Tuesday, September 20, 2011

Caveat Emptor

Greetings fellow bloggers. Based on your response to our last post regarding the Scripps decision to ban PODS from their hospital system, many questions have been raised regarding the OIG's response to U.S. Senators Grassley, Hatch, and Kohl's Senate Investigation. At best, the response still has those involved looking over their shoulder, as the OIG's intent is to methodically answer many questions that need clarification. What we have learned is that the OIG has major concerns regarding the proliferation of PODS and whether the mere existence of these entities has or will have an adverse effect on Medicare and other Federal programs. Obviously, those that have leveraged their earnings and futures on the legitimacy of PODS, are keeping a watchful eye on the OIG along with the ongoing investigation by the Wall Street Journal into Mississippi and Alabama. Some readers accuse TSB bashing PODS. Contrary to some beliefs, our position has been that until there is legislation that clearly defines this business model, PODS will run rampant without any boundaries. Whether they are ethical is another issue. Due to the lack of legal guidance, the OIG challenge will be to identify if the behavior, structure, and practices that PODS present violate any Federal Anti-Kickback Statutes? TSB's observation is that if they look deep enough, they will probably unearth more schemes than one can imagine. As PODS continue to to increase, the OIG's position is that guidance, legislation, and enforcement will be required. As the government continues it's investigation, their intent is to identify the financial arrangements that have been initiated between physicians and third parties acting as an intermediary between the POD and the hospital, the transparency between these parties and the hospitals, and the services that PODS offer in addition to the type of cost saving that these entities provide. A major focus will be on how many of these PODS are operating on Medicare patients, and is the impetus for these business model merely for profit, by driving up revisions and increasing surgical procedures. One could not expect anything less than a backlash from those that have leveraged their current and future earnings on PODS, but if recent history has taught us anything, it is that as long as it is legal, everything goes, regardless whether it threatens the mere existence and livelihood of thousands of industry professionals. An observer of PODS has even raised the potential of these PODS backfiring on the same individuals that are brokering these deals. In the long run, if some of these POD surgeons have such disdain for sales reps, accusing them of driving up the cost of delivering quality healthcare, who is to say that with one fell swoop they could eliminate their brokers, whom they view as less than partners, but more like necessary evils? What TSB has heard is that PODS are running rampant in the deep south and California, threatening the mere existence of a free markets. So the question must be asked, how is it that some of our readers cry out for free markets, only to game the system? Isn't there a conflict of interest when profits are driven by self-referral? And whom are some of the companies have gone from pretenders to contenders? What will be interesting to watch will be how hospitals, its administrators, and its compliance officers respond? TSB wants to know what you think?

29 comments:

  1. TSB, I agree that the longer a doc is involved in a POD, the more resentment he is going to have for the guy making the 60% while he and his partners can only make 40%. It's surgeon nature to want to shift the balance of money in their favor. At least it is for the ones who are most likely to be involved in a POD in the first place. They'll have to get very creative though. I foresee girlfriends and little brothers in the leather chair at the POD office with a cheap desk, 1 phone and fax machine.

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  2. TSB

    For the sake of our sanity, please delete the posts by the jackass who thinks it is still funny to ask about Globus going public. Im begging you!

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  3. Adapt or die. Obamacare, PODs, matrix pricing, etc will introduce enough uncertainty for the true businessmen to step up and win. At least we aren't the broke real estate guys yet, we still have it pretty good. Please spare us the whines/moans/bitches & groans about spine's armegeddon. Demographics alone insure money will be made.

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  4. "PODS are running rampant in the deep south and California, threatening the mere existence of a free markets."

    This statement makes no sense. PODs, whether they are legal/ethical or not, are the direct result of a free market. The best definition of a free market is one that puts together a willing buyer with a willing seller.

    If physicans are the willing buyer and companies are the willing seller, how is this not a free market?

    In any free market where there is excess supply and profits, the purchase decsion-maker will become highly empowered. In our case that decision-maker is the physician. As long as they have the power to choose what product to use, they will hold all the cards. That includes demanding incentives, payments, and ultimately increasing control of the market itself. That is what we are seeing now.

    Any student of the free market who studies spine would tell you that this is inevitable. PODs should come as no surprise. It is only the ineptitute of physicians as businessmen that explains why it has taken so long and the process so sporadic.

    No one can stop the willing transfer of goods and money between parties. Not even the law.

    Economics tells us that there are only three things that can stop PODS:

    1. Prices become so low that there is no longer enough profit to be made by intermediaries or provided as incentives.

    2. Supply/choice of product becomes so low that physicans have to take what they can get.

    3. Physicans completely lose decision-making power (i.e. to hospitals or the government) over what products to use.

    I am betting on number 3 myself.

