Let The Games Begin

The Martin Memorial Health Systems in the State of Florida issued a memorandum dated May 6th, 2011 to all of its providers of medical devices and supplies.  The reference on the memo was regarding PODS. Here is a reprint of the Memo as provided to TSB by one of our bloggers.

Martin Memorial and its affiliates believe that the growing influence of physician owned intermediaries in the medical device and supply industry is inconsistent with the spirit and intent of the federal anti-kickback statute, creating what the OIG has characterized as a "strong potential for improper inducement between and among physician investors, the entities, device vendors, and device purchasers.  The OIG has stated that these ventures should be closely scrutinized under the fraud and abuse laws.

PODS are beginning to appear in hospital supply chains as middle man entities, typically organized as a product distributor or a group purchasing organization, that gives physician investors an opportunity to receive profits from the sale of certain medical products or supplies to hospitals in which the physician investors provide professional services.  After reviewing various recent publications and legal opinions on this subject, Martin Memorial has concluded that it shall be its policy to refrain from entering into business relationship with supply chains that involved physician owned intermediaries. A snapshot of five bullet points follow;

1. Martin Memorial prohibits purchasing items or services for use in patient care including but not limited to pharmaceuticals, implants, instruments and other medical devices from any supply chain that involves a physician owned intermediary with which any affiliated physician or immediate family member has a financial relationship or which otherwise involves physician ownership in excess of 5%.  Exceptions to this rule may only be approved only by the Martin Memorial Audit Committee, in consultation with the CEO, the Chief Legal Officer, and Chief Compliance Officer.

2. No Martin Memorial entity will enter into any agreement for the purchase of medical devices, supplies, pharmaceuticals, or any other item or service if it determines that the transaction is intended to influence the referral pattern from a physician who has, directly or indirectly, a financial interest in the utilization of the item purchased.

3.  Where relationships with physician owned intermediaries is necessary, the relationship must be consistent with fair market value and satisfy all other applicable legal standards.

4.  Vendors of all medical devices and supplies shall be contractually required to disclose to Martin Memorial all financial relationships, whether directly or indirectly, involving physicians who are either employed by Martin Memorial or who serve on the medical staff of Martin Memorial.  Such disclosure shall include non-monetary benefits if the value exceeds $350 annually.  In, addition, contracts with vendors shall contain an ongoing obligation to disclose such future financial relationships,  and shall contain provisions for the prompt termination of the business relationship in the event of a failure to disclose or the disclosure of a prohibited financial relationship. The provisions of this section shall also apply to financial relationships with such physicians' immediate family members.  For the purpose of this policy, the term "immediate family member" shall be defined in the same manner as it is defined in federal regulations related to the anti-kickback statute.

5.  This policy shall be broadly construed such that whenever possible business relationships are avoided where supply chains for medical devices and supplies involve a potential conflict of interest of any kind. If Martin Memorial concludes that any vendor has engaged in an effort to circumvent the spirit and intent  of this policy, Martin Memorial may in its sole and absolute discretion, elect to exclude such vendor from doing business with Martin Memorial or take such other corrective action as it deems appropriate under the circumstances.