Life Science Compliance Update

May 12, 2016

Senate Finance Committee Majority Staff Releases Updated POD Report

Orin hatch

The Senate Finance Committee Majority Staff recently issued a report entitled, “Physician Owned Distributorships: An Update on Key Issues and Areas of Congressional Concern.” This report serves as an update to the Committee’s 2011 Physician Owned Distributorship (POD) report, which focused on concerns Senator Orrin Hatch had about the “spike in the utilization of medical procedures by physicians invested in these entities.”

The 2011 Report

The 2011 report came about based on information provided by a surgeon who was offered the opportunity to become an investor/owner in a POD and who felt that the arrangement appeared questionable. The Senate investigation concluded that “in the absence of stronger enforcement guidance, these entities would continue to grow at a rapid pace,” and resulted in two bipartisan letters being sent by Hatch and other senators, one to the Centers for Medicare and Medicaid Services (CMS) and the other to the United States Department of Health and Human Services (HHS) Inspector General, both calling for an investigation.

The HHS OIG stated that the guidance it had already issued was more than sufficient and that additional guidance was not necessary. CMS indicated in its response that it would address these issues in its final regulatory language. The final regulations issued in February 2013 did include PODs among the entities that are required to report to CMS any ownership interest and investment interests that are held by physicians.

2011 to Present

Since the time of the 2011 report, the Senate Finance Committee and its staff have continued to keep an eye on the growth and development of PODs. In forming this updated report, Committee staff reached out to “healthcare entities, including physicians (both those who participate in a POD and those who do not), insurers, medical device manufacturers, state and federal government agencies, medical ethics boards, hospitals, and patients.” In addition to those stakeholders, Committee staff spoke with representatives of several PODs and POD advocacy groups.

On November 17, 2015, the Finance Committee held a hearing on PODs, for which Chairman Hatch and Ranking Member Wyden issued the following joint statement:

While the vast majority of doctors operate with the highest ethical standards, those with a vested stake in medical device distributorships raise a number of concerning questions about the physician’s motivation in prescribing a procedure, as well as the overall cost to the health care system. When physicians have a financial incentive to recommend and perform a surgery, a potential conflict of interest and occur and jeopardize the health of patients. With this hearing, the Committee will have the opportunity to hear views on all sides of the debate, and we look forward to a constructive conversation on how to ensure major health decisions are made in the best interest of the patient and not the physician’s pocketbook.

That hearing did hear from several different viewpoints, including: Dr. Scott Lederhaus, President of the Association for Medical Ethics; Dr. John Steinmann, of the American Association of Surgical Distributors; Suzie Draper, the Vice President of Business Ethics and Compliance at Intermountain Healthcare; and Kevin Reynolds, the son of a patient who was treated by a POD physician.

Throughout the hearing and in the days that followed, it became clear that PODs are a concern for several members of the Committee, including the Chairman. Therefore, it is likely that, even following the release of this report, the Committee will conduct additional oversight efforts.

The 2016 Report

The 2016 report essentially went through the history of PODs from 2011 through today. The report discussed the Special Fraud Alert (SFA) issued by the HHS OIG, which was issued to “inform the medical community of the dangers posed by PODs,” and many health systems have implemented new policies to avoid those dangers.

The report also discussed an analysis of whether or not POD surgeons perform surgery at a higher frequency than non-POD surgeons. The Committee found that POD surgeons saw 24% more patients than non-POD surgeons, that POD surgeons performed fusion surgery on nearly twice as many patients as non-POD surgeons, and that POD surgeons performed surgery 44% more often than non-POD surgeons. Those findings concerned the Committee, and prompted several recommendations, covered in more detail below.

The Sunshine Act

The report also carved out a section on the Sunshine Act and its impact on POD arrangements. The Committee believes that “there are serious gaps in Sunshine reporting of POD arrangements,” and that those “shortcomings prevent patients and hospitals from having access to information about the financial interests of physicians.” It will be interesting to see if the Committee tries to force further transparency of PODs through the Sunshine Act, via additional inquiries and requests for CMS to release additional rules. 

Committee Recommendations

The Committee is concerned that there is a lack of transparency relating to PODs and issued three recommendations along those lines:

(1) for an update to federal law, requiring physicians to disclose any ownership they or their family members have in non-publicly traded device companies to the hospitals where they practice, and also disclosure to patients;

(2) to require hospitals and ambulatory surgical centers to not only examine Open Payments data, but also document that they have taken that data into account when making device purchasing decisions; and

(3) that CMS and HHS OIG should examine whether current compliance guidance about PODs is sufficient, or if it needs to be supplemented.

The Committee also issued a recommendation to the GAO to examine the costs and benefits of CMS requiring hospitals that choose to purchase from PODs to perform enhanced quality assurance and utilization review activities in connection with surgeries using POD-supplied products, out of a concern that hospitals that purchase from PODs perform medically unnecessary or overly complex surgeries.

The Committee is recommending law enforcement continue (and expand) their efforts to charge and prosecute doctors, PODs, and hospitals, that are violating the law.

The Committee is also making recommendations relating to PODs and their shifting payment structures. The Committee makes three recommendations revolving around that general idea:

(1) that CMS undertake increased enforcement actions to ensure compliance with Sunshine Act reporting requirements;

(2) that HHS OIG study the impact of the Special Fraud Alert (SFA) and recent litigation on PODs and update its 2013 report and SFA as needed; and

(3) that CMS provide additional Sunshine Act guidance or rulemaking to make clear that the exception from reporting requirements for employment applies only to manufacturers, and only to bona fide employment.

