has agreed to consider covering Regenexx procedures as part of its workers' compensation program on a case-by-case basis, McKay said. The school system has not signed a contract with Regenexx, however, and hasn't included Regenexx in its health plan.

McKay said she knows of two school employees who have tried Regenexx. While one employee was satisfied with the results, McKay said, another “went through a couple procedures and ended up needing surgery anyway.”

Corporate executives have become some of Regenexx's biggest boosters. Hy-Vee's former chairman and CEO, Ric Jurgens, appears in a Regenexx marketing brochure and says that he turned to Regenexx because of heel pain. The brochure, which was removed from a Regenexx website after Kaiser Health News began reporting this story, quotes Jurgens as saying, “I knew that giving our employees the chance to explore options besides surgery was in their best interest.”

Hy-Vee did not make Jurgens or other employees available to interview.

Steve Lacy, Meredith's former CEO and current board chairman, said he underwent a Regenexx procedure two years after his company began covering stem cell treatments. He had been facing knee surgery and thought stem cells were worth a try. The procedure got him back to doing everything he wants to do, Lacy said, even running several days a week. He also has done daily physical therapy for over two years. “The rehab and recovery is far less onerous” with the Regenexx procedure than with surgery, Lacy said. “If the procedure doesn't work for an individual, there's no harm.”

Meredith has spent about $400,000 in four years on 85 employees who have had Regenexx treatments, or about $4,700 a patient, said Meredith spokesman Art Slusark. That's a small share of the roughly $75 million a year that Meredith spends on its medical plan, he said.

At its headquarters, Meredith has promoted Regenexx procedures through email, posters and “lunch-and-learn” sessions in the office, said Jenny McCoy, Meredith's corporate communications director.

McCoy herself has become a poster child for Regenexx's benefits. She and two other Meredith employees appear with Lacy in a marketing video on the Regenexx site. Although McCoy had begun to experience knee and hip pain during exercise, she said in an interview that her pain was not severe enough to need surgery. McCoy underwent platelet injections two years ago and is pain-free today, she said.

“I thought, 'If Meredith is covering it, I might as well have it done early before [the pain] causes me too many problems,'” said McCoy, 52. Given the price tag, she said, “I would not have done it otherwise. I wouldn't have even known about it.” In the Regenexx marketing video, Lacy is shown saying stem cells saved Meredith roughly $700,000 in one year. Lacy said he estimated that number by comparing what Meredith spent on Regenexx with what it would have spent on hip and knee replacements.

But Slusark said Meredith hasn't examined employee medical records to determine how many were eligible for surgery or how many needed joint surgery after trying Regenexx. “We don't spend a lot of time calculating savings,” Slusark said.

Without that medical information, Meredith can't accurately estimate how much money it saved, if any, Fu said. He noted that relatively few people with joint pain undergo surgery, which doctors typically view as a last resort for patients who have exhausted all other treatment options. Although 14 million Americans have knee arthritis, the Arthritis Foundation estimates that doctors perform only about 757,000 knee replacements each year.

Before recommending joint replacement, doctors often tell patients to try exercise, physical therapy, weight loss, supportive shoe inserts or steroid injections, Garlich said. Physical therapy, in particular, helps many patients, said Fu; it's possible that PT, and not the stem cell injections, should get the credit for Lacy's recovery.

How the patients feel

Regenexx has posted video interviews of dozens of satisfied customers on its website, including a refinery worker treated for a non-healing wrist fracture, a snowboarder who had stem cell therapy in his knees and an avid weightlifter with multiple shoulder problems. All say Regenexx helped them.

Other Regenexx patients say the treatments wasted their time and money. Several patients who posted online reviews of the company agreed to be interviewed for this article.

One is Amanda Lynch, a 42-year-old Australian trapeze artist who lives in Montreal. Lynch said she spent $7,700 last year to treat an injured ligament at a Regenexx clinic in Colorado. Doctors administered a series of injections in her knee over several days, including platelets and her bone marrow, Lynch said. She shared copies of the emails she exchanged with the clinic, a bill from Regenexx and a document in which doctors evaluated her candidacy for treatment.

But within a few months, Lynch had to undergo surgery in Montreal for both knees, she said, paying an additional $16,100, according to her medical bill. Because Lynch is Australian, she was not eligible for free care in the Canadian health system and had to pay out-of-pocket.

Roland Jersevic, a 67-year-old lawyer living in Saginaw, Mich., said he needed knee replacement after his stem cell treatments failed to relieve his arthritis. Jersevic said he went to a Regenexx clinic in Toledo, Ohio, in 2015 to get help with severe arthritis in his knees, which had caused his legs to bow. “The pain was horrendous all the time,” he said. Jersevic's medical bills, obtained for this article, show that he paid the clinic $7,500 out-of-pocket because his insurance wouldn't cover stem cell therapy. “They told me they were going to regrow my cartilage,” he said, referring to Regenexx. “I wanted it to work.”

Although the fat and bone marrow injections may have given Jersevic a “little bit” of temporary relief, his pain soon returned, he said. Regenexx offered to administer more injections, at an additional cost, Jersevic said. “At that point, I had lost all faith in what they were doing. To spend more money on a booster — what for? It wasn't working.”

Jersevic had both knees replaced in summer 2016, his medical records show, and his insurance paid most of the bill. His knee pain is gone, and Jersevic said he felt well enough to return to track-and-field competitions — including hurdles and pole vaulting — in 2017.

“When your knees are that bad, it's not going to work for you,” Jersevic said. “They should tell you it's not going to work for you. But they want the cash.”

In response, Regenexx noted that many patients who undergo knee surgery are also unhappy with the results. Research suggests that up to one-third of those who have knees replaced continue to experience chronic pain, while one-fifth report that they are dissatisfied with the results of their surgery.

“We are disappointed to learn of any patients who didn't have a positive outcome,” Regenexx said in a statement. “Our goal at Regenexx is to achieve the best possible clinical efficacy, and we are actively researching to find out why some patients respond better than others.”

Kaiser Health News is a nonprofit news service covering health issues. It is an editorially independent program of the Kaiser Family Foundation, which is not affiliated with Kaiser Permanente.

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