May 10,2016

ICYMI, Doctor-Device Deals Need Scrutiny, Report Says

Senate Finance panel says physicians need to inform patients and hospitals of device deals
By Stephanie Armour
May 9, 2016

Spinal surgeons are more likely to perform surgery if they profit from the medical devices used in the treatment, according to a congressional study that recommends more safeguards to police such financial incentives.

The report by Senate Finance Committee Republicans analyzes the trend in which doctors have ownership interests in commercial entities that act as intermediaries between medical-device makers and hospitals. The surgeons generally get a commission on each sale, which may lead them to perform excessive or unnecessary operations in order to steer business to themselves.

The doctor-owned distributorships are most common in spinal surgery and were operating in at least 43 states. The report says they may also be operating in other fields.

Physician-owned distributors “present an inherent conflict of interest that can put the physician’s medical judgment at odds with the patient’s best interests,” the report said. Surgeons involved in the distributorships performed spinal-fusion surgery on nearly twice as many patients—91% more—as surgeons who weren’t in such arrangements, according to the analysis.

The committee’s report outlines a number of recommendations. It says federal law should require doctors to disclose any ownership they or family members have in private device companies to hospitals where they practice, as well as to patients.

The authors of the report also call on federal agencies to boost enforcement actions, and they say the Centers for Medicare and Medicaid Services and the Health and Human Services Office of Inspector General should examine whether current guidance about doctor-owned distributorships needs to be tightened.

“It is my hope that, with this report, we can continue to work towards expanding transparency and identifying how to better protect and inform patients about what could possibly be harmful [physician-owned distributorship] arrangements,” said Senate Finance Committee Chairman Orrin Hatch (R., Utah).

Proponents of the distributorships have said they are legal and can be a benefit when properly structured. They can give doctors greater control over selecting which devices are used in surgery and can lead to cost savings because the distributorship can negotiate better prices for hospitals, which otherwise get devices directly from the manufacturer.

The inspector general of the Health and Human Services Department, which last year also issued a report on the topic, in 2013 issued a special fraud alert warning that the distributorships are “inherently suspect.” The Department of Justice has pursued claims in recent years against the entities for alleged kickbacks and unwarranted surgeries.

The Senate Finance panel’s report is the culmination of several years of work on the issue. The panel held a hearing last fall on the organizations and five years ago the panel examined the issue, concluding the trend was on the upswing.

In the meantime, some hospitals have been implementing policies to restrict their relationships with the distributorships.

The Senate Finance report says financial transactions involving the distributorships may violate an anti-kickback law. The report also said that unnecessary surgeries lead to overuse of spinal-implant products, which results in higher costs for Medicare.

There’s also little evidence the physician-owned distributorships are complying with financial-disclosure requirements imposed by CMS and some hospitals, the report said. That makes it more difficult for hospitals to identify which of their doctors are in such arrangements.

“Our concerns about medically unnecessary services are especially acute in the case of seniors who, due to their age, are less physically capable of withstanding the rigors of complex, invasive spine surgery,” according to the report.

Committee staff identified about 500 spinal-fusion surgeons believed to have financial relationships with a physician-owned distributorship and compared the number of surgeries they did against the number done by doctors not affiliated with a distributorship.

As a percentage of patients seen, surgeons associated with distributorships, on average, saw 677 patients from 2011-12 and performed fusion surgery on 9.1% of them. That’s higher than the 6.3% of the 547 patients that had fusion surgery performed by the average surgeon not in a distributorship.