U.S. Inspector General Issues Fraud Alert on Doctor-Owned Distributors

The U.S. Office of Inspector General (OIG) has issued a warning about the risk of fraud when doctors own medical device distributors.
In a report released on Tuesday, the government watchdog agency was direct in its warning that “the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute illegal remuneration under the anti-kickback statute,” Reuters said.
Physician-owned distributors (PODs), small private companies that manufacture orthopedic and spinal devices, are a common business arrangement in some orthopedics practices. Despite the fact that PODs may save hospitals some money, the OIG report clearly warns that “[t]he anti-kickback statute is violated if even one purpose of the remuneration is to induce such referrals” by healthcare professionals in PODs, according to Reuters.
Dr. Josh Jennings, an analyst for investment bank Cowen & Co, told Reuters that the government report will discourage hospitals from using PODs, even if they do save money, adding that the warnings will likely discourage physicians from joining PODs. Jennings said that while there have been attempts to expand PODs into the areas of joint reconstruction and cardiac devices, fraud concerns will probably dampen those efforts.
Reuters also reports that a Wells Fargo research note revealed that the curtailment of PODs would be a positive development for Medtronic, Johnson & Johnson, Nuvasive and other large manufacturers of spinal devices because these big companies do not participate in PODs.

March 28, 2013 By F.A. Kelley

Josh Sandberg

Josh Sandberg is the President and CEO of Ortho Spine Partners and sits on several company and industry related Boards. He also is the Creator and Editor of OrthoSpineNews.

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