By Joe Carlson
Posted: March 26, 2013 - 12:30 pm ET FiDA highlight
Doctors who hold part ownership in medical device companies, beware: people in HHS' inspector general's office are watching you. And they don't like what they see.
The inspector general's office published a special fraud alert Tuesday (PDF) on the rapidly growing phenomenon of physician-owned distributorships, or PODs, saying, “OIG views PODs as inherently suspect under the anti-kickback statute.”
The office is already investigating physicians who hold ownership stakes in spinal-implant businesses, and whether those doctors practice at hospitals whose Medicare patients receive a higher-than-average proportion of spinal-fusion procedures. That case may also widen to include doctors with stakes in cardiac-device makers, the office's 2013 work plan says.
The alert follows a letter from five bipartisan members of the Senate Finance Committee in June 2011 (PDF) that said a Senate investigation had turned up evidence physicians were being pressured into taking on lucrative ownerships in device companies because of a dearth of federal rules on the topic left it open to abuse.
Under federal law, it may be legal for a surgeon to hold shares in a company that manufactures devices that the doctor prescribes for his patients, even if it's a small company that manufactures a product not widely used outside of the hospital where the doctor practices. But such arrangements are risky and easy to abuse, the alert says.
Medicare's Anti Kickback law makes such arrangements illegal if even one of the doctors' motives in prescribing devices he has ownership in is personal profit. Those risks are particularly acute, the alert says, for physicians who own stock in companies that make surgically implanted medical devices, because hospitals typically listen to doctors' preferences when making purchasing decisions about those devices.
In figuring whether a particular arrangement may be illegal, the inspector general considers, among other factors, whether the profits gained from device-maker ownership are out of proportion to a small investment by the doctor; whether the price of the stock varies depending on how much prescribing the doctor is expected to do; and whether doctors have to sell their ownership if they change specialties.
Failing to report an ownership interest is also a red flag, the alert says.
“This is important guidance for providers who legitimately want to avoid getting into difficulty with the federal Anti Kickback law,” said Don White, a spokesman for the inspector general's office.
The senators' 2011 letter said that such specific guidance was needed by physicians who were being encouraged to enter physician-owned distributorships of uncertain legality. The letter cited specific feedback from doctors: “One surgeon who was pushing back against his colleagues pressuring him to join a POD wrote that those colleagues were citing the absence of any prevailing guidance specifically on point on this topic as a reason for joining a POD venture, and that 'this sort of thought is what prevails unless OIG takes a stand.'”
The HHS inspector general's office is slated to release its sweeping investigation of PODs later in 2013, according to the office's work plan.
“Anytime a few bad actors determine the treatment and care of patients, as this warning makes clear, patient safety is put at risk and millions of dollars are lost to fraud. This is simply unacceptable,” said Sen. Orrin Hatch (R-Utah), the ranking Republican on the Senate Finance Committee.
Hatch, who released a critical report on PODs in June 2011, was joined by committee chairman Max Baucus (D-Mont.), who said the alert raised serious questions about the practice.
“Patients have a right to know they're getting treatment that's tailored to them – not someone else's bottom line – but physician-owned distributorships may put that guarantee in doubt,” Baucus said in the emailed statement.
Senator Max S. Baucus
511 Hart Senate Office Bldg
Washington, DC 20510