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  5. In reference to this statement...
    "A major focus will be on how many of these PODS are operating on Medicare patients, and is the impetus for these business model merely for profit, by driving up revisions and increasing surgical procedures."

    By evaluating the model much will be uncovered about not only PODS but how much CMS will reimburse in the future. It will also lead to new levels of transparency for inventory and new products that enter the market. This isn't necessarily a correction but an evolution to the current market. The same notions that woke up surgeons to be bold enough to step out and create the POD will create the similar response by CMS and industry regulators. Hospitals will no longer be able to bill out the monsterous numbers they did before and medical device manufacturers will have to learn to run leaner. Only the strong will survive and surgeons will now depend more than ever on their ability to gain market share with good business practice. No more shanty office settings with a good referral source to sustain themselves. Surgeons and everyone else are going to have to step it up a notch. Medical device manufacturers will have to learn to operate more efficiently or they will be eliminated. They will slowly bleed until they are (a) acquired, (b) cross the line with unfair business practices or (c) go bankrupt and close their doors. If they don't begin to act now by the time the OIG comes out with the verdict they will find themselves behind the ball. Good luck to all and happy selling!! Don't forget to hug your rep today because in the end he/she will always be your strongest asset.

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  6. anyone hear the latest on globus going public?

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  7. The only reps bitching about PODs are the ones who aren't good enough or don't have the strong enough relationships w/ their key customers to compete & survive in this dogfight.

    I believe this theory/ scenario might just be called "Spinal Darwinism",,??

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  8. "No one can stop the willing transfer of goods and money between parties. Not even the law"

    Are you serious? IMHO, the law can stop all of this

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  9. Lets call Obamacare what it really is -- Romneycare

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  10. 9:05am are you kidding me bro??? WTF are you talking about 'the only reps bitching", dude more than reps are bitching! You will be the first one to throw the POD's under the bus the minute one of your "surgeons" throws you under the bus and jumps the POD ship after it starts sinking.

    Those that will come out of this "dog fight" as you quote, will be those reps that have built longstandingm, ethical realtionships with not only thier surgeons (cause this is half the battle), but the customer that is paying the bill..the hospitals.
    Good selling~!

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  11. 7:18, your analysis is fundamentally flawed as follows: In a POD situation, the Surgeon is both the buyer and the seller. The magic for this surgeon is that they make the buying decision (to buy from themselves) and then someone else (the hospital) pays for it.

    This is not a free market situation as the incentives are perverse.

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  12. Hey 6:17, While today's effort was a little weak, I actually enjoy the increasingly creative ways that Globus-dude keeps posing the same question. Keep it up!

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  13. 10:24, right on the money. That's why medicine can't be completely free-market, as there is a huge separation of the consumer from the time and method of purchase (payment of insurance premium or taxes) and their time and amount of demand (episodes of care). As long as we don't have a direct "get only what you pay for right now" system, it is inherently socialistic, rife for exploitation, and thus in need of some form of regulation. Right now POD's are exploiting one of the inherent conflicts that has long been controlled simply by the ethical obligations of the surgeons not to prescribe unnecessary or overly expensive treatments, and mind the cost of products they choose. As that obligation seems to have gone a bit by the wayside of late, the exploitation opportunity arose.

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  14. Can't believe how naive you people are thinking it's the same person making the Globus posts. It has been a collective blog joke that I'm sure plenty of people have made. I'm sure I've posed the question when is globus going public once or twice.

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  15. いつになるかは Globus 株式公開である。??!?

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  16. عندما يذهب الجمهور غلوبوس ??!?

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  17. Hi, I'm new to this blog.

    Is Globus really going to go public?

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  18. No, so stop asking

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  19. So when is Globus going public?

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  20. Really stop asking. If its 2:02 on a Tuesday and this is what your doing then obviously you've made your sales calls for the day

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  21. Yes, I've made my sales calls for the day. It turns out the surgeons weren't interested im my PEEK cage or pedicle screw. I don't get it. The comnpany that hired me told me they were really cool and innovative.

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  22. Hi I'm a rep for Globus and they like to keep us lowly sales guys out of the loop. Are there any senior managers who work for the company who can tell me if we're going public?

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  23. ------- I
    GlobuS
    O
    I
    N
    G. PuBic ?

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  24. let the Crying Begin, or continue!

