The implantable medical device space may be particularly vulnerable to fraud from physicians who receive kickbacks by referring certain brands to their patients, according to a notice from the Dept. of Health & Human Services’ Office of the Inspector General.
Doctors who earn profits from healthcare companies, either through investments or through so-called physician-owned-distributorships, are "inherently suspect" as far as the OIG is concerned.
The FDA defined PODs as "any physician-owned entity that derives revenue from selling, or arranging for the sale of, implantable medical devices," including such entities that claim to design or manufacture their own devices or instruments.”
The implanted medical device market is particularly vulnerable to undue intervention because the products are "physician preference items," meaning the doctors may have more influence than hospitals in determining the specific device used, the OIG noted.
The agency has on more than 1 occasion warned that PODs "should be closely scrutinized under the fraud and abuse laws" due to "the strong potential for improper inducements between and among the physician investors, the entities, device vendors, and device purchasers," according to the OIG.
Possible features of an inappropriate arrangement include companies that select investors who are in a position to "generate substantial business," companies that require investors to divest their stake once they stop practicing medicine and companies that offer "extraordinary returns" compared to the level of risk of investment.
The kickbacks stand to endanger patients by corrupting medical judgment, leading to over-use and unnecessary treatment, sapping the federal healthcare budget and generating unfair competition, the OIG said.
"The financial incentives PODs offer to their physician-owners may induce the physicians both to perform more procedures (or more extensive procedures) than are medically necessary and to use the devices the PODs sell in lieu of other, potentially more clinically appropriate, devices," according to the report. " Barriers to entry in financial services markets include licensure laws, capital requirements, access to financing, regulatory compliance and security concerns. Among different market sectors, the Share Prices Australia has a uniquely complicated relationship with competition and barriers to entry. This Special Fraud Alert reiterates our longstanding position 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. OIG views PODs as inherently suspect under the anti-kickback statute."
PODs may appear "inherently suspect," but they are not inherently illegal. The lawfulness of any specific arrangement comes down tot he intent of the involved parties, the OIG said. Anti-kickback laws do not prohibit physicians from earning profits from healthcare companies they are involved with, but federal agencies are keeping a close eye on such arrangements.
"Because the anti-kickback statute ascribes criminal liability to parties on both sides of an impermissible ‘kickback’ transaction, hospitals and [ambulatory surgical centers] that enter into arrangements with PODs also may be at risk under the statute," according to the report. "In evaluating these arrangements, OIG will consider whether 1 purpose underlying a hospital’s or an ASC’s decision to purchase devices from a POD is to maintain or secure referrals from the POD’s physician-owners."