Discovery of some old promotional videos three years ago while Brentwood dentist Jay Grossman was cleaning out an office closet lead to an "aha" moment and a fast-growing side business.

Grossman's Waiting Room Theater Inc. is now considered the nation's largest video-content subscription service for dental offices, and recently signed strategic partnerships could triple the size of the company's subscriber base of 3,000 offices.

Waiting Room Theater provides new DVDs each quarter for dentists to play in their waiting rooms to both entertain and educate patients before appointments.

The service has its origin in old education and promotional videos that Grossman had a friend edit into a show to play continuously in his own office. He found the video increased sales of the promoted products and procedures.

A slicker version of the video was created for Grossman to exhibit at an industry trade show three years ago, gaining 247 subscriptions from that maiden effort alone.

The show isn't entirely comprised of infomercials and flossing instructions. Grossman had amassed an extensive collection of classic dental comedy sketches over the years, and obtained licenses to include many of them on his DVDs.

Today, Grossman has developed a variety of partnerships and sponsorships to grow revenue. Products such as Oral B toothbrushes and Invisalign braces are promoted in the videos.

"With things like Tivo making it possible to skip over commercials, companies see a service like ours as a way to promote their product to a captive audience who can't turn off the TV," said Grossman, who has cut back his dental office hours to 20 a week to devote more time to the new venture.

Waiting Room subscriptions can cost a dentist practice up to $999 a year, but some device companies now provide a complimentary subscription to new customers, sometimes in exchange for getting a plug in the video.

The latest of these deals is with Biolase Technology Inc., a maker of water-and-laser dental drills used in close to 5,000 dental offices around the country. In another new partnership, Dental Dek, a large direct mail marketer to dental offices, is now promoting the video subscription service to its customer base.

Testing Complaint

The U.S. Attorney's Office in Los Angeles has filed a civil complaint alleging that a Beverly Hills-based chain of diagnostic clinics defrauded the government by performing unnecessary tests on Medicare patients.

The April 14 complaint, filed in United States District Court in Los Angeles, accuses Oaks Diagnostics Inc. of directing an employee to recruit Medicare beneficiaries to undergo medically unnecessary diagnostic tests, such as CT scans and MRIs. Oaks does business in six locations under the name Advanced Radiology of Beverly Hills.

Also named in the suit was clinic owner Dr. Ronald Grusd and Dr. Earl Fernando, a physician practicing in Marina Del Ray who allegedly directly referred patients for tests and in some cases pre-signed blank prescriptions for others to use.

The complaint alleges that Advanced Radiology submitted claims to Medicare for unnecessary services rendered to at least 438 Medicare beneficiaries between 1999 and 2003. Medicare paid the company more than $600,000 for those procedures. Under the False Claims Act, the government can recover three times the amount of its losses plus penalties.

Last month, former Advanced Radiology employee Nordelyn Lowder pleaded guilty to one criminal count of health care fraud. Lowder, who is scheduled to be sentenced on June 2, admitted she improperly recruited patients to the clinics, often coaching them about symptoms to complain about.

"This is a type of marketing scheme that unfortunately is not uncommon," said Shana Minz, the assistant U.S. attorney handling the case. "Health care fraud is rather rampant in the Los Angeles area, and we think it's important to pursue these cases even though it may take some time."

The original "whistleblower" lawsuit was filed in 2003.The act allows a private party to file an action on behalf of the U.S. and receive a portion of the recovery.

Grusd's attorney, Patrick Hooper, said his client contends the tests were properly prescribed, and that the whistleblower, Maria Serrano, is a disgruntled former employee. Fernando, whom Minz said is cooperating with the investigation, could not be reached for comment.

Arrowhead Merger

Nanotech holding company Arrowhead Research Corp. last week announced completion of the merger of two subsidiaries, Calando Pharmaceuticals Inc. and Insert Therapeutics Inc.

The combination, under the Calando name, is designed to streamline operations and enable the companies' products to be brought to market more quickly, said Christopher Anzalone, chief executive of Pasadena-based Arrowhead.

Calando has an experimental ovarian cancer treatment moving into mid-stage clinical trials. Insert's lead cancer drug candidate is in an early stage human study at City of Hope.

Staff reporter Deborah Crowe can be reached at dcrowe@labusinessjournal.com , or at (323) 549-5225, ext. 232.

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