By Nina Youngstrom - November 30, 2011

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As it promised key senators on the Senate Finance Committee, the HHS Office of Inspector General will scrutinize certain physician-owned distributors (PODs), according to its 2012 Work Plan. PODs sell medical devices to hospitals, where they are often implanted by the surgeons who own the PODs. But there are concerns that PODs may drive up Medicare costs and encourage unnecessary surgery.

According to the new Work Plan, OIG for the first time will take a close look at PODs that market spinal implants. OIG says it will determine the extent to which PODs provide spinal implants bought by hospitals. “We will also analyze Medicare claims data to determine whether PODs we identify in our review are associated with high use of spinal implants. PODs are business arrangements involving physician ownership of medical device companies and distributorships. PODs are focused primarily in the surgical arena and currently primarily involve orthopedic implants such as spine and total joints. However, PODs appear to be quickly growing into other areas, such as cardiac implants. Congress has expressed concern that PODs could create conflicts of interest and safety concerns for patients.”

OIG’s scrutiny of PODs was triggered by the Senate Finance Committee’s minority staff, led by Sens. Orrin Hatch (R-Utah) and Democratic chairman Max Baucus (D-Mont.). The senators have asked OIG to look more closely at the financial and quality implications of PODs and consider more guidance on them. Among other things, there is concern that hospitals buy devices from PODs to ingratiate themselves to surgeons, who have power over patient referrals. Some hospitals have voluntarily refused to do business with PODs because they are worried they may appear to be violating the federal anti-kickback law. But POD defenders say they reduce costs for medical devices because they offer an alternative to the large device companies.

Are you worried about the increasing scrutiny of PODs?

Is your hospital taking any steps to rein in the use of PODs?