The latest investigative piece by health-beat reporter John Carreyrou, ‘Surgeons Eyed over Deals with Medical-Device Makers’, published on 25 July in the Wall Street Journal, describes the potential patient harms that can result when surgeons have a financial interest in the implantable medical devices that they order for their own patients via ownership in a physician-owned distributor (POD).
The article correctly points out that the Office of Inspector General of the US Department of Health and Human Services (OIG) has written in a recent ‘Special Fraud Alert on Physician-Owned Entities’ (SFA) that PODs are ‘inherently suspect’ under the federal healthcare programmes (FHCP) anti-kick-back law (AKL). While the article correctly highlights the potential patient harms associated with PODs, it contains mis-statements of the law regarding whether PODs can be legally structured and the importance of the size of a physician’s return on investment in an AKL inquiry.
The article’s statement that such entities can be structured so that they are ‘legal’ under the AKL is misleading. Among other things, the AKL makes it illegal for physicians to receive (or hospitals or device sellers to offer) any remuneration, including a return on investment, if even one purpose of the arrangement is to induce the physician to refer patients for products or services covered under Medicare or another FHCP (such as Medicaid). The supply chain for implantable medical devices in the US almost uniformly involves direct sale from the product manufacturer to the hospital where the surgery is performed, and the hospital equally uniformly orders the implant that the operating surgeon dictates…
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