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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