Senate report finds physician-owned distributorships lead to overutilization

Surgeons involved in physician-owned distributorships performed surgery at a rate 44 percent higher than surgeons not involved in such arrangements, according to a report published by Senate Finance Committee Chairman Orrin Hatch (R-Utah).

In particular, these arrangements are most prevalent in spinal surgery. The report found spine surgeons involved in PODs performed nearly twice as many fusion surgeries — 94 percent more — than their peers not involved in PODs.

PODs are structured so physician-investors profit from the sale and use of the distributorship's products — presenting what Sen. Hatch called "a clear conflict of interest" that puts patients at risk. On top of that, the wide variation between POD and non-POD surgeons suggests PODs may be influencing surgeons to promote unnecessary surgeries which can inflate federal healthcare costs.

"The relationship between doctors their patients should be one characterized by trust and a level of professionalism that is held to the highest standards," Sen. Hatch said in a press release. His report details several primary concerns with the arrangements, including that they pose an inherent conflict of interest, may lead to medically unnecessary surgeries and that they may violate the Anti-Kickback Statute, Stark Law, or both.

In response, the committee details a number of recommendations, calling for physicians to disclose any ownership to patients, for law enforcement to charge and prosecute arrangements that break the law and for all hospitals to establish their own POD policies, among others.

This report builds on previous efforts by Sen. Hatch, including a 2011 analysis on POD structure and growth and a 2015 hearing in the Finance Committee on the issue. HHS' Office of Inspector General has also noted concerns with these arrangements, issuing a special fraud alert on PODs and a report in 2013.


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