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.
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.