Medical Journal - Houston Page 13
April 2013
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LEGAL AFFAIRS continued from page 1
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through referrals to an entity in which the physician has an ownership interest may corrupt the physician ’ s medical judgment . The OIG is concerned that this potential for monetary gain may lead a physician to order products and services that are not medically necessary . Likewise , such arrangements that do not contain sufficient safeguards can result in overutilization and increased costs to patients and federal health care programs . Finally , the OIG is concerned that such arrangements lead to unfair competition .
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( R-UT ) was quoted in the report ’ s press release as saying : “ The financial incentives created by these entities set a dangerous precedent that , as indicated in this report , can lead to serious overutilization and force unnecessary , invasive procedures for patients .” On the day the report was released , five senators from the Committees on Finance , Aging , and Judiciary issued a letter to the OIG . In the letter , the senators indicated that the OIG ’ s guidance on the topic of PODs “ is not sufficient .” They also stated “ 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 .” |
On September 13 , 2011 , the OIG issued a letter responding to the senators ’ concerns . In the letter , the OIG emphasized its commitment to enforcement actions and promised a report analyzing the impact of PODs on the health care industry . The OIG also explained that , because the AKS is an intent-based statute that depends on the facts and circumstances of a particular case , a one-size-fits-all rule pertinent to every form of POD is difficult to develop .
True to its word , the OIG indicated in its Work Plan for FY 2013 that the OIG will issue a report concerning PODs that provide spinal implants to hospitals . Also ,
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the recent Fraud Alert expands upon the suspect characteristics identified in the 1989 Special Fraud Alert to highlight certain questionable factors relating to PODs . The questionable factors listed by the OIG include : ( 1 ) the size of the investment offered to a physician depends upon the volume or value of referrals the physician is expected to generate for the POD ; ( 2 ) profit distributions are not proportional to the physician ’ s ownership interest ; ( 3 ) investors pay different prices for the identical ownership interests ; ( 4 ) physician-owners of PODs overtly or covertly condition referrals to hospitals on the purchase of the POD ’ s
Please see LEGAL AFFAIRS page 14
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Many states , including Texas , attempt to reduce the likelihood of fraud and abuse by enacting statutes that require a physician , when referring a patient , to disclose to the patient the physician ’ s interest in the entity receiving the referral . The OIG emphasized that such disclosures do not sufficiently reduce the risk of fraud and abuse , however . According to the OIG , such disclosures can be manipulated to serve as a promotion of the physician-owned entity and its products and services . For example , a physician may disclose an interest by saying , “ As an owner of this company , I know the quality of the products .” Such disclosures cause a patient to trust the physician ’ s referral rather than question whether the physician is acting in the patient ’ s best interest .
In the Fraud Alert , the OIG highlights a certain type of physician-owned entity — i . e ., a physician-owned distributorship ( POD ). PODs are entities that sell , distribute , and / or manufacture medical devices that are implanted through surgical procedures . Over the past few years , the number of PODs throughout the United States has grown substantially . According to the OIG , such entities “ are inherently suspect under the anti-kickback statute ” because : ( 1 ) the risks associated with investing in PODs are generally low ; ( 2 ) physician owners can realize a high rate of return ; and ( 3 ) a physician has a significant amount of discretion over the implantable device used when the physician performs a surgery in a hospital .
Since 2006 , PODs were on the federal government ’ s radar . On October 6 , 2006 , Vicki Robinson , Chief for the Industry Guidance Branch of the OIG , issued a letter regarding PODs . In the letter , she indicated that the OIG ’ s 1989 Special Fraud Alert regarding joint ventures applied to PODs . She also stated that such entities should be closely scrutinized because they present a “ strong potential for improper inducements between and among the physician investors , the entities , device vendors , and device purchasers .” Two years later , on February 27 , 2008 , OIG representative , Gregory Demske , testified before a special committee of the Senate that PODs “ raise substantial concerns that a physician ’ s return on investment from the venture may influence the physician ’ s choice of device .”
On June 9 , 2011 , the Senate Finance Committee released a report concerning PODs . The Ranking Member Orin Hatch
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