Hospitals boost spinal surgery when physicians stand to gain from device sales, OIG finds

Hospitals tended to increase their spinal surgery cases when the orthopedic surgeons who performed the operations stood to profit from the sales of the surgical plates, rods and screws used in the procedures, HHS' Office of the Inspector General concluded.

Senate Finance Committee members had asked OIG whether financial conflicts of interest inherent in physician-owned distributorships, or PODs, could drive overuse of spinal fusions and surgical decompressions.

The OIG found that as many as 20% of the 179,000 Medicare-funded spinal surgeries in 2012 involved devices that were purchased from companies in which doctors had an ownership stake other than publicly traded stock.

Further, hospitals that began buying from physician-owned companies saw a 16% increase in the number of spinal surgeries six months after the switch. That was three times the rate of increase in spinal procedure volume for hospitals overall during the same period of time, the report says.

Proponents of physician-owned distributorships say they save hospitals money by cutting out the expensive marketing and sales forces employed by the major U.S. devicemakers and selling “generic” surgical devices directly.

The new OIG report, though, casts doubt on claims that PODs deliver cost savings to hospitals. For five types of devices, the OIG found the cost differences between traditional and POD-sold devices were not statistically significant. For a sixth category, spinal plates, the OIG found POD-sold devices were on average $845 more expensive.

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