Thursday, June 9, 2011

POD Surgeons To Be Probed by U.S. Senate

If you have ever had a physical when all is well, it can be an exhilarating experience. Unfortunately, being probed can be a real pain, especially when you are on the receiving end. Surgeons involved in POD's are about to get a check up from the U.S.Senate Committee on Finance led by no other than Senator Orrin Hatch, (R-Utah).

WSJ Article Link

For those of you that haven't read today's Wall Street Journal, sleuth reporter John Carreyrou reported that the Senate Finance Committee will launch an investigation into the legality of Physician Owned Distributorships. As per the article, it is estimated that POD's exist in at least 20 states with as many as 40 in the state of California. Rumor has it that the East Bay of San Francisco is ground zero, the breeding ground for POD's.

It will be interesting to hear our readers reactions,as the potential for a legal battle ensues. On one side you have Hooper & Lundy, a California bases law firm that has provided legal guidance for POD's, on the other side, the people, hopefully properly represented by the Senate Finance Committee that intends on shedding some light on this issue. Will this pit industry insiders against one another? Will Dr.Steinmann and his band of renown make a guest appearance on the Hill? How soon before this escalates into a free for all, as cynics of the government frown upon one group of corrupt officials setting out to investigate another group, whom claim that their intentions are sincere and that they are doing this to save the hospital money. Regardless of whom you side with, pull up a chair, grab some popcorn, and fasten your seat belts because the shows about to start.


  1. If the PODS don't pass the sniff test, I think we should test out DOPs - Distributor Owned Practices. Do you think that may be legal...?

    This is going to be entertaining!

  2. Popcorn :check
    nom nom nom.......

    I am crossing all fingers and toes that this model gets the big
    kabash put on it!

  3. Besides the heading, this is old news from what I read on TSB.

    TSB rules!

  4. Hopefully this will be the beginning of the end of a lot of bottom feeding spine companies as well.... Let the festivities begin!!!!!

  5. The folks that run PODs will just find another model. You can't stop the fundamental laws of economics. As long as surgeons still decide what product to use, and the devices are sold at a premium, monies will inevitably find a way back to them.

  6. PODs

    Your values is a disarray prioritizin' horribly
    Unhappy with the riches 'cause you're piss poor morally
    Ignorin' all prior advice and forewarnin'
    And we mighty full of ourselves
    All of a sudden, aren't we?

    You're gonna be a shinin' star
    In fancy clothes and fancy cars
    And then you'll see you're gonna go far
    'Cause everyone knows just who you are

    So live your life
    You steady chasin' that paper
    Just live your life

    ~ Rihanna

  7. How about when the docs family, ie. son, wife, brother owns the distributorship ?

  8. What if they rule they are legal or give the framework on how to do it legally?

  9. If they are ruled to be on the up and up, you better get your Skype account set up. That way you will be able to collect 1% commission for answering any questions Dr. honschuler may have during surgery. Actually, I think he knows the answers already, but 1% is 1%. Not bad for sitting on your ass !

  10. It is likely they will reach a compromise and put in a 5-10% ownership restriction.

  11. There is no way these entities pass muster. Some surgeons are going to be in serious trouble.

  12. The government actually likes it when money is diverted from device manufacturers and pharma to physicians. That way they can pay docs less and the loss can be made up by the companies.

    Surgeons payments are nothing but a back-door tax on the companies. As long as it doesn't drive up volumes (the tricky part) the government doesn't seem to mind.

  13. This will be just like physican-owned hospitals. There will be a sunset provision but not necessarily repercussions for those currently in place.

  14. Hello all. While we can sit around and say POD’s are all about economics or due to the ever changing environment or market, it doesn’t make them right, and yes, while the decision making is still up to the end user we will have to deal with these types of changes in market the best we know how by continuing to provide the service and core products hoping that one day we won’t become extinct. I have been in Spine sales for over 11 years and I have no problem putting my name out on this blog, no need to hide behind the value of anonymous.

    Most of you out there, like me, have busted your asses for years growing, cultivating your business, relationships and territories only to have them either SUPERSIZED by your company or lost business for whatever reason and then up pop’s POD’s. I will have to be honest, here in the Sacramento Region they are not as common, from at least what I have seen. You have to go more towards the Bay Area to see more of the damage they have done to those of us that try to sell more on our knowledge, dedication and relationships hoping to not have them severed by some POD like the ones down in Southern California that come up promising the world to your customer. Call me bitter or call me pissed…but I call it like I see it. I have seen a lot of great distributors and reps lose their business and livelihoods over this very issue.

    This is still a very small world (Spine Sales) and most of us know each other and have a great deal of respect for our competition, and we have all for the most part, learned to live in harmony with each other. But over the past 2-3 years I have seen the decline in that, and it’s sad. But for the most part, I am still very passionate about this business and wish each and every one of you all the success.

    Thanks TSB for this informative website. Only wish it would have come around years ago.

    Bryan Freeman

  15. Great post Bryan, and for the physicians participating in PODS you reap what you sow and even if it turns out to be legal it isn't right. Most of the surgeons participating in PODs would laugh and turn your nose up at the products your using. When reimbursement goes down for the physicians the price the hospitals will pay for the implants also go down and so do the commissions. So we are all facing lower revenues and incomes does that give sales representatives the right to rob convenient stores? And for the phsyician that argued Plastics get paid on breast implants many threads ago, last time I checked Medicare, Medicaid and Private Insurers don't pay for breast implants genius.

  16. Distributor Owned DistributionJune 9, 2011 at 4:08 PM

    The POD docs have gotten organized. Check out this website and then make your comments on TSB. I see flaws all over these policies, but I'm afraid only those of us who see the inside story can pick these policies apart effectively. Hopefully I'm wrong and Senator Hatch catches on.

  17. Should make for a very interesting debate between the surgeons & the government,,

    The surgeons will simply argue that due to ever increasing malpractice premiums & declining reimbursements, ESPECIALLY from Medicare, that they are "forced" to initiate actions like partaking in entities suchs as PODs in order to "make ends meet". Not to mention bringing the potential impact of Obama-care into the discussion.

    In any event, as slow as the government moves (Ex. Barry Bonds trial,,), it could take YEARS & YEARS for this inquiry to produce much of anything,, or anything at all for that matter.

  18. I posted that this was coming in an earlier post and no one believed me.

    Jerry Bowman, can you hear me now?

  19. Ah, I guess this is justice!?

    I have never been part of a POD, but I confess, I too had a consulting deal that reimbursed me for "educating the sales force" of one of the major spine companies. I also spent my time "educating" my fellow surgeons on the advantages of TLIF. Luckily, I was only paid a per diem for my efforts, and I had good documentation of the events.

    Even today, every few months, I Have a company approach me about a royalty, or a "Surgeon advisory panel" deal. Fortunately, my attorney has rightfully steered me in the more conservative path. I hate it when the attorneys are right.

    You sales guys are a bunch of hypocrites.

