March 28, 2013
On March 26, 2013, the Office of Inspector General (OIG) of the U.S. Department of Health & Human Services issued a Special Fraud Alert on physician-owned entities. The Special Fraud Alert specifically addresses physician-owned distributorships (PODs) that profit from selling implantable medical devices for use on the patients of such physician-owners at hospitals or ambulatory surgical centers (ASCs). OIG previously had issued guidance on this topic on Oct. 6, 2006. In this Special Fraud Alert, OIG stated that it is “particularly concerned” about financial incentives in the implantable medical device context because these types of devices are “physician preference items,” meaning that the physician has the ability to strongly influence the choice of brand and type of device used, rather than having the hospital or ASC make those decisions. OIG specifically notes that disclosure to a patient of the physician’s financial interest in the POD is not sufficient to address fraud and abuse concerns. In fact, OIG in the Special Fraud Alert calls PODs “inherently suspect” under the Anti-Kickback Statute.
The Special Fraud Alert lists a number of suspect characteristics that are warning signs for problematic PODs:
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