Physician-Owned Distributorships – Under Attack
The Inspector General of Health and Human Services has been asked by the US Senate to open an investigation into physician-owned distributorships, or PODs, to determine whether these entities are in fact legal. The probe is intended to determine whether the purpose of PODs is to be set up as middlemen firms that allow surgeons to profit illegally from the medical devices they use on their patients. If you are a member of a POD, it is cause for concern.
While there are a variety of POD’s out there, the request and probe appear to be directed at the proliferation of distributorships in the spine and orthopedic surgery area of medicine. The report by Sen. Orrin Hatch’s office alleges that use of these entities create “financial incentives for physician investors to use those devices that give them the greatest financial return.” The report also alleges that “physician investors in PODs may perform more procedures than are medically necessary” because the surgeon can earn extra income each time he/she implants a device in the patient.
The Senate reports have only anecdotal evidence to support these claims at this time. However there has been an explosion in spinal fusion with the advent of physician-owned distributorships. Last year a study by the American Medical Association found that complex spinal fusions increased 15 fold among Medicare patients with spinal stenosis since the inception of PODs. The heat is certainly on the orthopedic community and you can be sure that it will spread to other physician-owned entities and put these organizations under the microscope as well.
Physician-owned distributorships exist in at least 20 states and there are at least 40 of them in California alone. PODs reside in a legal gray area at the moment with some law firms advising physicians that these organizations are legal if structured properly. Our experience at Khouri Law has taught us that once the spotlight is on an issue like this, it does not go away. If you are a physician involved in a POD or thinking about investing in one, you should give us a call first. If you have received communication from the Department of Health and Human Services about your involvement in a POD, you should also call Khouri Law before supplying any information.
The physician-owned distributor concept tests the limits of the federal physician anti-kickback regulations, otherwise known as the Stark Law. In the face of shrinking federal health care budgets, the Department of Health and Human Services may attempt to stretch these statutes and try to force physicians to pay back fees and income from past years billings. The budget shortfalls have to be made up somewhere. The Department of Health and Human Service may once again look to audit physicians to make up for these shortfalls. Khouri Law understands Stark Law gray areas like PODs. Our firm is here to defend you should it become necessary. If you have any questions about your legal rights please call us for a free consultation.