    The same guys who now are owners of the POD's, are the same guys who your contracted with these sweetheart consulting deals.

    These are the same guys that our "we only care about the patient" hospitals court and pursue like a prom queen (Guess who Paul?)

    Investigations by the Senate will only hurt our whole community. The baby will go out with the bath water. Shame on the companies who promoted the congressional investigations. You are only doing this to spite the same physicians you desperately wined and dined a few months ago.

    It is hard for you industrialists to fathom. But, medicine is not a pure business. Physicians do have an obligation to do what is right. Sometimes, that means offering a solution that does not use all the high priced technology.

    I cherish my sales staff. They have been good advocates for may patients, but in the end, as a "old spine doc", I still desire to do what is right. Yes, pile on me. But you all know this is true.

  20. 7:01

    Way to lump all sales representatives into a pile!

    Not all of us have offered shady deals or gotten business by unethical means, just as not all surgeons have accepted and sought out these types of deals. It would appear you are the latter if I am reading your "educating the sales force" sentence correctly.

    What does the "high priced technology" statement have to do with anything? Its our job to try to sell the most recent technology (Although if I do not believe in it I will not) and its your job to decide if its beneficial to your patient population, nobody is twisting your arm?

  21. 7:26, Don't be so sensitive. I am saying that the POD's model is only the next iteration of business for our colleagues who most sales representatives have actively pursued. It is ironic that these POD physicians are maligned. For most sales guys, these surgeons would be their champions if they were using their products.

    Earlier in my career, I also fell for the ego stroke. I rationalized that I too should be paid handsomely for my great clinical acumen and skill. Why shouldn't I teach my great skills to the sales force and other clinicians? And yes, my version of the pedicle screw is superior to all others. I definitely deserved a royalty. Of course, I was only a few years into my practice.

    Now, about 20 years later, I know I drank the same poison as everyone else.

    We need true innovation for the next round. I am patiently waiting for it.

  22. Distributor owned distributionJune 9, 2011 at 8:03 PM

    Old spine doc,

    There can be no generalizations of all doctors or reps or companies. The same usual suspects (from all 3 categories) seem to find each other while the rest of the crowd goes about business in the appropriate way. These docs with the PODs have, unfortunately, done their best to make medicine a pure business and thrown the hipocratic oath out the window in exchange for the benjamins. As you should well know, all companies need doctors to teach courses to reps and other surgeons. Personally, of the many weeks of training I have had over the years, the most beneficial, yet scarce, hours have been with surgeons presenting cases and asking the sales reps how they would approach the pathology. You have obviously served in this capacity and you should be compensated fairly for it. Maybe you are good at it and that's why reps are asking you constantly to do it for their company. Or maybe you are a high volume guy and the usual suspects are just finding each other.

    I don't think investigations will hurt the community. Hopefully they will expose the sham that PODs live by, cost savings. Those docs only get involved if money can be made, period. They don't give a damn about saving money, it just happens to be a requirement for the sham to fit under one of the safe harbors. Just like anybody on the supply side, they would charge more if they could, and in fact they do. after they establish pricing on day one, the hospitals are locked in to that price as other companies face pricing pressure. For some reason, hospitals aren't too eager to force a captitated pricing system down the throat of a company owned by surgeons who refer patients to their facility.

    Don't generalize doc, we don't all fit in one box. There are bad apples on all sides. If they all live in the same basket, maybe we can eliminate them all by eliminating the business models they live in.

  23. 8:03

    Can you be my distributor? Very refreshing. Maybe you already are. Thanks for being one of the good guys.

  24. 8:03

    Great post!!!

    Is globus going public???

  25. 8:03 you took the words right out of many of our mouths!! Great post. I especially liked what you said about not categorizing all us "reps" into the same groups. Not all of us are out to make a fast buck or ride the One Trick Pony until we fall off. It wasn’t until I found myself flat on the OR table back in 2002 having a 360 at the ripe age of 32 after years of baseball torture, that I really saw what I was doing for a living, might really be making a difference, while maybe not directly but indirectly with my products or better yet, in the hands of the surgeons I was working with. This came from like you said, listening to the many surgeons that would either come into sales training or NSM and hearing the passion that these surgeons had not only for medicine but for really teaching. I miss those days.

  26. I guess I'll just have to stop buying my eyeglasses from the P.O.E.S. (Physician Owned Eyeware Store). He gave me the script and directed me next door to his eyeware store... just the thought of it is so dirty...I hope Sen. Hatch investigates the opthamologists too!...SpineSeller

  27. hey 8:51, big diffence dick weed. You are comparing eye glasses to a surgeon implanting the same implants he is investing in? Give me a f-ing break. No chance you make one bit of sense. I think you feel into the wrong blog dude. This is a medical spine blog. I am suprised TSB let your blog past his muster...oh wait he wanted everyone to see what a complete idot you are.

  28. sorry, you fell into the worng blog 8:51

  29. The headline of this blog "POD Surgeons To Be Probed by U.S. Senate," is a totally untrue. Where does the Hatch letter say this?

    In fact, the letter seems to be fairly balanced regarding the existence of PODs. The greater concern was the lack of OIG guidance which would allow PODs to function within the rules. This is actually welcome news for PODs as it will finally provide an OIG opinion for designing the entity - a POD safe harbor, just like there already is for physician joint ventures.

    When the OIG comes out with their report, all you folks hoping for the end of PODs will be sorely disappointed.

  30. I often hear from the proponents of POD's that the model is no different that physician owned specialty hospitals or bracing business etc.

    How would you all respond to that as it relates to POD's? Just curious what the major difference is in everyone's opinion?

  31. 9:36pm sounds just like person who would involve him/herself with a POD. They simply twist words around on a page until it says exactly what they want it to say. If that doesn't work, they revert to the old standby, "the government wouldn't dare prosecute surgeons involved with PODs because the entire healthcare system would collapse!" I've got news for you buddy! Most spine surgeons would welcome a bit of spring cleaning in a specialty that is grossly over-served in most markets. Add in the fact that there are less patients anyway due to the new Milliman guidelines and you'll realize that these guys would do just about anything to increase their case-loads. None of the surgeons get along in the major metro area I'm in. They all hate each other because the competition is so intense.

  32. 9:19 is an example of the kind of person we've all come to know and love in our industry..."I sell pedicle screws thus I'm the smartest person in the world with an ego the size of the hospital in which I work" syndrome. Hey 9:19, I bet your world is getting turned upside down because you wouldn't know what to do if you couldn't make your 6 figures standing in an O.R. in scrubs all day. Take a look in the mirror big guy and see who the real idiot is...SpineSeller

  33. This is great news. The OIG will have to finally put out an opinion on PODs. Legal or not, it will hopefully stop the endless debate on this issue on this blog and elsewhere.

  34. We can count on the OIG to produce a credible report on their findings.

    Credibility is everything - I live by it daily.

