Last week, U.S. Senators warned hospitals that higher rates of back surgery may indicate a kickback if the purchase of spinal devices has increased as a result of physician ownership of device distributors.  Senators Orrin Hatch (R-Utah), Max Baucus (D-Mont.) and Chuck Grassley (R-Iowa) issued the bipartisan statement based on an HHS report that showed a direct correlation between doctors who have a financial relationship in spinal medical device companies, known as Physician Owned Distributorships (PODs), and an increase in spinal fusion surgeries.  According to Senator Hatch,

Seniors on Medicare deserve a surgeon who makes these life-changing health care decisions based on what is best for the patient, not what is best for the surgeon’s bottom line.

The report, which was requested by the three senators, found that hospitals’ overall rate of spinal surgery grew more quickly for the group of hospitals in the sample that purchased from PODs than the rate of those hospitals who did not.  According to Senator Grassley,

As a start, hospitals should take a closer look at whether their physicians are participating in and benefiting from these arrangements and what that means for patients.

Our Insight.  Your Advantage.  It is clear that Senators Grassley, Hatch and Baucus are concerned about POD arrangements and the implications on Medicare reimbursement and its beneficiaries. Based on the issuance of this OIG report, coupled with the previous OIG Fraud Alert and last week’s statement by the senators, we expect that both hospitals that purchase from PODs and physicians who invest in them will see increased law enforcement activity in this area.