A new report from the HHS Office of Inspector General has found spine surgeries increased at hospitals after hospitals began purchasing devices from physician-owned distributorships.
In 2012, Medicare reimbursed hospitals $3.9 billion for spine surgeries, making the spine industry a large and profitable sector within healthcare. Physician-owned distributorships, or PODs, play a big role, the OIG said. PODs are physician-owned device companies that sell spinal devices to hospitals. Owners of PODs may include surgeons who implant the different devices from the PODs, which critics have said creates a conflict of interest for physician owners who may be looking to maximize profits.
In 2011, the Senate tasked the OIG to look into PODs. This past march, the OIG released a fraud alert saying PODs could "produce substantial fraud and abuse risk and pose dangers to patient safety," and they are "inherently suspect" under the federal Anti-Kickback Statute.
The report found that in 2012, hospitals that purchased spinal devices — such as spinal plates, fusion devices, pedicle screws and rods — from PODs performed 28 percent more spine surgeries than hospitals that did not purchase devices from PODs. In addition, the complexity, and consequently reimbursement, of spine surgeries in those hospitals was higher.
OIG officials also said POD devices were not any cheaper than devices that came from other companies. "This, combined with the volume of spinal surgeries we found at hospitals that purchase from PODs, may increase the cost of spinal surgery to the Medicare program and beneficiaries over time," the OIG concluded.
The Patient Protection and Affordable Care Act implemented a new legal guideline called the Sunshine Act. This act essentially requires drug, device, biologic and medical supply manufactures to report payments and gifts to physicians and teaching hospitals, and it also requires disclosure of physician ownership or investment interests in those companies. CMS plans to list all PODs and physician ownership interests on its website soon.
More Articles on Physician-Owned Distributorships:
Sunshine Act Drives Surgeons to Rethink Industry Relationships
Physician-Owned Distributorships and Investigations: WSJ Reports
OIG Issues Special Fraud Alert on Physician-Owned Distributorships