    Jim Tressel

  35. RIP Spinal Elements and Alphatec...

  36. Whenever the government gets involved in anything, while the intention is noble, the final safegards have significant unintended consequences. More paper work, more regulation, more costs.

    POD's do take advantage of the relationship between docs, hospitals and patients. But, done with some conscience, it can have benefits. If you think that doc's should not be trusted with these decisions, then I guess doc's should not be trusted with any decisions that potential impact their financial situation. That is basically saying that Doc's then cannot be trusted with their indications for any surgery, since there is some financial consequences to the process.

    While physicians also have their "Anthony Weiner's" amongst them, most surgeons do care about their patients and outcomes.

    Let the competition determine who is successful. POD's have connotations that may be bad. As long as there is disclosure of the relationship to the patients and payors, the field is fair. The non- physician distributors need to then compete for this business.

    What I do not understand is why there is so much anxiety about this. Sounds like the sales reps think these POD doc's are hacks. Why would you then want to develop relationships with these "Weiners" anyway?

  37. 10:29 raises the question which the OIG will have to answer. How do you create an entity (i.e. POD, POC, ASC, POH, etc.) which meets the intent and safe harbors of the AKS & Stark? Those wishing for PODs to totally disappear will be disappointed. Having reviewed numerous POD models, there are a few out there that will probably meet the guidelines set by the OIG. However, the vast majority will not and you will see the DOJ make examples of some surgeons, hospitals, and device manufacturers over the next year or so. You will then see a wave of change as surgeons, hospitals, & lawyers develop companies and distribution models which will generate more money for them in a manner that has been blessed by the OIG. Don't fool yourself into believing things will ever go back to the "good ole days". A new wave of ankle biters will replace the Spine USAs, Spinal Elements, and Alphatecs unless the bigger companies can quickly develop business models which work within the new guidelines. It will be interesting to watch as the industry evolves over the next few years. Bottom line..... reps, surgeons, hospitals, & device companies will all see cuts as Uncle Sam pushes to drive down medical costs. Capitalism will lead to new companies that will profit by quickly taking advantage of these changes.

  38. F.O.D.'s (Family Owned Distributorships)Some the more astute members of the Surgeon Entrepreneurial Class need to be investigated as well by Mr. Hatch. Major companies and their distributors have been supporting this in Carson Tahoe for several years. Screws are peel packed with with sizes written on the package and left in a bin where family member picks up after the case and writes of the invoice. Nice system. If this is deemed legal by the committee I'm sure we will see Junior running trays to Fed Ex.

  39. Old Spine Doc,

    I have to imagine the angst that you are referring to that in your opinion is unwarranted is due to the fact that physicians purchasing and selling their own instrumentation makes it impossible for true competition.

    On what merits do you suggest we compete in that scenario? Product? Relationships? You see good Doctor, the POD model will do away with the "level playing field". I imagine the only competition you will see is which company can offer the physician cheaper implants so he can profit more.

    Even if a rep has the cat daddy of all products with loads of data and studies to support its efficacy he has zero chance of getting a POD physician to use said product if that product does not fit into the POD model.

    Probably a bad example but it would be like a referring PCP hiring their own specialty surgeons to keep all referrals in house. Why on earth would they refer out to local specialty surgeons when they could keep the patient in house and capitalize on not only conservative treatment but surgical as well. If you were not an employee of that PCP you would die on the vine.

    The fact of the matter is things are just sad these days. Patients have no clue that it is likely that their treatment is being determined not by whats the best treatment for them but what is the best financial option for the physician. Talk about wolves in sheep's clothing, patients are getting blindsided and its just sad. Not all, but sadly the majority of the physicians I work with fall into this category.

    I am not smart enough to know how to fix things, I can just remember when they weren't like this.

  40. Does anyone think PODS will be able to continue to operate freely until the verdict is out? and if so, how long? If anything this looks like it may buy PODS more time to sort out their underwear drawer. Here's a good can medical device manufacturers compete with PODS that sell their own me-too products? or are they POMS? Physician Owned Manufacturers? Where do these guys fair in the grand scheme?

  41. 8:10

    I am already competing against the hospital based and multispecialty clinics. Their surgeons are "inhouse" and the family doc's do sent all their patients to them.

    I compete on providing good care, caring staff, and appropriate scheduling. And yes, competition is good. You rise to the challenge, and improve outcomes or experiences.

    Not every doc is in a POD. Why don't you go after those doc's?

    Some one called the POD's doc the "entrepenuerial class". I like that analogy. Patients do not want to go to just an entrepeneur. They want to go to someone who treats them as a patient, before they treat them as a customer. There is a difference. In business, the customer is always right. But, as a physician, I cannot tell a person what he wants, I need to tell him what he needs.

    Likewise, for your non-physician distributors, you will have to deliver real and useful value to your physicians. I suspect if you doc's are in pod's they will not want you type of value. But the other doc's will.

    Compete well everyone.

  42. 8:23

    Unfortunately patients on the whole are not sophisticated enough to know the difference between an entrepeneurial surgeon and one that is not.

    If you in fact do tell patients what you believe they need based on their disease then good for you. Unfortunately many do not, they tell them what they need to get what they (they physician) want.

    Bad apples are bad apples, not much we can do about that.
    Just have to keep plugging without compromising our values and hope our efforts and value are recognized and rewarded.

  43. Old Spine Doc,

    According to the article...
    "Physician-owned distributorships, or PODs, now exist in at least 20 states, with more than 40 operating in California alone, according to the report."

    How do the reps in California survive if they are not affiliated with these PODS? They become scavengers not reps. In reference to your comment..."Not every doc is in a POD. Why don't you go after those doc's?" Are you serious? By making that comment makes me feel, and I am sure others, that you are completely unaware from a business standpoint what a cancer this is. We will either cure it or soon we will all be walking around with chemo pumps attached to our asses including yourself or you and your practice will be pushed into non-exsistence. This is changing everything. Reps cannot survive off of doing business with just a single doc unless they have every bit of his business and that doesn't happen unless the doc is getting some sort of deal. Your moral balance is appreciated but your lack of understanding is concerning. Check yourself...we should all check ourselves including the medical device manufacturers. Start running leaner, take care of your reps, and make sure your docs truly like your products because there's a storm coming and it is not as simple as a "correction".

  44. 9:54

    The doc's and sales reps are just pawns in this game. Step back and look at the big picture.

    If I was just a business guy, I would take out the Dartmouth Atlas, find out were the (4 times more spine surgery than average) places are located, move my sales guys to the area and assess the area for opportunities.

    If it is full of POD's, then I need to be a provider of hardware to the POD's. If there are high volume surgeons, not in POD's, then I need to offer a reason why these docs would switch to my products.

    I need to have face time with the materials managers at the all the hospital, and compete to find out what I need to do to break into the market.

    The point is, as a pure business, you will look for the asymmetric situation and develop the opportunity.

    Sitting by, and hoping the OIG and DOJ will save you is wishful thinking.

