The Department of Health and Human Services’ Office of Inspector General (“OIG”) has issued a special fraud alert in which it takes issue with physician-owned entities that the OIG believes pose a “substantial fraud and abuse risk and pose dangers to patient safety.”
The target of the alert was physician-owned distributorships (“PODs”), which are entities that make money by selling implantable medical devices ordered by their physician owners. OIG has noted in the past the “strong potential for improper inducements” between the POD investors, vendors, and purchasers, which merits close scrutiny under the fraud and abuse laws.
The OIG expressed concerns about what it called “questionable features” of certain PODs, in particular selecting and retaining POD investors, soliciting capital contributions, and distributing profits.
The OIG acknowledged that culpability under the anti-kickback statute depends on the intent of the parties. However, the OIG considers PODs as “inherently suspect” under the statute, and will particularly concerned when PODs exhibit any of a list of certain t characteristics. For example, profit distributions are not made in proportion to ownership interest, or physician-owners pay different prices for their interests, due to the volume or value of devices used by the physicians. Also, physician-owners conditioning their referrals to hospitals or ASCs on their purchase of the POD’s devices through coercion or promises.
Furthermore, OIG stated it doesn’t believe that simply disclosing a physician’s financial interest in a POD is sufficient to address its concerns. This because physicians often market their financial interest as a reason why the patient should patronize the facility.
The OIG special fraud alert can be read here.
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