On July 8th, 2010, the HHS Office of Inspector General (OIG) announced settlement of a civil monetary penalty and Medicare exclusion case with United Shockwave Services, LLC, United Prostate Centers, LLC, and United Urology Centers, LLC, a group of physician owned companies. The companies collectively agreed to pay $ 7,359,000 to settle this case. So why is TSB writing about a case that involved physician owned urological companies? Because this case could establish a precedent for future investigations and litigations that the OIG and DOJ pursue. which could include physician owned distributorships, especially when it comes to spine and orthopaedics.
The OIG believed that the conduct by the above mentioned parties violated laws by "leveraging patient referrals to obtain contract business from hospitals." The language in this settlement indicates an increased interest in fraud and abuse risks posed by other types of Physician Owned Companies. Kickback concerns exist when companies link investment opportunities to the ability to generate business, and offer return on investment that are disproportionate to business risk. These concerns seem particularly applicable to the business model employed by Physician Owned Implant Companies.
Whether organized as sellers or distributors of manufactured products, group purchasing organizations, or, commissioned sales agents (physician owned distributorships), the concern that the OIG has, is that these business models leverage referrals of physician-owners/investors into contracts with hospitals where the physicians perform their procedures to implant devices in turn receiving profits for their relationship with a company or distributor. So the question must be posed to our readers;
Are physician-owned intermediaries shell entities with no real infrastructure, or capital investment, a legitimate business model?
Is this behavior unlawful, whereas, physicians are controlling the selection of implants based on financial remuneration for their decisions?
Does this behavior/business model violate anti-kickback laws?
Does this business model distort a physician's ability to make prudent clinical decisions?
Do these business models actually keep cost down?
Does this business model have a negative effect on competition?
These are questions that are being asked within many legal circles, considering, that many of these models have played a significant role in companies developing new business. In addition, it seems many of the legacy companies are viewing this business model with disdain, considering that they are under a much larger microscope than an early-growth stage company. TSB wants to know what our readers think?