    And yes, both you and the Doc's will need to adapt to the new paradigm, or look for a place that still competes on the old rules. Either way, you will need to evolve, or go away.

    Provide value (legal value, I hope), and maybe you will survive, and possibly flourish.

    Cruel comment, but true.

    Stop sounding like the polaroid salesmen. The digital photo is here.

    Compete well.

  45. Is it true that a company whose name rhymes with "Biker" is doing end arounds with AdvaMed and "getting" business by helping customers build websites and promote their practice??
    How come they are not investigated for all their "extras" they provide

  46. 12:48

    Company that rhymes with "Biker" rep here. No end arounds or extras at all from corporate. It we were any more Avamed compliant we would be on the payroll. Just like any legacy company finding value in something other than your pedicle screw can help build relationships. If you work for a company that doesn't offer support for marketing or patient education you probably need to assess the strength of the organization that employs you and or find a new gig. Good luck

  47. paying for advertising is Advamed Compliant? since when?

  48. I have a question that no one seems to be talking about. What about the hospitals? For example, let's take two hospitals that the POD sells to.

    Hospital A buys screws for $900.00
    Hospital B buys screws for $900.00

    All is rosy in POD land. Then Hospital A hires a consultant that says the hospital can demand construct pricing from the manufactures and they say they will only buy screws for $600.00.

    Does the POD comply and "lower" their prices to "help" the hospital, or do they move "REFER" all their business to hospital B?

    I think I know the answer and if the POD does move the business it will be hard to argue the "we save the hospital money" statement. Lets face it, POD's are in the business to make money first and not save the hospital money.

    Can you say "STARK"?

  49. How about when they all go to $500-600 per pedicle including the set screw? It's coming boys and girls. If PODS survive, someway somehow the dam will break and the bottom falls out. We brought it on ourselves. Many ppl out of jobs, total re-alignment, where will it end. We are close to never, never land.

  50. Who is the LDR distributor in MN?

  51. I believe the distributors name is Harry Ballsonna.
    just sayin...

  52. What happened to the Synthes employees? Were the sentenced to jail time?

  53. Let's say a surgeon has a dural tear or a foot drop on an adjacent level case wherein he did the operation say 5 years ago. Even he's insulated from serious malpractice claims through financial firewalls, a plaintiff attorney could make a very compelling case. It would be very difficult to be on the witness stand getting interrogated by a very crafty and artful PI attorney as he displays a 4'x6' graphic of the corporate structure of the POD for which the surgeon distributes. Don't see a jury getting the warm fuzzies as they look at the money flow from manufacturer to distributor. When they learn that the surgeon does not perform any of the activities a normal principal agent does such as canvassing, marketing and servicing surgical devices.

    The surgeon may have had a patient truly indicated for surgery, had a dural tear due to mitigating pathology, such as nerve adherence to scar tissue, but that jury will only be focusing on the money flow. The perception would be one of over-utilization of instrumentation for personal gain. So POD's may be legally permissible in a very narrow manner, but are not perhaps, legally advisable. The risk exposure is still very high regardless of loopholes, etc.

  54. im in the Northeast and ive been at 500 for pedicle screws for almost 7 years. No news here. POD's present zero threat to me. They cannot and will not go any lower than what my pricing is

    Also, my surgeons operate at some of the most renowned teaching institutions in the world. There is no way POD's will ever be allowed in these hospitals.

    The way i see it...if you have a POD in your territory, you just have to deal with it. As some of the earlier posts said, they will always find ways to exist and funnel money to the surgeons. Its just the way this business has gone. We all have our own issues in our own areas. Out of network surgeons with low volumes, low pricing, and slow moving product through the FDA. It is what it is. No one is forcing you to do this job.

    All this negative attention to our industry is doing much more harm than good. We as reps and companies are scrutinized more now than ever before. As usual, big government now gets involved. Its a sad state of affairs

  55. to 5:20am..

    the sad story is that POD, POC, POM, etc. can go to as low as 200-300 and source from many companies sprouting up to fill this need or make for themselves. be careful what you ask for. these ruthless sorts will put it in the NY times or Wash Post in the NE so your hospital admin can finally get it. (I'm sure the hospitals know already. They just wait for the ground swell).

  56. A screw, is a screw, is a screw.......

    Commodity. No new innovation that is worth the R & D price.

    I hear Home Depot and Lowe's are getting in the business.

  57. I heard Globus is not going public.

    They are being Ace Hardware.

  58. 5:20

    The best and most rational post ever on this subject.

  59. what's good for 5:20 must be good for the whole spine industry. what a joke. Just because YOU aren't affected by the POD's does not mean that a whole lot of people w/ FAMILIES are! These doc's are not SAVING the hospital $$$ they are doing this to make themselves more $$$, anyone who does not realize this is either involved in POD's or is just plain ignorant to the situation. It's amazing that some of these surgeon's greed is taking over the legal obligation to provide the best technology and medicine to their patients.

  60. 1241

    Boo hoo! I can't feed my family because of new competition. It's so unfair! My income is a constitutional right! Please help me mommy government! Waaaah!

    Get a life you pathetic soul.

  61. 12:41

    When sales were good, did you share your hard earned bonuses with the poor guys who had no sales? After all, I bet they had families too.

    And those stupid Doc's. They are usually the worst businessmen. We use to only have to buy them dinner, and a lap dance. A few consulting deals and we were in the bonus pool.

    I guess they learned from our greedy practices. Maybe, they are not so dumb. Or, after dealing with us, they started to see medicine as more than a profession. They also realized it is a business.

  62. POD's are a JOKE and so are the surgeons that run them! Saving the same hospitals money that are trying to screw the surgeon in the first place? Give me an f-ing break! Any surgeon that tries to sell me that he/she is doing this in the name of "saving the hospital money" is full of shit! Hey doc I got some news for you, why did you add that extra "fusion code" to that case? Was it cause you roughed up some bone and placed it in the lateral gutters, calling it a fusion? These guys are the most unethical creators around!

  63. every business runs its course. Ortho, Spine, cardio, etc.
    As technology develops new treatment methods for doctors there will always be the first in... they will take the risk and put in the hard work up front to bring this new technology to the medical community. As time rolls along the copy cats will jump on board and sooner or later it all peaks ,
    and then the saturation comes.
    this is where spine sales is. figure out how to earn a living in this environment. times have changed. how many more points of fixation can we dream up??

  64. 5:20 here,

    Once the plaintiff attorney has taken his pound of flesh from the surgeon, they will be looking to take a front end loader's worth of flesh from the hospital/hospital chain.

  65. zimmer spine is for sale. maybe a pod can buy them !

  66. 12:41

    What on Earth are you talking about? Instead of getting into some un-winnable argument regarding the legality of PODs, I simply described a legal scenario that should these type of arrangements unattractive. Forget about ethics and Stark/Anti-Kickback, the real force that will drive PODs away is surgeon exposure to lawsuits that would normally be nuisance suits but due to the fact that there is POD involvement, become hugely problematic and costly. Its not necessary to make some moral arguement when the risk exposure is enough to make PODs too risky.

