The recent announcement of a $311 million settlement to end a long-running physician-kickback case may have garnered impressive headlines for federal prosecutors, but some critics of vendor-marketing practices are questioning whether the punitive deal will do much to curb influence-peddling between devicemakers and doctors.
The settlement is the outcome of a 2005 federal investigation into whether Biomet, DePuy Orthopaedics, Smith & Nephew, Stryker Corp. and Zimmer Holdings violated the anti-kickback statute and civil federal False Claims Act. Investigators say that between 2002 and 2006 the five orthopedic-devicemakers, under the guise of consulting contracts, provided cash inducements, expensive trips and other perks to entice surgeons to use their products.
Over that period, according to a news release from the U.S. Justice Department in New Jersey, orthopedic-device makers entered into hundreds of consulting deals that required little to no work from surgeons. In the release, prosecutor Christopher Christie characterized the deals as commonplace and said many orthopedic surgeons chose implants based on how much money they could make from devicemakers instead of what was in the best interest of patients I think there are definitely close relationships between some physicians and vendors that this settlement may address, but Im not so certain you can say (the settlement) will fix the problem; it just clarifies the rules of engagement, says Joan Goodroe, whose VHA-owned company, Goodroe Healthcare Solutions, has piloted cost-cutting gain-sharing projects between physicians and hospitals.
At issue for hospitals, observers say, is not only whether the soft consulting deals between orthopedic-devicemakers and some doctors were illegal, but also whether the deals drive up the costs of orthopedic implants. HHS estimates more than 700,000 total hip and knee replacements are done annually, with nearly two-thirds of those surgeries being performed on Medicare patients.
Unwarranted consulting arrangements, says Harry Greenberg, a professor of medicine and senior associate dean of research at Stanford University School of Medicine, can encourage physician-preference purchases. This often circumvents clinical purchasing decisions that were made to save hospitals money and address quality concerns, he says.
I think that at all levels (surgeons and devicemakers) have to work hand-in-glove to create the safest, most effective devices available, Greenberg says. But what you want is for hospitals to make their (purchasing) decisions based on what device is best for the patient and most affordable. I think this settlement said other factors entered into that equationthat doctors were getting paid (by devicemakers) to favor certain devices.
Attorney Gadi Weinreich, chairman of the healthcare group at law firm Sonnenschein Nath & Rosenthal, believes the 18-month monitoring provision could have a more significant and long-term impact than the financial penalties on physician-devicemaker consulting agreements. Monitors will be reviewing each and every consulting agreement, and suddenly you have a federal employee in the boardroom making decisions for companies about whats appropriate.
But while healthcare-industry experts believe the new regulations may well clarify which consulting agreements are legitimate and which are simply efforts to buy brand loyalty among doctors, not everyone is certain the new regulations will ultimately help hospitals reduce costs. I think the question going through the minds of hospital (executives) is whether this will help get a handle on the rising cost of devices, says Blair Childs, senior vice president of public affairs for the group purchasing organization Premier.
Lee Perlman, president of the GPO GNYHA Ventures, agrees, saying that while the settlement may increase transparency and reduce the amount of money devicemakers spend on physician consulting agreements, it remains to be seen whether hospitals will be able to reduce physician-preference purchasing and create greater price competition among vendors.
I think (consulting deal) transparency is a good thing for doctors because, when we start talking about physician-preference purchasing as a thing thats motivated by (inducement) payments, then it maligns the doctors and makes it seem as if theres no legitimate reason for preferences. But there is as long as its based on (a surgeons) objective comfort level using a device, Perlman says. So, I believe transparency can help, but it wont be a panacea to (control) preference purchasing.
Whether the settlement lends hospitals long-desired assistance in controlling costs, some believe it will provide much-needed backup for hospitals working to enforce ethics rules involving interaction between clinical staff and vendors.
Its not that this (consulting issue) is something new, says Doug Clark, vice president of audit, compliance and tax at Detroits Henry Ford Health System, who also chairs the systems conflict-of-interest panel. The industry has been trying to deal with this issue for a while. Hopefully, this (settlement) will help speed along the movement towards transparency.
Henry Ford has been working to weed out vendor influence on its purchasing decisions for several years. In 2004, the healthcare system instituted a conflict-of-interest policy that requires physicians to disclose their consulting agreements and the amount and type of compensation they receive. Its a dollar-one policy, Clark says. Any involvement with a supplier is required to be disclosed regardless of the level or kind of compensation.
Kathleen Yaremchuk, an ear, nose and throat specialist who also heads the health systems compliance committee, says that the policy also limits consulting physicians influence over the hospitals procurement process. They arent allowed to sit on committees that make purchasing decisions for products they consult on, she says.
But while Henry Fordwhose orthopedic surgeons and other physicians are a mixture of staff and community doctorsfeels comfortable holding its physicians to such rigorous disclosure and conflict-of-interest policies, not all hospitals feel empowered to do so.
Virtua Health, a community hospital system headquartered in Marlton, N.J., doesnt believe the settlement will affect its ability to monitor consulting activity between vendors and attending physicians at its four hospitals. Thats primarily because the system is dependent on these private-practice physicians to bring patients through the hospital doors for care.
If hospitals want to know about consulting relationships with physicians on staff, thats one thing, says Jo Ann Dower, Virtuas assistant vice president of program excellence for orthopedic and spine surgery. But when physicians are in private practice, they are their own entity. We have no say in how they run their office or who theyre employed by.
Scott Schoifet, an orthopedic surgeon with attending privileges at Virtua, is a consultant for Stryker, one of the companies involved in the settlement.
As a part of his agreement, Schoifet teaches surgical techniques using Stryker implants, conducts cadaver laboratories and lectures at medical schools. While he declined to reveal how much he has paid for his services, he does note he is not compensated for his surgical time. When surgeons come (observe me) operate on a patient, I dont get paid for that, Schoifet says. He notes compensation for providing observational training on a device would essentially amount to a kickback for using the device in his patients.
Schoifet says he believes that the settlement between orthopedic-devicemakers and federal prosecutors may draw clearer lines about what types of consulting agreements are legitimate and which are simply soft agreements that pay surgeons to use their products. But, hes also not certain it will empower hospitalsparticularly community ones like Virtuato have greater control over physician preference purchasing.
If I said I wanted to use a certain product, theyd be hard-pressed to say no they wouldnt purchase it, Schoifet says. But its also not in my best interest to have them spend too much money on a product, so I can go to a vendor and say, This is too expensive; you have to offer a better price. But the problem is if a doctor is getting paid to use a device, hes going to be less inclined to be concerned about the costs.What do you think? Write us with your comments at [email protected]. Please include your name, title and hometown.