Surgeons who own shares in so-called physician-owned distributorships (PODs) could soon find themselves under tighter regulatory scrutiny. The arrangements, in which physicians-investors own shares in a third-party entity that distributes the medical devices they use, "raise a number of troubling issues" that regulatory bodies have yet to address, warns a bipartisan group of U.S. senators who've asked the Department of Health and Human Services to further review PODs and their practices.
PODs started cropping up in California in 2003 but their numbers have grown rapidly over the past 2 years, giving them a "significant national presence," according to a report released by the Senate Finance Committee minority staff this month. For now, these distributorships primarily deal in orthopedic and spine implants, and the report questions whether there's a relationship between their proliferation and a reported rise in complex spinal fusion surgeries being performed on Medicare patients.
"The very nature of PODs seem to create financial incentives for physician investors to use those devices that give them the greatest financial return and that, in the process, patient treatment decisions may be based on personal financial gain," write Republican Finance Committee staffers, led by Sen. Orrin Hatch of Utah.
In response to the findings, Sen. Hatch and 4 other members of the Senate Finance Committee sent letters to HHS Inspector General Daniel Levinson and Centers for Medicare and Medicaid Services Administrator Donald Berwick, MD, this week asking them to investigate the potential conflict of interest, patient safety and cost containment issues associated with PODs.
The senators do not condemn PODs outright and note that some of these entities appear to have safeguards in place to prevent abuse. But they express concern that existing guidance may not be enough to prevent potential abuses and that "guidance alone, in the absence of any visible enforcement proceedings, may be insufficient to stop the growth of those entities that do not appear to be structured with the appropriate safeguards."
The senators have asked the OIG to conduct an inquiry into PODs, report their findings by Aug. 12, 2011, and recommend what, if any, "further action should be taken by the OIG and Congress to effectively address the patient and program risks presented by PODs."
Meanwhile, they ask CMS to include PODs in their considerations as they finalize reporting requirements for the Physician Payments Sunshine Act and implementation of accountable care organizations. "The final rule" for ACOs "should prohibit ACOs from purchasing products or services from entities that are owned by physicians participating in the ACO," write the senators, who seek a response from CMS by July 15.
Irene Tsikitas