  67. 7:57

    As a physician, that is the most compelling reason to moderate the enthusiasm for a POD model.

    But, we have all been down that model before. It comes down to disclosure to the patients. I have a stake in a local surgery center. I must disclose that to the patient. And yes, because the non-physician owned entities took a hit from our center, we took extra caution to make sure we are extra compliant with all regulations, and make sure that the patients know that we have the best, most competent, and caring staff and physicians. It costed us much more that we thought, and we did have to deal with a few physicians who had unrealistic expectations.

    POD's will evolve, with the bad apples being eliminated by either the government, or by public scrutiny.

    Either way, physicians who prioritize the patient, while also being business savvy can, and probably will make this model work. I suspect, soon, one of the major spine companies will develop a division that will supply the POD's.

    In the end, there will and should be some business risk in this venture. You distributors and sales reps need to provide legal value to the remaining physicians, so that they decide the risks, and efforts are not worth the rewards and scrutiny.

  68. A surgery center is a true business. You have staff, overhead, pay benefits to that staff, etc. Getting paid to use hardware by some legal slight of hand is merely disguising a kickback in the form of a "distributorship." The simple fact that none of these PODs sell product to surgeons other than themselves is enough to know that these things don't cut the mustard. How can you be the distributor AND the customer?

    There are many surgeons who currently do not perform their own discograms in order to retain objectivity with respect to their treatment decision-making.

    Can't imagine how a surgeon can be unbiased when he is making straight up cash on his hardware. Conservative care will become a joke.

    But remember one bad act begets another and those PI guys will literally be taking ads out in the paper like:

    "Have You Recently Been the Victim of Non-Indicated Surgery? Are You Suffering from Post-Op Complications After a Spine Surgery? Do You Know If Your Spine Surgeon Profits From The Metal Screws and Plates That Were Implanted Into You? If So Call 1-800-EZ-MONEY"

    They were all over the Sulza Hip and Charite. Just a matter of turning their focus. Furthermore, they will sue upstream to the manufacturers and hospitals who wrecklessly ignored Stark and Anti-Kickback Statues.

    The only PODs that will exist will be in surgeon-owned surgery centers. Any risk analysis manager of a major hospital would have to be high to bring instrumentation in from POD's. BTW, those Chinese pedicle screws that fail won't have a major American corporation behind them to pay a product liability case. Can't see Spine USA paying any claims. They'd probably disappear overnight without any assets to seize. The hospital where the implants were implanted would be left holding the bag.

    I'm not a hater but these things just don't pass the smell test at ALL.

  69. Like I said, is it worth the scrutiny?

    Some will say yes, and to be successful, will put in all the safeguards to lessen the fears about aggressive indications, poor quality products, etc.

    The business community will provide supplies to these entities as long as they can prosper. This goes back to the discussion on why does a screw cost $900? It does not cost that amount to manufacture. It costed that much because of marketing, regulation, and product development.

    We all know that many of the screws are now begin produced at manufacturing facilities that manufacture for many of the same competitors. In other words, the quality of production is almost the same.

    Previous posts indicate $500/screw in the Northeast. Someone will provide the high quality low cost screw to the POD's. And yes, that will decrease the overall costs, as the payers (insurance and gov) are already scrutinizing indications as well as costs. The doc's will not be able to control volume of patients just because they want to increase utilization of the products.

  70. The POD's in my area are charging what everybody else is charging. The playing field is still the same, the POD has a ringer. One POD is actually charging the POS that the doc owns list price. Triple dip for that DOC!!!

  71. I have friends from childhood and college that are in politics and Congress now. I have been fortuate enough to hear from them (prior to the WSJ article) that a Task Force has already been established to address POD's. Their plan is to erradicate POD's in about 1 1/2 years (take that timeline with a grain of salt, this is government, afterall). The point is, the government plans to act swiftly and forcefully. Some poor bastards will be made a compelling example of. This recalibrates the risk vs. reward equation.

    The fact that any federal or state facility, provider, or insurer does not support POD's should speak volumes. Military hospitals, VA Hospitals, State University Systems, Medicare, Medicaid, Medi-cal, ... even Kaiser, have rendered it against policy.

    I find the situation analogous to the housing bubble. Those that got in, got out, and ran with the money will prevail. Those that either get in too late, or stay in too long due to greed, will perish.

    I just hope that these surgeons recognize they have studied and worked too hard and too long to obtain their credentials to risk losing them. It is not just their reputation and legal bills to think about, it is their LIVELIHOOD! What will they do when their medical license is revoked? Where is Makker now? Those are not shoes most spine surgeons strive to be in.

    ~Prudent West Coast Rep

  72. their license revoked for being in a POD yea that's gonna happen. SURE ....most pod's are way more legal then half the bullshit some of these guys are engaged in, I mean really!

  73. 3:28

    "I have friends from childhood and college that are in politics and Congress."

    I don't think tweeting Rep. Wiener counts.

  74. 12:20 said WIENER - that's a bad word -teeee heeeeee.

    Besides what's this have to do with my ipod anyway?

    Ohhhh Myyy Gawd,
    Teenage Girl Wiener Tweets

  75. 5:57

    You obviously work for a POD. Don't be an idiot, some of these surgeons will be made examples of and either lose their license or go to jail. Irreprible harm will have been done at this point and these surgeons will never be viewed the same. These surgeons have been through years of schooling but only a small amount if any was dedicated to understanding business.

  76. Question...what is the difference between a surgeon getting paid a generous royalty on a product he's consulted on versus a percentage of a partnership agreement in a POD? Or having a shareholder position in a medical device manufacturer of products he uses in the OR? Am I the only one that thinks these arguments will be made in this hearing?

  77. 7:44, in a royalty agreement, the surgeon's own hospital is excluded from royalty a POD he is compensated directly from own hospital usage...regarding an investment in a publicly or even privately held company, there is no direct payout only a potential...and even then, there are rules relative to disclosure on ownership and limitations....the argument about saving the hospital money will be shot down as soon as the prosecution asks a clinician in a POD, 'so, if Stryker offered their implants at $10 per screw, you would switch and there would be no need for a POD, yes?"...

  78. How does a POD save a hospital money anymore than your average distributor? I do not see this argument at all. Please explain the relevance or potential thereof. Thanks.

  79. Can anyone think of a good way to short the Local Spine Distributor Industry?" I'd like to make some cash. The PODs aren't a long-term solution, but neither is the current system. I will get blasted for this, but deep down you know its true. Start diversifying now!

  80. How about helping customers build websites and promote their practice. Is that allowed? Wait until the dirt comes out on that. I see reps being fired due to advamed issues.

