United States: Senate Finance Report Puts Another Nail In The POD Coffin

On May 10, 2016, the Senate Finance Committee Majority Staff released a long-awaited report entitled "Physician Owned Distributorships: An Update on Key Issues and Areas of Congressional Concern" (Report). The Report follows the hearing that the Committee held on Physician Owned Distributors of implantable medical devices ("PODs") on November 17, 2015. Although the Committee has been critical of PODs in the past, this Report relies on new data demonstrating that PODs lead to overutilization and increased costs, contains the strongest language yet against PODs, and puts forth specific recommendations for actions by regulators and law enforcement that, if adopted, would go a long way towards putting an end to the POD business model.

Among the Report's important findings and recommendations:

  • Conflict of Interest: "PODs present an inherent conflict of interest that can put the physician's medical judgment at odds with the patient's best interests."
  • Harm to Patients: "PODs compromise patient safety as patients receive high-risk treatment beyond what is medically warranted."
  • Overutilization: "POD doctors see more patients, perform more surgeries, and perform more complex surgeries . . . [which] come at a cost, not only by increasing costs for the entire health care system, but also by harming patients who receive unnecessary treatment."
  • Illegality: "The business structure and payments associated with certain PODs have been found to be illegal," and physician threats to move their procedures unless hospitals purchase from their POD "would likely violate fraud and abuse laws."
  • Risks to Hospitals: "[T]he fact that a POD has taken some steps to try to mitigate the risks associated with its business model does not mean that those risks no longer exist. Hospitals face serious risks when they do business with PODs, and the only way to completely eliminate those risks is to not conduct business with any POD or POD-like entity. . . ."
  • Enhanced Hospital Regulation:

    • Government Accountability Office ("GAO") should evaluate the costs/benefits of requiring hospitals that purchase from PODs to perform enhanced utilization review, and
    • CMS should consider withholding reimbursement from hospitals that have not adopted POD-specific policies and do not document that they consider the Sunshine Act database in making procurement decisions involving medical devices.

The Report begins by stating the Committee staff's concern that physician ownership of and self-referral to PODs result in:

  • anti-kickback statute (AKS) and Stark law violations
  • physician conflict of interest
  • evidence of overutilization and higher health care costs
  • danger to patients 
  • continued medical industry confusion over legality
  • lack of transparency of physician ownership, including failure of PODs to meet their legal obligations to report under the Sunshine Act

After summarizing key federal action on PODs – taken by Congress (2011 report, 2015 hearing), Office of Inspector General ("OIG") and CMS (2013 OIG Special Fraud Alert ("SFA") and report on prevalence of use, CMS regulation implementing the Sunshine Act), and the Department of Justice (two criminal and two False Claims Act lawsuits) over the last several years – the Report presents its analysis of several new pieces of evidence.

  • Overutilization. Relying on a comprehensive data set compiled by CBS News and many other sources, Committee staff reached the "troubling" conclusion that, compared to non-POD surgeons, POD surgeons performed more procedures, including complex procedures, resulting in increased health care costs and harm to patients who receive unnecessary treatment. Specifically, the Report concluded that, compared to non-POD surgeons, POD surgeons:

    • saw 24% more patients
    • performed fusion surgery on nearly twice as many patients
    • performed surgery at a rate 44% higher
    • performed nearly twice as many fusion surgeries
  • Other marketplace changes since the SFA. The Report also concluded that despite legislative, regulatory and enforcement actions, PODs had continued to proliferate, were having a distorting effect on the cost of health care services, and perhaps because of the growth in hospital procurement policies prohibiting purchasing from PODs, were changing their payment models in an apparent effort to obscure physician involvement.

    • Number of states where PODs operate up from 20 to 43
    • Distortion of prices for related health care services (e.g., testimony that POD profits allow doctors to take unreasonably low managed care rates for physician services)
    • PODs acting to obscure ownership by hiring physicians as employees
    • Increasing numbers of larger hospitals adopting no-POD policies, with resulting migration of PODs to smaller hospitals

The Report concludes with several important findings and recommendations:

  • Finding 1: Lack of Transparency. PODs operate in an opaque environment and have taken steps to conceal their financial relationships.

    • Disclosure to hospitals and patients. Federal law should require physicians to disclose ownership to hospitals and patients, and patient notices should include the implications and risks associated with PODs, specifically including the risks of unnecessary surgery and patient harm.
    • Require hospitals to use Sunshine database in purchasing. CMS should require hospitals and ASCs to review the Open Payments database and document that they take it into account in making device purchasing decisions.
    • Consider hospital policies avoiding any POD suspect characteristics. CMS and OIG should examine whether further guidance is necessary, including specifically amending OIG's hospital compliance guidance to recommend that hospitals adopt policies that would restrict dealing with PODs "to circumstances that avoid any of the suspect characteristics identified" in the SFA.
  • Finding 2: Overutilization. "When hospitals purchase products from PODs, the number of surgeries goes up, suggesting that some of the surgeries performed are medically unnecessary or overly complex."

    • Consider enhanced utilization review requirements for POD hospitals. GAO should examine the costs and benefits of CMS's requiring hospitals that choose to purchase from PODs to perform enhanced utilization review.
  • Finding 3: Illegal Behavior. "The business structure and payments associated with certain PODs have been found to be illegal," and physician threats to move their procedures unless hospitals purchase from their POD "would likely violate fraud and abuse laws."

    • More AKS/Stark enforcement against PODs. Law enforcement should continue to expand efforts to charge and prosecute doctors, PODs and hospitals that violate the law.
  • Finding 4: Hospital Policies. The adoption by large hospitals and hospital systems of specific POD policies is causing migration of PODs to smaller hospitals.

    • Require SFA-consistent POD policies for all hospitals. All hospitals should adopt specific POD policies consistent with the SFA, and rigorously enforce them.
    • Withhold reimbursement for non-compliant hospitals. CMS should establish a date whereby all hospitals must implement POD policies, and non-compliant hospitals should not be reimbursed for surgeries involving POD-supplied devices.
  • Finding 5: PODs' Changing Payment Structures. PODs are acting to "circumvent" the AKS and the Sunshine Act.

    • More Sunshine, Stark and AKS enforcement. CMS should undertake increased enforcement of Sunshine Act requirements, CMS and Congress should consider increased penalties for violation, and OIG and law enforcement should investigate potential violations of the Stark Law and the AKS.
    • Expand list of POD suspect characteristics. OIG should study the impact of the SFA and recent DOJ enforcement and update its prior guidance on PODs as needed, in particular considering "whether the list of suspect POD characteristics in the SFA should be revised or expanded".
    • Plug Sunshine employment reporting loophole. CMS should provide additional Sunshine Act guidance to make clear that the exception to reporting requirements for employment applies only to manufacturers (not to GPOs, which is what most PODs are), including standards that would prevent sham employment from qualifying.

Although the Committee heard testimony at last Fall's hearing from both sides of the POD debate, including from the American Association of Surgeon Distributors, the Report is bereft of any positive statements, findings or recommendations about PODs. In fact, page one of the Report includes a footnote summarizing its attitude towards the concept of "ethical" PODs: "[T]he fact that a POD has taken some steps to try to mitigate the risks associated with its business model does not mean that the PODs are operating in a legal or ethical manner." In sum, the Report contains nothing but bad news for PODs, and ought to be the most serious reminder yet of the legal risks that physicians and hospitals take when they choose to deal with them.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on Mondaq.com.

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
In association with
Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Related Video
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions

Mondaq.com (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of www.mondaq.com

To Use Mondaq.com you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions