It's not always clear which doctors have ownership interests in both physician-owned distributorships and the hospitals to which they sell devices, according to HHS' Office of Inspector General.
The OIG found one doctor who had ownership interests in both a hospital and a POD that sold spinal devices to the hospital, as part of an analysis of 12 physician-owned hospitals that reported buying spinal devices from PODs.
But there could be more out there, according to the report.
“It is possible that additional physicians had such ownership interests that we could not detect using the available information,” according to the report. The investigators found that it wasn't always easy to find details about the ownership of PODs.
That lack of transparency raises concerns about HHS' ability to ensure that providers don't violate the anti-kickback statute, the Stark law governing physician self-referrals, patient safety and quality of care, according to the report.
“One of the primary criticisms of PODs is that ownership may affect physicians' clinical decisionmaking, such as influencing them to perform unnecessary surgeries or to choose a device in which they have a financial interest rather than another device that may be more appropriate for the patient,” according to the OIG report.
The vast majority of PODs are already supposed to report their physician ownership interests under the Physician Payments Sunshine Act, said lawyer Thomas Bulleit, a partner at Ropes and Gray in Washington. But it's likely that PODs are under-reporting those ownership interests, said Bulleit, who represents the Quality Implant Coalition, a group of manufacturers concerned about PODs.
Bulleit said that might be because they think they're flying under the radar or too small to face enforcement.
It's also possible some PODs don't believe they're subject to the Sunshine Act, though Bulleit believes that's an erroneous belief.
Of the 12 PODs the OIG examined, two listed their physician owners on their websites, and OIG identified the physician owners of another three PODs by reviewing state business registration websites.
The OIG said that CMS' implementation of the Sunshine Act, a provision of the Affordable Care Act, may make it easier in the future to identify owners of PODs. It requires manufacturers and group purchasing organizations to report physician ownership interests to the CMS, which publishes the information on its Open Payments website. The OIG said it will monitor the database to see how it affects transparency within Medicare.
The CMS did not immediately respond to a request for comment on what can be done to improve transparency. The OIG makes no recommendations in the report.
Experts say the report released Friday is the latest example of growing discomfort with PODs.
OIG noted that the CMS staff expressed an interest in the issue after a 2013 OIG report that showed PODs supplied the devices used in nearly 20% of spinal fusion surgeries billed to Medicare. A number of hospitals and hospital systems have already enacted policies prohibiting or restricting the purchase of devices from PODs, including Intermountain Healthcare, HCA Healthcare and Tenet Healthcare.
Advocates of PODs say they lower costs by eliminating some of the expenses of device sales and also allow doctors who invest in them to collaborate with manufacturers, increasing innovation. Critics, however, say some PODs are increasing healthcare costs by charging above-average rates for implants. They say PODS may even incentivize physician investors to perform more surgeries, including medically unnecessary ones.
“The OIG has been increasing its attention to the concerns that some have raised about PODs for several years,” said Lawrence Vernaglia, a partner at Foley and Lardner in Boston and New York. “I think PODs are on the ropes.”
Recent high-profile cases involving PODs haven't helped, he noted. Earlier this year, Michigan neurosurgeon Dr. Aria Sabit pleaded guilty to fraud in connection with a case involving a POD. Sabit acknowledged that his participation in a POD led him to perform medically unnecessary spine surgeries.
Vernaglia, who has represented PODs and hospitals seeking to do business with them, said the OIG may be looking at the overlap between PODs and physician-owned hospitals because there's widespread wariness of physician-owned hospitals as well. The Affordable Care Act put a moratorium on allowing new physician-owned hospitals to do business with Medicare.
But Vernaglia said OIG may be “barking up the wrong tree,” at least when it comes to costs. After all, if a physician-owned hospital is buying devices from one of its physician-owners' PODs, it would seem that both parties would want to keep costs low.
Bulleit likewise said the scope of the OIG's report seemed “pretty limited.”
“The conflict of interest PODs present exists whether we're talking about a physician-owned hospital or a non-physician-owned hospital,” Bulleit said.
The quality of the devices may be a different issue.
Vernaglia, however, said PODs probably can't be viewed as all good or all bad.
“I think like a lot of things in healthcare, there's a lot more complexity to them than there appears,” Vernaglia said.