Jun 2011

Senators Criticize OIG for Lack of Guidance on Physician Joint Ventures: Request Study on Physician Owned Distributorships

A bipartisan U.S. Senate committee has asked both the Centers for Medicare & Medicaid Services (CMS) and the Office of Inspector General (OIG) for the U.S. Department of Health and Human Services to study the proliferation of physician owned distributorships (PODs), citing a lack of regulatory guidance on how these arrangements square with existing federal law.

PODs, arrangements in which physicians purchase ownership shares in entities that serve as a distributorship for products used in surgeries, can save hospitals millions of dollars in supply costs, and allow physicians to share in the savings. At the same time, critics of PODs claim they cause an increase in utilization, especially in spinal fusion surgeries. The Senate’s action will focus regulatory and legislative attention on this rapidly evolving development in the healthcare industry.

Senators Cite OIG Confusion

U.S. Senator Orrin Hatch (R-Utah) in June 2011 released a report compiled by the Senate Finance Committee that examined the complicated issues surrounding PODs. The report blamed the proliferation of PODs – which now exist in at least 20 states – on the lack of regulatory guidance. Over 40 PODs have been identified in California, and in particular there seems to be a marked increase in rural areas where PODs are being used very aggressively.

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Michael Silhol