Five senators are calling on HHS' Office of the Inspector General (OIG) to investigate physician-owned distributorships (PODs) to determine whether they violate anti-kickback statutes or federal fraud and abuse laws, the Wall Street Journal reports.
Distributorships are "middleman entities" that market and distribute medical devices to hospitals in exchange for a commission on the sale. Accordingly, sales commissions may go to surgeons or physicians if they own the POD. However, surgeons often determine which devices hospitals purchase, allowing those involved in PODs to "steer business to themselves," the Journal reports.
According to a Senate Finance Committee report compiled by Sen. Orrin Hatch's (R-Utah) office, PODs create "financial incentives for physician investors to use those devices that give them the greatest financial return." Citing anecdotal evidence, the report linked PODs—which currently operate in at least 20 states—to an increase in unnecessary surgeries. For example, one hospital's spinal re-operation rate increased by more than 300% after a POD formed in its community.
At least one hospital system already has ceased conducting business with PODs because of such concerns, the Journal reports. According to Stuart, Fla.-based Martin Memorial Health Systems officials, the distributorships are "inconsistent with the spirit and intent of the federal anti-kickback statute." However, one Los Angeles law firm says that PODs are legal, as long as they institute appropriate safeguards. POD defenders also note that distributorships can cut costs, as they usually offer hospitals lower prices than the manufacturer.
Sens. Hatch, Max Baucus (D-Mont.), Herb Kohl (D-Wis.), Charles Grassley (R-Iowa), and Bob Corker (R-Tenn.) have asked the OIG to submit initial findings of the POD investigation by Aug. 12 (Carreyrou, Journal, 6/9).
