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.

In association with
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
Check to state you have read and
agree to our Terms and Conditions

Terms & Conditions and Privacy Statement

Mondaq.com (the Website) is owned and managed by Mondaq Ltd and as a user you are granted a non-exclusive, revocable license to access the Website under its terms and conditions of use. Your use of the Website constitutes your agreement to the following terms and conditions of use. Mondaq Ltd may terminate your use of the Website if you are in breach of these terms and conditions or if Mondaq Ltd decides to terminate your license of use for whatever reason.

Use of www.mondaq.com

You may use the Website but are required to register as a user if you wish to read the full text of the content and articles available (the Content). 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 & conditions or with the prior written consent of Mondaq Ltd. You may not use electronic or other means to extract details or information about Mondaq.com’s content, users or contributors in order to offer them any services or products which compete directly or indirectly with Mondaq Ltd’s services and products.


Mondaq Ltd and/or its respective suppliers make no representations about the suitability of the information contained in the documents and related graphics published on this server for any purpose. All such documents and related graphics are provided "as is" without warranty of any kind. Mondaq Ltd and/or its respective suppliers hereby disclaim all warranties and conditions with regard to this information, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. In no event shall Mondaq Ltd 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 or performance of information available from this server.

The documents and related graphics published on this server could include technical inaccuracies or typographical errors. Changes are periodically added to the information herein. Mondaq Ltd and/or its respective suppliers may make improvements and/or changes in the product(s) and/or the program(s) described herein at any time.


Mondaq Ltd requires you to register and provide information that personally identifies you, including what sort of information you are interested in, for three primary purposes:

  • To allow you to personalize the Mondaq websites you are visiting.
  • To enable features such as password reminder, newsletter alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our information providers who provide information free for your use.

Mondaq (and its affiliate sites) do not sell or provide your details to third parties other than information providers. The reason we provide our information providers with this information is so that they can measure the response their articles are receiving and provide you with information about their products and services.

If you do not want us to provide your name and email address you may opt out by clicking here .

If you do not wish to receive any future announcements of products and services offered by Mondaq by clicking here .

Information Collection and Use

We require site users to register with Mondaq (and its affiliate sites) to view the free information on the site. We also collect information from our users at several different points on the websites: this is so that we can customise the sites according to individual usage, provide 'session-aware' functionality, and ensure that content is acquired and developed appropriately. This gives us an overall picture of our user profiles, which in turn shows to our Editorial Contributors the type of person they are reaching by posting articles on Mondaq (and its affiliate sites) – meaning more free content for registered users.

We are only able to provide the material on the Mondaq (and its affiliate sites) site free to site visitors because we can pass on information about the pages that users are viewing and the personal information users provide to us (e.g. email addresses) to reputable contributing firms such as law firms who author those pages. We do not sell or rent information to anyone else other than the authors of those pages, who may change from time to time. Should you wish us not to disclose your details to any of these parties, please tick the box above or tick the box marked "Opt out of Registration Information Disclosure" on the Your Profile page. We and our author organisations may only contact you via email or other means if you allow us to do so. Users can opt out of contact when they register on the site, or send an email to unsubscribe@mondaq.com with “no disclosure” in the subject heading

Mondaq News Alerts

In order to receive Mondaq News Alerts, users have to complete a separate registration form. This is a personalised service where users choose regions and topics of interest and we send it only to those users who have requested it. Users can stop receiving these Alerts by going to the Mondaq News Alerts page and deselecting all interest areas. In the same way users can amend their personal preferences to add or remove subject areas.


A cookie is a small text file written to a user’s hard drive that contains an identifying user number. The cookies do not contain any personal information about users. We use the cookie so users do not have to log in every time they use the service and the cookie will automatically expire if you do not visit the Mondaq website (or its affiliate sites) for 12 months. We also use the cookie to personalise a user's experience of the site (for example to show information specific to a user's region). As the Mondaq sites are fully personalised and cookies are essential to its core technology the site will function unpredictably with browsers that do not support cookies - or where cookies are disabled (in these circumstances we advise you to attempt to locate the information you require elsewhere on the web). However if you are concerned about the presence of a Mondaq cookie on your machine you can also choose to expire the cookie immediately (remove it) by selecting the 'Log Off' menu option as the last thing you do when you use the site.

Some of our business partners may use cookies on our site (for example, advertisers). However, we have no access to or control over these cookies and we are not aware of any at present that do so.

Log Files

We use IP addresses to analyse trends, administer the site, track movement, and gather broad demographic information for aggregate use. IP addresses are not linked to personally identifiable information.


This web site contains links to other sites. Please be aware that Mondaq (or its affiliate sites) are not responsible for the privacy practices of such other sites. We encourage our users to be aware when they leave our site and to read the privacy statements of these third party sites. This privacy statement applies solely to information collected by this Web site.

Surveys & Contests

From time-to-time our site requests information from users via surveys or contests. Participation in these surveys or contests is completely voluntary and the user therefore has a choice whether or not to disclose any information requested. Information requested may include contact information (such as name and delivery address), and demographic information (such as postcode, age level). Contact information will be used to notify the winners and award prizes. Survey information will be used for purposes of monitoring or improving the functionality of the site.


If a user elects to use our referral service for informing a friend about our site, we ask them for the friend’s name and email address. Mondaq stores this information and may contact the friend to invite them to register with Mondaq, but they will not be contacted more than once. The friend may contact Mondaq to request the removal of this information from our database.


This website takes every reasonable precaution to protect our users’ information. When users submit sensitive information via the website, your information is protected using firewalls and other security technology. If you have any questions about the security at our website, you can send an email to webmaster@mondaq.com.

Correcting/Updating Personal Information

If a user’s personally identifiable information changes (such as postcode), or if a user no longer desires our service, we will endeavour to provide a way to correct, update or remove that user’s personal data provided to us. This can usually be done at the “Your Profile” page or by sending an email to EditorialAdvisor@mondaq.com.

Notification of Changes

If we decide to change our Terms & Conditions or Privacy Policy, we will post those changes on our site so our users are always aware of what information we collect, how we use it, and under what circumstances, if any, we disclose it. If at any point we decide to use personally identifiable information in a manner different from that stated at the time it was collected, we will notify users by way of an email. Users will have a choice as to whether or not we use their information in this different manner. We will use information in accordance with the privacy policy under which the information was collected.

How to contact Mondaq

You can contact us with comments or queries at enquiries@mondaq.com.

If for some reason you believe Mondaq Ltd. has not adhered to these principles, please notify us by e-mail at problems@mondaq.com and we will use commercially reasonable efforts to determine and correct the problem promptly.