OIG Finds POD-Supplied Spinal Devices Boost Cost of Surgery

Nearly one in five devices used in spinal fusion surgery in 2011 were supplied by physician-owned distributorships, also called PODs, and while these products resulted in a lower number of devices used per procedure, they did not contribute to lower surgery costs overall, according to a report released by the U.S. Department of Health and Human Services’ Office of
Inspector General (OIG).

“Our findings raise questions about [physician-owned distributorships] PODs’ claim that their devices cost less than those of other suppliers. Surgeons performed more spinal surgeries at hospitals that purchased from PODs, and those hospitals experienced increased rates of growth in the number of spinal surgeries performed in comparison to the rate for hospitals that did not purchase from PODs,” Daniel R. Levinson, Inspector General of the Department of Health and Human Services (HHS), wrote in the executive summary of the report. “Taken together, these factors may increase the cost of spinal surgery to Medicare over time.”

Investigators conducting the HSS report sampled 1,000 Medicare claims bills in fiscal 2011 and asked each hospital associated with the claims to fill out a questionnaire asking for details about the spine devices used during surgery. Roughly one-third of the hospitals that responded said they purchased spine devices from PODs, and hospitals that did not use POD devices had lower surgery costs than those that did use POD devices.

The Advanced Medical Technology Association (AdvaMed) called the HHS data compelling and said the report reinforces findings from the SpecialFraud Alert OIG issued in March that found PODs produce “substantial fraud and abuse risk and pose dangers to patient safety.”

“AdvaMed believes that transparent, ethical interactions between health care professionals and medical technology companies are critical to innovation and improved patient care,” Christopher L. White, AdvaMed senior executive vice president and general counsel, said in a statement. “We have long been concerned that companies—such as PODs—with equity investments by physicians who are also major revenue generators for the companies, raise important legal and policy issues relating to the potential effect on clinical decisions by physicians.”

“My deep-seated skepticism that physician-owned distributors operate in the best interest of patients and save taxpayers money has been confirmed by this non-partisan report,” U.S. Sen. Orrin Hatch (R-Utah), one of three legislators who demanded an investigation into PODs two years ago, said when the report was released. “Seniors on Medicare deserve a surgeon who makes these life-changing healthcare decisions based on what is best for the patient, not what is best for the surgeon’s bottom line. The HHS Inspector General’s finding that hospitals conduct a greater number of high risk spinal surgeries when they purchase products from PODs shows why vigorous oversight is necessary to protect the health and safety of patients.”