April 20, 2016

CMS Update Call on Open Payments

Recently, the Centers for Medicare & Medicaid Services (CMS) held a National Provider Call on Open Payments: Program Overview and Prepare to Review Reported Data. Robin Usi and Erin Skinner took turns educating participants how to identify the parts of the review, dispute, and correction process and how to take appropriate actions in the Open Payments system.

What is Reported?

As a reminder, any direct or indirect payments, or other transfers of value, that are made to covered recipients (i.e., physicians, teaching hospitals, physician owners, investors). Certain ownership or investment interests that are held by physician owners or investors, or their immediate family members are also reported.

Who is Responsible for Reporting?

Applicable manufacturers of covered products and entities under common ownership with applicable manufacturers who also provide assistance and support, as well as applicable Group Purchasing Organizations (GPOs), are required to annually report to CMS.

Who is Reported On?

There are three categories of individuals and entities that are reported on – covered recipient physicians, covered recipient teaching hospitals, and physician owners or investors. Covered recipient physicians cover individuals, such as: doctors of medicine or osteopathy legally authorized to practice medicine or surgery by the state; doctors of dental medicine or dental surgery legally authorized to practice dentistry in the state; doctors of podiatric medicine legally authorized to perform by the state; doctors of optometry legally authorized to perform as a doctor of optometry by the state; and chiropractors licensed by the state and legally authorized to perform by the state. Covered recipient teaching hospitals can change from year to year and each year, Open Payments publishes a list of these teaching hospitals on their website.

Program Year Timelines

For the 2015 program year, data collection ran from January 1, 2015 through December 31, 2015. Payment data was submitted by applicable manufacturers and GPOs from February 1, 2016 through March 31, 2016. Therefore, the review and dispute period for physicians and teaching hospitals is April 1 through May 15, 2016, and the period for applicable manufacturers and GPOs to review and correct the data runs fifteen days after that close, to June 1, 2016. The data is scheduled to be displayed on the website on June 30, 2016.

Registration Process

In order to be able to review and dispute any data reported in the Open Payments system prior to its publication, users must register for the Open Payments system using the two-step registration process. Physicians and teaching hospitals who registered during 2013 or 2014 do not need to register again. Additionally, a physician may nominate one authorized representative to perform system functions on their behalf and teaching hospitals can designate up to ten authorized representatives and authorized officials to act on its behalf in the Open Payments system.

Review, Dispute, and Correction Record Statuses

There are several different status' that can show for each record. A status of "initiated" means the dispute has been initiated by a physician, teaching hospital, or principal investigator. Once the reporting entity acknowledges the dispute, the status will change to "acknowledged." If the reporting entity and physician, teaching hospital, or principal investigator have resolved the dispute in accordance with the Final Rule and no changes were made to the disputed record, the status will change to "Resolved No Change." If the dispute was resolved by the reporting entity with updates made to the record, the status will change to "Resolved." If the physician, teaching hospital, or principal investigator has withdrawn the dispute, the status will reflect that.

Question and Answer Session

At the end of the call, the presenters allotted time for questioners who had previously submitted questions and for those who were on the call and had specific questions.

The first question was whether or not every physician in a particular practice need to register for the Open Payments system. The answer was yes, each physician needs to register since all payments are reported to physicians individually. Once a physician has registered, they can appoint an authorized representative, but each physician needs their own account.

It is also important to note that CMS does not send an email of alleged payments to physicians, making it important for physicians to register for Open Payments so they can see what payments are being assigned to them.

Another question was asked about whether there are any plans for an institutional reviewer role in the future to allow compliance officers to review data for teaching hospital faculty process review and dispute. While CMS cannot speak to any current plans, they took comments under advisement for future improvements to the program.

For any other help or issues, CMS recommends that you contact the CMS Open Payments Help Desk.

April 18, 2016

District of Columbia Makes Changes Transparency Law to Align with Open Payments

Late last week with only a photo attachment, the District of Columbia Department of Health announced to the pharmaceutical industry that the District is changing its gift reporting requirements to meet the requirements with the new Open Payments reporting.

Chapter Eighteen of the District of Columbia Municipal Regulations requires manufacturers and labelers of prescription drugs dispensed in the District who engage in marketing in D.C. to report to the Department of Health their costs for pharmaceutical drug marketing in the District. Each manufacturer or labeler is required to report their annual prescription drug marketing costs in a report filed with the Department of Health on or before July 1 of each year.

This year, the aforementioned changes will be reflected in the Nature of Payment, Form of Payment, and Primary Purpose sections. The categories will have to align with Open Payments categories. Some responses will now be limited to the updated set of values.

While payments made to physicians or teaching hospitals must be reported to the United States Department of Health and Human Services (HHS), companies are not required to report this information to the District of Columbia. However, payments made to recipients other than physicians and teaching hospitals must be reported to the District of Columbia. Reporting requirements for aggregate and advertising expenses remain unchanged.

The D.C. Department of Health recommends that companies who have filed reports in previous years use the Microsoft Excel file published online, as it will reflect changes and updates in the law. Complete instructions for filling out the forms are found in the PDF document, as well as on the fifth tab of worksheet of the Excel document.

The Company Information, Gift Expenses, Advertising Expenses, and Aggregate Cost worksheets should be filled out electronically according to the instructions, and submitted in Excel format to The Company Information worksheet should also be printed and sent to the D.C. Department of Health, along with a $5,000 filing fee check made payable to "D.C. Treasurer."

This change was supposed to take place in 2013 when the Physician Payment Sunshine Act preempted state reporting. The District of Columbia is a little late to this change.



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