Wednesday's Editorial

TSB's last few posts have exhibited the dichotomy that continues to exists within the industry regarding the establishment  of Physician Owned Distributorships.  The challenge that the Office of the Inspector General is faced with is clearly defining the language of the Federal Anti-Kickback Law and Regulatory Safe Harbors pertaining to POD's. There are too many unanswered questions when one reads the 2011 eight page U.S. Senate Oversight Committee report.  If one analyzes the language in the One Purpose Rule, it explicitly states that, "a physician's decision as to use of one product over another cannot in any way be based on the physician receiving payment for using a particular product. Therefore, if the POD structure did lower healthcare costs, such an arrangement should not trump or justify violation of the Anti-Kickback Statute."

The Senate Oversight Committee must have a sense of urgency as this drama continues to unfold. On the face of it, POD's are entirely inconsistent with the fundamental tenets of healthcare compliance.  When words like unethical and illegal become commonplace in our everyday practice, we as a society have stooped to the lowest level.  When surgeons themselves have questioned their peers motives based on statistical facts, does one wonder why there has been an increase in POD's across the nation?  The lure of financial incentives to perform unwarranted surgeries and the lack of regulatory oversight has aided in this behavior.  

Let's be honest.  Little or no business is gained by any POD from physicians that have no affiliation with a POD.  What would be the incentive?  Many of our readers know the many "shell companies" that have been developed to deflect attention from POD's. If those participating in POD's were so confident that this is a legal model, why aren't there more Dr. Steinmann's willing to openly discuss their model?  How many POD's are willing to be transparent?  And if one believes that this model is truly driving down the cost of delivering healthcare by eliminating the middleman only to  replace them in the food chain, why not contribute to the necessary oversight and regulations that are desperately needed?  Rather than debate what is ethical or illegal here are TSB's recommendations;

• Physician Investors in a POD must recuse themselves from any Product Evaluation Committee due to a potential conflict of interest.
• Physician Investors in a POD may only compete vis-a-vis a"closed bid" process to eliminate the potential advantage garnered from inside information.  If its all about driving down the cost, it shouldn't really matter whose product one uses considering the state of the art.
• The OIG should call for complete transparency/disclosure in equity ownership identifying all investors and officers involved with a POD.
• The OIG should have the right to audit the POD's surgical output on a year to year basis.
• Comprehensive guidelines to Medicare and Medicaid patients to minimize the potential of violating the Federal Anti-Kick Back Laws. 

So in closing, TSB must pose the following questions, what are the moral limits of the medical device marketplace?  Are coercion or corruption acceptable?  Are market exchanges voluntary when someone can exhibit undue influence based on their position?  The POD business model has a degrading effect on the market valuation of goods and services.  Does the POD create a fair bargaining condition?  Are POD's really just looking to fix background market conditions within which market exchanges take place?  These are the questions that must be answered by the Government.  TSB wants to know what the solutions really are, because in hindsight if you are depending upon the Federal Government to step in and regulate there'll be a cold day in hell before that ever happens.