    Medtronic Wins $101 Million Award From NuVasive Over Spine Device Patents

    By Bill Callahan - Sep 20, 2011 5:03 PM CT


    Medtronic Inc. (MDT) was awarded $101.2 million in damages in a jury trial against NuVasive Inc. over patent infringement claims related to medical devices used in spinal surgery.
    The federal jury in San Diego also found today that Medtronic owes NuVasive $660,000 in damages for infringing one of its patents.
    In a two-week trial, Warsaw Orthopedic Inc., a unit of Minneapolis-based Medtronic, accused San Diego-based NuVasive of infringing three patents for implants capable of being inserted translaterally between adjacent vertebrae, a plate and screw system used to stabilize vertebrae in the cervical spine and a tissue retractor, according to court filings.
    “Medtronic is certainly pleased by the jury’s recognition that our patents are valid, that they are valuable and that they were infringed,” Medtronic lawyer Luke Dauchot said in an interview after the verdict was read in court.
    Today’s verdict is the 14th-largest jury award in the U.S. so far in 2011 and the fourth-largest in a patent infringement claim, according to data compiled by Bloomberg. The largest patent jury verdict in 2011 was for $482 million in a lawsuit against a Johnson & Johnson unit over stents.
    NuVasive lawyers and officials declined to comment immediately, saying the company will issue a statement later.
    Dauchot told jurors in his closing argument that they could award as much as $375.2 million for lost profits and royalties.
    NuVasive alleged that another Medtronic unit, Medtronic Sofamor Danek USA, infringed its patent for a nerve monitoring system for lateral spinal surgery, according to court filings.
    A NuVasive financial expert testified during the trial that NuVasive could be awarded as much as $752,000 over the company’s infringement claim against Medtronic.
    NuVasive lawyer Frank Scherkenbach told jurors that NuVasive didn’t infringe the Medtronic patents. He said NuVasive’s technology at issue is the product of independent development, was first put on the market in 2003 and soon “changed the face of spinal surgery.” He said that Medtronic possessed no such technology in 2003.
    ‘We Didn’t Copy’
    “We didn’t copy,” he said. “NuVasive copied nothing.”
    He said that NuVasive’s devices became so successful that the small company that originated in an orthopedic surgeon’s garage became a target for the much larger Medtronic.
    “They wanted in on this product,” he said.
    Dauchot said today that Medtronic stands by its claims that it didn’t infringe the NuVasive patent.
    “Although we respect the jury’s finding of infringement on NuVasive’s patent we differ and are considering our options in that regard,” he said.
    U.S. District Judge Michael M. Anello presided over the trial.
    The case is Medtronic Sofamor Danek USA v. NuVasive Inc. (NUVA), 3:08-cv-1512, U.S. District Court, Southern District of California (San Diego).

    To contact the reporter on this story: Bill Callahan in San Diego at callahan@san.rr.com.
    To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.

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  25. "Is Globus going Public?"
    The comedic value of the constant posts holds more value than the inference of the statement. Globus going public is irrelevant. The question and the continued postings have already diminished in potency and effect as seen above. A parallel to the company and its value I could offer no better. In fact, I would argue the posts above are by one and the same in a desperate attempt to to try and be novel.
    The patina has worn thin.

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  26. That makes $65M for Trademark infringement paid in January and $101M in IP Infringement. Time for the bear to put down the legal team, which is very large btw, then step down for complete and utter arrogance.

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  27. Well done Nuvasive,, congratulations on today's verdict as your arrogance has FINALLY come home to roost.

    Who cares about PODs, let's talk about the Nuvasive & the money that Lukianov, et al have cost investors as that company gets drilled again today & styands to take another pounding tomorrow at market open.

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  28. Where to begin? First, I don't work for a POD. I work for one of the bigger companies. I don't have a problem with PODs if the surgeon is providing proper care for their patients. There is nothing wrong with being a businessman and a doctor to maximize income. I doubt many are doing this and are either over-operating or putting their pts through a different/larger/open procedure. Most of the PODs in my area don't have an MIS portfolio and I have seen good surgeons that were getting great results with MIS procedures switch to open because that is the "commodity" equipment that the POD uses. This is unfortunate for pts that don't receive the latest and greatest (let's not let this begin a debate on MIS vs. open, we can do that on another post). Luckily in my region a few hospitals are limiting/eliminating their POD usage and drafting contracts with anywhere from 2-8 larger vendors ie: Kaiser = MDT or Depuy

    Large companies with a full bag and other divisions/products can give more overall savings to a hospital and PODs can't compete with that, even after they drove down product prices.

    Smaller hospital systems have the opportunity to check the cost savings with contracting with larger companies vs PODs and see that the clear winner will be large companies. Also, it would be wise for them to take the high road and avoid negative publicity as this challenge is becoming much more public.

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