  81. 8:01 it doesn't. There is absolutely no mechanism inherent in the POD that saves the hospital any money. If the surgeon really wanted to just help save the hospital money, they would just sit on the same side of the table as the purchasing department, and demand concessions from the vendors. Any concession a surgeon can negotiate as part of a POD could have been negotiated as a user as well. And arguably should be.

    "Now, for a small fee..."

    The difference is that in a POD, the surgeon suddenly is being paid to demand concessions, as the difference between what he negotiates and what the hospital would otherwise pay is not going to the hospital, at least not entirely, but rather going into his pocket.

    "Welcome to Materials Management, Dr. Smith. Here is your name tag, cubicle, and punch card."

  82. I think the POD surgeons should have to check in with purchasing and wear the reptrax sticker while they are operating.

  83. All very interesting comments. You feel PODs are illegal and unethical and want them gone. Maybe so, but shouldn't it be illegal for hospitals to not allow other companies into their hospitals when those companies could in fact save them money over their present two or three vendors? Of course it should be. But you all don't think so if you are the ones who are on the inside looking out. Yet you feel that another business model like a POD that threatens that sweet heart arrangement should be illegal. You are hypocrites! At least be honest and say you don't like PODs because they threaten your income. Be honest that if the surgeons no longer need you or their consultancies or whatever arrangements you have with them and wish to cut you out you will lose income!! Now some may say, "hey I don't operate that way, I am clean and my surgeons use me for me". Cool, you are the minority and have absolutely nothing to fear regardless of whichever way this shakes out. To all the rest, stop hiding behing the ethical and moral arguments when in fact it all comes down to your wallets. If PODs go away then the same Senators should make it a law that no company can be held out from competing anywhere in the country. Every company should be allowed to compete in any hospital if a surgeon wishes to try that company. Why would anyone fear this? And the answer is for the same reason and that is that it can potentially impact their business and their income. Competiton makes things better and almost always lowers costs which would again impact people's earnings. Unfair competition is unfair whether its a POD or a company being excluded from the ability to compete. Be honest folks. Just be honest. Is it really PODs or is it your income. The answer is obvious.

  84. You have an active community here. Why not put out Twitter alerts on your posts?

  85. Ha! Great post 8:50.

  86. So do you think there is still time to start a POD in Recon before the POD hits the fan?

  87. 9:06 has a strong point, at least when it comes to public funds; hospitals should have no right to limit competition.

  88. so ownership in a POD is more unethical then being paid to use a many dr's are getting flown around to speak or taken out to dinner with their wives that would make avamed puke on many fishing trips from the distributor are going on....are those ethical?


  90. Because of the potential for these abuses, POC arrangements are likely to be found illegal. In October 2006, the Office of Inspector General (OIG) of the Department of Health and Human Services indicated it was “aware of an apparent proliferation” of POCs. “[G]iven the strong potential for improper inducements between and among physician investors, the entities, device vendors, and device purchasers,” the OIG believed “these ventures should be closely scrutinized under the fraud and abuse laws.” OIG officials recently confirmed in Congressional testimony that POCs “raise substantial concerns that a physician’s return on investment from the venture may influence the physician’s choice of device.”

    The legal analysis is not complicated. The federal anti-kickback statute prohibits, among other things, giving or receiving any financial benefit or “remuneration” in exchange for, or to induce, the referral of any patients for, or the purchase, lease, order, or recommendation of, any item or service for which payment may be made under Medicare or other federal healthcare programs. Although the policy objectives of that statute include avoiding unnecessary utilization and spending, protecting competition, and ensuring quality of care, no showing of improper utilization, spending, or patient care is required for a violation.

    Penalties for violating the statute include substantial criminal and civil fines, imprisonment, and exclusion from participation in federal healthcare programs. Courts and administrative bodies have ruled that the statute is violated if even “one purpose”—as opposed to a sole or primary purpose—of a payment arrangement is to induce referrals for services or purchases of items reimbursable under a federal healthcare program.

  91. I like my beats fast and my bass down low.

    - hip hop

  92. Check your facts! Senate asked OIG for oversight not investigate. Oversight means the senate is asking OIG to establish rules for which to play by. I think it's a bit telling that Hatch knows the word pod now. Can only mean one thing, the giants have hired lobyist

  93. Hey 4:18,

    If this is your first day on the interwebs then I apologize but you might want to read the first sentence in the article that clearly states 5 senators asked for an INVESTIGATION, much different than oversight.

    Oh, and you are a knucklehead. Of course the big boys have lobbyist, is this your first day in the real world? The sun sets in the evening, but no will be back up again tomorrow!

  94. @9:06
    Contracts which "limit" competition exist in ALL areas of business and industry. For one example, a lumber supplier contracts with a certain sawmill to provide their lumber for a given amount of time at a given price. That is the way business is done. Neither side would enter into the contract were it not the best option for them at the time. None of these contracts are infinite. When those contracts are up for renewal, other sawmills are given the option to bid on the next/new contract and length of said contract. POD’s are essentially locking-up business through an alternative route and indefinitely. THAT is unfair.
    You make the argument that what people are really worried about is losing their income? Of course they are. But that fear is also related to the fact that the competition, in this case POD’s, is not playing fairly or by the same rules. Your argument is like telling an athlete who follows the rules vs. one who uses illegal performance enhancing drugs that he should be HONEST that he is only mad about not finishing first, not that he is worried about the integrity of the sport. It’s nonsense. Losing to someone who cheated is a LOT different than losing on an even playing field.
    When we are already competing against reps whom are cheating, we shouldn’t have to compete against surgeons whom are cheating as well. I think it is a pretty sad argument to validate POD’s by citing other unethical business practices which violate AdvaMed guidelines. As you said, unfair competition is unfair whether it is a POD or company exclusion from hospitals. I agree. But unless those hospital contracts were secured in an unethical, illegal manner they are not unfair. It’s business. Get the business the next time the contract bid comes around.
    Don’t be mad about losing income to someone cheating because some other guys are already cheating, too? Give me a break.

  95. POD Haters:
    Spin your thoughts however you want so you can rest better with yourself at night. The real test to your future will be when the OIG builds some criteria on these arrangements so that they ALL operate according to CMS (Medicare) guidelines and will only excelerate these models to grow way beyond just implants! Get your rose colored glasses off and finally one day you will see that not even MDT has enough gold in California to stop the frenzy of more POD events to happen.

  96. 5:44 WRONG!!! You take aim at 9:06, however your logic is convoluted.
    If the lumber supplier was to base it on objective parameters then we have pure play economics. But when surgeons who are consultants and also get royalty checks in the mail - "go to bat" for a company to be one of the exclusive vendors.... then we have "quid pro quo"
    It has less to do with Depuy or Medtronic being the best option for the account. It has to do with Depuy and Medtronic having surgeons who have been/ are being- compensated very well and are taking care of Depuy/Medtronic. Scratch my back.......ect. So Mr 5:04, good thing you peddle screws and are not a lawyer because you just don't get it. POD's are just the new answer to "what have you done for me lately".
    Depuy and Medtronic have pretty much exhausted the consultancy/royalty track and now the customers are stretching their necks to see what is coming their way. PODs seem to be the immediate answer.

