Amid concerns about mounting drug and health care costs, physicians are coming under scrutiny regarding potential financial conflicts of interest that can potentially add greatly to medical costs.
Back in March, a study by ProPublica, the non-profit news organization, revealed that physicians who receive payments from the pharmaceutical industry were more inclined to prescribe pricey brand-name medications than doctors who don’t accept payments, gifts or other honoraria.
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Now comes a report by the Senate Finance Committee on another medical industry practice that suggests that many surgeons are lining their pockets by encouraging patients with serious back problems to undergo difficult and costly operations using devices and equipment supplied by companies with which the surgeons have a financial interest.
They are called physician-owned distributorships, or PODs, and they are legally structured commercial entities that serve as intermediaries between medical-device manufacturers and hospitals. The doctors profit from the sale of the products, which often are covered by Medicare and Medicaid. These distributorships currently operate in at least 43 states.
The report, released by Chair Orrin Hatch (R-UT) on Tuesday, found that POD surgeons performed surgery on their patients at much higher rates – 44 percent -- than non-POD surgeons did. And in absolute numbers, POD surgeons performed nearly twice as many back fusion surgeries as did non-POD surgeons. The surgeons typically receive a commission on each sale, according to the report, which provides a tantalizing incentive to perform far more back surgeries than other surgeons without a financial stake in the sale of equipment.
“The relationship between doctors and their patients should be one characterized by trust and a level of professionalism that is held to the highest standards,” Hatch said in releasing the study. “Unfortunately, when surgeons have a financial interest in medical device companies, the data calls into question whether the best interest of the patient is considered when invasive surgeries are recommended.”
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The new report concludes that PODs “present an inherent conflict of interest that can put the physician’s medical judgement at odds with the patient’s best interests.”
Experts say that spinal fusions are among the most challenging and costly forms of back surgery, and that doctors usually only recommend them to treat the most serious back problems. The report noted that spinal implants are typically “physician preference,” meaning that hospitals usually automatically purchases the devices suggested by the surgeon. And typically, the more screws, plates, rods and other hardware ordered by the hospital, the larger the payment the surgeon receives from the POD.
The Finance Committee’s staff first began investigating PODs in February 2011 after being tipped off by a surgeon about a shady POD arrangement that had been pitched to him. Later that spring, a number of whistleblowers steered the committee staff to surgeons affiliated with PODS who allegedly performed harmful back surgeries on Medicare beneficiaries. All of those cases were subsequently referred to law enforcement officials, according to the report, and some have resulted in legal action.
Proponents of the distributorships argue that they are legal and often give doctors greater control in selecting which devices to use and sometimes results in cost savings through negotiating better prices, according to The Wall Street Journal.
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Dr. John Steinmann, a practicing orthopedic spine surgeon and a POD investor, told members of the Senate Finance Committee late last year that a “properly structured POD represents a valuable alignment between the surgeons and the hospital.”
“In some circumstances it is reasonable for the hospital to own the inventory, such as hospital systems with an employed and hence, aligned staff,” he testified. “However, in most circumstances where there is not an employment relationship, hospitals will be very reluctant to purchase inventory for fear the surgeons will not continue to support that inventory investment.”
