Senators: Report Confirms Financial Gains Tied to PODs, Increased Surgery Trend

The United States Committee on Finance just released that U.S. Senators Orrin Hatch (Republican-Utah), Max Baucus (Democrat-Montana), and Chuck Grassley (Republican-Iowa) announced that a new report from the U.S. Department of Health and Human Services Office of Inspector General (HHS-OIG) reveals a direct correlation between doctors who have a financial relationship in spinal medical device companies—so-called Physician Owned Distributorships (PODs)—and increased  spinal fusion surgeries. This has placed patients’ health at risk and is costing taxpayers through increased billings to the Medicare program, the senators noted.

Finance Committee Ranking Member Hatch, Committee Chairman Baucus, and Judiciary Committee Ranking Member Grassley, requested the report after finding that PODs supplied devices that were used in about one in five spinal fusions surgeries and billed to Medicare in fiscal year (FY) 2011. According to the report, in FY 2012, surgeons performed more spinal surgeries at hospitals that purchased from PODs than from those that did not.

The HHS-OIG report’s key findings follow. The complete release can be accessed here:

•  “PODs supplied spinal devices for 19 percent of the spinal fusion surgeries billed to Medicare in FY 2011.”
• “… surgeries that used POD devices implanted an average of 12.3 spinal devices compared to an average of 14.2 spinal devices for surgeries that did not implant POD devices.”
• No statistically significant difference was seen between the average total device cost for spinal surgeries that used POD devices when compared to surgeries that did not use POD devices.
• Of the six spinal devices examined, none was cheaper, per unit, when provided by PODS. In fact, one POD-provided unit was more expensive.
• The spinal surgery growth rate after hospitals began buying from PODs was three times greater than that for all hospitals.

In a PODs arrangement, physicians purchase ownership interests in the medical device distributor and share in the profits PODs make through sales to hospitals. To date, PODs have been created in least 20 states

The OIG previously issued a warning over fraud risks tied to PODs. In its prior report, the Office indicated that its longstanding guidance “makes clear that the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute illegal remuneration under the anti-kickback statute,” according to a prior Reuters report. “The anti-kickback statute is violated if even one purpose of the remuneration is to induce such referrals” by healthcare professionals involved in PODs, the report indicated. The language in the report “can’t get any more damning,” Dr. Josh Jennings, an analyst with Cowen & Co, told Reuters previously.