  97. Show me a rep who has an account where there are a few "exclusive" contracts and I will show you a rep who is currently riding the gravy train, but who has a very unsecure future. It's a very slippery slope when you make your sales and service abilities an after thought and go after "exclusivity" You are basically selling your company. Once you stop selling yourself and you promote just what Your Company can provide , your days are numbered. I see 4 percent commissions coming for those bigger companies. The squeeze has to hit someone...

  98. Please 6:39. Get your head out of your ass. You are understandably bitter from having your ass kicked by the great satans of spine. But, do you think, for one minute, that Medtronic or DePuy would touch a POD with a ten foot pole? With the bad press this type of business model is getting? Right now? If you do, step away from the crack pipe. Quit sucking that glass dick and seek help.



  99. Sh!$ just got real!

  100. 7:04 you missed the point. POD's will replace the consultancies and Royalties that Medtronic and Depuy seem to "thrive" on. You have a third grade reading comprehension, and a filthy mouth you inherited from your low class DNA

  101. This thread has spiraled down the toilet.

    We will all see how this shakes out, its apparent there are very solid lines that have been drawn here.

    Time will tell.

  102. 7:04 is a typical Depuy/Medtronic rep suckling from the nipple of his corporate sponsor. How fat have you gotten from the work of others?

  103. TSB
    Time for a new post! The POD articles and comments once again are making our industry look foolish and divided.

  104. How about us reps group together get some gear from Korea and sell direct to the patients. You pay extra if ya want me in there to tell the Doc how to put it in.

  105. We can bitch and moan until Lebron wins a championship, it isn't going to change anything. Legit reps need to stop pushing products for companies that supply pods. The peoole running these companies aren't going to get in trouble it is the surgeons who are going to be left holding the bag.

  106. I agree, time for a new post TSB. This blog has run its course.
    Bryan Freeman

  107. Completely agree that this blog has run its course...

    With that in mind, let me describe a real-life situation of how a POD has affected a surgeon's clinical decision making and the potentially negative effects.

    For 10+ years, this surgeon has been treating the majority of his lumbar fusion indications with an A/P fusion (ALIF + bilateral pedicle screws) because he felt it was the best procedure he could offer his patients.

    He started doing business as part of a POD 12 months ago. Because this company does not offer an ALIF implant option, the surgeon has moved the majority of his cases to PLIFs (yes, 2 implants, not one), and uses reduction screws on every level (exactly 2 times the cost of a standard polyaxial screw in this account). Let it be known that his ALIF access surgeon still operates at the account regularly.

    Now, I can't say that his decision to change his surgical treatment of his patients had anything to do with the financial implications from the POD; however, if this were the case, am I crazy to believe there is a major problem with this?

    How does this benefit the patient, hospital, or the cost of health care for the rest of us?

    Final disclaimer: yes, my business was impacted by this change and I am slightly bitter. He still works with me when he needs something his POD does not offer, which is not often enough if I'm one of his patients.

  108. @6:39, 5:44 here…
    Talk about reading comprehension skills…
    I never attempted to address what the existence of POD's is in response to. Nor did I allude to any unethical underlying factors in contracts being acceptable.
    Regarding what I DID say, you essentially reinforced my point. I said that contracts are renewed and bid proposals are made before the contracts are decided upon. The bid proposals are the objective parameters here. Other confounding variables, such as royalties and consultant agreements with docs, are obviously not figured into a bid. If the royalties and consultant agreements are not legitimate, then it is not a level playing field. By definition, it is cheating.
    The SUBJECTIVE aspect to these bid proposals exists as well. While the ethics behind even legit agreements can be argued, so too, then, can the ethics behind any relationship the surgeon has with a rep which influences his decision to use that rep’s products or “go to bat” for him. Maybe he likes this rep better than you? He provides better service? His decision isn’t based solely on product, so does that make it unethical if the rep wins contracts this way? No, because you can step up your game, provide better service and value, and work on your relationship with said surgeon in the hope that he may “go to bat” for you to capture business.
    POD’s ability to capture business is in the fact that they are the ones using the product AND profiting directly from it. It is safe to say that no matter what value you can bring or how well liked you are by POD surgeons, you will not dissuade them from their own products thereby losing income. There is essentially no way to compete for this business. NOT a level playing field, therefore cheating.
    My entire argument was directed at 9:06’s comment that we should be “honest” about the fact that we are actually concerned about loss of income and not the POD’s unethical practices. Such a statement is totally irrelevant when assessing whether POD’s are legal or ethical to begin with. Again, if an athlete blows the whistle on a competitor using steroids, we do not attempt to discern whether his intent was based on his frustration at losing or rather, his interest in preserving the integrity of the sport. We just know that the other guy cheated, and should not be allowed to continue his unethical ways.
    Cheating is cheating, whether via unethical relationships or unethical POD’s.
    My point was and is: don’t hate a guy for hating the cheaters. Regardless of the motivations behind his hate, THEY ARE the cheaters.

  109. This comment has been removed by a blog administrator.

  110. I'm afraid that those waiting for the congressional investigation to validate PODS via definition of the boundaries will be disapointed.

    "A companion letter to CMS asked that the agency be certain not to inadvertently provide protection for PODS when drafting..."

  111. Some of the comments are really ridiculous especially legit reps not selling companies that provide PODs. Give me a break. Here are the 2 most important facts about this article people:
    1. The JAMA study concluded that spine surgeries grew 15 fold between 2002-2007. Pods didn't even exhist during this period friends so we can't blame them. Maybe its baby boomers, maybe consulatancies, royalties, or expensive trips. But it sure as heck wasn't PODs.
    2. They site Dr. Makker as having done numerous surgeries during 2002 - 2009. He wasn't even in a POD. Guess who he was using for all those surgeries?? STRYKER!! And that is a fact. So where was the Stryker rep during all these cases. Did he think to go to the DOJ? Obviously not becasue he was making money.
    Those are the real facts and as our second President John Adams said "Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence".

  112. 2:09------the Stryker rep was building the customers practice through websites and local promotion. Go Stryker!! Stryker reps know how to get it done. even if they cross the line

  113. I suggest any hopsital that takes government funds - Medicare & Medicaid should allow anyone to compete there if a surgeon or surgeons wish to use that comoanies product. That will almost certainly bring down pricing and competition will make the socialistic monopoly have to work to keep the business. Also, Senate investigations need to occur where these contracts and lock outs exist to see if there is a surgeon / company relationship or sweet heart deal that sways the surgeons into promoting that company in any contract negotiations. That should be the next BLOG Mr. Spine Blogger!!!

