Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use, Report by Daniel Levinson, OIG DHHS — 10 Key Points and Observations

The Office of Inspector General released a report in October regarding the use of physician-owned distributorships. This article briefly provides several key thoughts regarding the findings of the report. The report in whole appears to be fairly even handled. However, it doesn't make an effort to explain why certain findings may have occurred.

Here are 10 key points and observations from the OIG report.

1. Probably the most interesting finding is that PODs supplied the devices in nearly one out of every five spinal fusion surgeries billed to Medicare in the sample year 2011. This may be due to selection bias of the hospital surveyed. Nevertheless, it's a higher number than one may have suspected.

2. Spinal fusion surgeries that used PODs implanted fewer devices — 12.3 compared to 14.2 — but did not have lower device costs.

3. Thirty-four percent of the 589 hospitals surveyed purchased from PODs. Three-hundred-eighty-six hospitals did not purchase from PODs.

4. When hospitals started to work with PODs, their rate of spinal surgery, including spinal decompressions and fusions, grew faster than the rate for hospitals overall. The rate of spinal fusion among hospitals that used PODs increased 21 percent compared to 9 percent at all hospitals over a one-year period. 

5. Hospitals that purchased from PODs performed more spinal surgeries than those that did not. In 2012, hospitals that did not purchase spinal devices from PODs performed 99 spinal surgeries per 1,000 discharges, while hospitals that purchased from PODs performed 131 surgeries per 1,000 discharges.

6. If a hospital is using a POD, we would strongly encourage that hospital to 1) have policies in place to know if buying from a POD or not, 2) be able to show that it is gleaning serious cost savings, and 3) be able to show that it is not a vehicle to steer spine surgeries to the hospital.

7. The OIG reported that the use of PODs grew substantially after 2009.

8. The OIG report categorized PODs based on whether they also manufactured or just bought and resold product. The more the POD is truly more than just a middle man, in the long run, the easier it may be to defend PODs' efforts.

9. A POD should not condition referrals based on the purchase from the POD.

10. The benign nature of the report will be used by POD advocates to defend PODs. However, a few findings in the report will be used by POD's critics and the medical device establishment to try and further attack and legislate PODs. For example, the report shows that hospitals that purchased from PODs did more spine surgeries than those that did not. This may be used by critics to show that there is either overutilization or that the hospitals are buying steerage.

For more information on any of these issues, please email Scott Becker at sbecker@beckershealthcare.com or Heather Linder at hlinder@beckershealthcare.com.