  114. Stryker reps BLOW!

  115. stryker is paying of drs and hospitals in Ohio
    including the Cleveland Clinic - shady bunch out of the three rivers distributor

  116. I happen to work for Dr. Steinmann, and have been involved with seeing the POD structure set up. I can tell you first hand that I see the hospitals in our area save millions in implant costs. The reason? PODs are able to stock their own inventory by buying in bulk AND do not have to pay sales reps high commissions to push product through. I realize that there has already been some bad apples out there that the media, including John Carreyrou, have picked up on and then use it as a one sided argument. A POD should be structured appropriately as the Alliance model suggests as to avoid over-utilization and other legal and ethical issues. The Alliance model has helped establish PODs that are ethically and legally compliant, which have helped saved several hospitals in So Cal millions of dollars by reduced implant costs. Society obviously benefits from these kinds of savings. Hard to argue against that.

    Look at this article released back in 2009 from the Press Enterprise:

  117. I am not in the industry however great reading. It seems to me that the POD's are trying to maximize profits. I would bet the IRS would like to look into how the POD's are paying the reps that actually work for them. Are they independent contractors or direct employees? I would say they are indedpendent contractors who only work for the POD's! This means that they are trying to save money by not paying taxes on truly direct employees. This is a huge issue and could cost a lot of money on back taxes? Just an outsider reading the post, this could be an issue for the IRS as well. It seems that it is all about the bottom line and I am sure if the surgeons are trying to get the most out of the deal they are not paying their fair share of taxes for the employees (independent contractors) to uncle Sam. This potentially could sink all of the POD's if they are not following the labor laws? Has anyone thought of this? It takes it to another level?

  118. PODs simply will not pass the sniff test. Lots of onion layers on this one. Spine is basically become the whored out house on a lonely hill, and the last ditch effort of certain people to bleed the final drops is the POD model. You cannot tell me that sending out a prospectus with cancelled checks on it is not grossly enticing. Yeah, it may save some money, but it is not that big of a savings...I have seen the bills and trust me MDT, Styker and Depuy are billing less at the big accounts than the PODs are in many place, so the POD scam doesn't hold much water on the "cost savings" issue. As well, I find it hard to believe a surgeon who was using an MIS system or a specialized system to address his patients' needs, when he/she suddenly joins a POD and those niche items are not available, is acting in the patients best interest. I love how Dr. Steinmann's PA is standing up for this POD model...maybe he/she gets paid that way as well. By the way, So Cal is simply the most fucked up sales arena in the game. As for trained reps that bring value (Waking up at late night beckoning calls, actually selling features and benefits and taking less money each year to insure that business moves forward)...well, I think they should read Atlas Shrugged and consider letting the scabs take this business into the mindset of the Middle East.

  119. 6:21
    If you work for Dr Steinmann, then maybe you can answer some questions that he won't answer.
    1. How do you justify that PODs save by buying in bulk and not paying high commission rates to reps? All hospitals can have product placed on the shelf at no cost and the charge to the hospital for the implants can be as competitive as necessary. The fact that they buy and resell (whether in bulk or not) is irrelevant to the cost savings seen by the hospital. As far as the high commissions, I suppose you are referring to Dr. steinmanns "study" that suggests implant mfgs get a 15% price increase every year and that the rep AND the distributor make more per case than the surgeon and the hospital? That paper was good as a fish wrapper only and was so full of holes it wouldn't keep the flies out.

    2. How are you comparing implant costs? The "study" compared costs to then current contracts. In my area, when a POD sets up shop, all other vendors are out and there may not be any contracted price. Even if there were still contracts for non POD surgeons, how would you know their pricing if you are a sales entity? As a distributor, I have never been able to get a hospital to hand over all my competitors pricing so that I could come in and confidently underbid every item. If there are multiple competitors, which of their prices did you compare to? The highest, the lowest, the mean?
    3. If the goal and justification of the POD is cost savings, what would the POD doctors do if a competitor said "we are on board with the savings goal and we will offer our implants at 30% lower than the Alliance products and we will provide an employee to restock the trays"? You know the answer as well as all of us out here in the real world. They would not use the lower priced implants. If they were interested in saving money on implant costs, they could have made that happen without being in a POD. The fact is, they claim being in a POD makes them partners with the hospital. The opposite can be the only truth. If they were partners with the hospital, they would have put pressure on the vendors for pricing concessions with the threat of switching products for the hospitals sake before the POD. Once they enter the supply side of the equation, they are incentivized by higher prices and higher volume, just like we are and that inducement is what makes the POD illegal, even if the prices are lower and no over utilization ever occurs. The presence of inducement is the key. If over utilization occurs, then it because a fraud and abuse issue, in addition to an AKS issue.

  120. 4.  Even if a POD can be structured legally, that doesn't mean the surgeons always do or can act in compliance with the by laws of the POD.  Even if a surgeon doesn't threaten to take his business to another hospital if his current facility chooses not to do business with the POD, the threat is always there because the surgeon is the hospitals customer.  The fact that he is their customer, yet he decides what they have to buy and pay for, and he decides to buy products that financially benefit him is the reason all of this is so screwy.  Nowhere else in another industry is this kind of setup possible with the exception of insurance and government (a party other than the buyer pays the bill).  My point is that even if the structure of the POD is written within legal lines (what are those lines by the way?), it is impossible for the actions of the surgeons to always fall within the written structure of the entity.

    5.  When you say "over utilization", what exactly do you mean?  The "study" looked at overall surgical rates with some sort of nebulous exception concerning new patients.  Operating on more patients (loosened surgical indications) is only one form of over utilization.  Did the study look at implant utilization PER PATIENT?  In other words, did the POD docs all of a sudden start putting a cross link on every construct?  Did the number of multilevel cases spike?  Did the number of wasted implants spike?  Did they switch from allograft spacers to PEEK spacers because the POD didn't offer what they formally used or because they could make more margin on PEEK than tissue?  Did they convert to PLIF versus TLIF because it requires 2 implants per level.  Did they switch bone grafting to one available from the POD when they were adamant about their graft choice prior to the POD.

    What about underutilization of newer technology.  Did they abandon MIS spine? Did they discontinue doing ALIFs? Do they still use BMP? Did they discontinue using an integrated cervical device on revisions opting to put a new POD plate on?
    Obviously, there are a lot of ways they can change their practice pattern to maximize their margin that do not fit within their prior treatment algorithms because the POD won't have everything they formerly used.

    The fact that he even did the "study" (I won't give up the quotations because I refuse to give that marketing/ justification piece any credit) indicates that he feels compelled to prove that he doesn't operate on more people and he needs to vilify the reps income (please tell me how that is even relevant to a study on over utilization). Would he be willing to disclose what he makes on the implants? If a rep makes 10%, I would be willing to bet that he, as the surgeon, and the 60% owner of Alliance both make more than the rep. Even if they are selling at a price lower than the market average prior to the POD and have since lowered prices 5%, I would bet again that somebody out there can beat their price.

    I wonder what would happen if the hospital implemented a captivated pricing scheme that lowered his margins drastically. Would he still be partners with the hospital? We'll never know because the hospital can't do that to a customer.

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