Administrative Ethics Paper

Greed has once again brought physician owned distributorships, known as POD’s into the spotlight. The Justice Department has filed a lawsuit alleging that three surgeons performed unnecessary spinalsurgeries. A distribution companythey invested inencouraged them to pressure hospitals tobuyits medicalimplants, and the company and one of the surgeons denied the physician investments even as the surgeons received hundreds of thousands of dollars. However, only one of those surgeons was named as a defendant (Lee, 2014). Physician Owned Distributorships.

A False Claims Act lawsuit filed earlier this month, highlight the potential risks for patients and hospitals when hospitals contracts with physician-owned distributorships. These companies sell medical implants to hospitals and physicians are usually investors or owners. Proponents say PODs lower costs by stripping out expenses associated with device sales and also allow physicians who invest in the distributorships to collaborate with manufacturers to foster innovation. These distributorships are most prevalent in California, often associated with the spine implant market (Lee, 2014).

Enforcement actions over the past two years indicate some PODs are charging above average prices, therefore driving up healthcare costs. The assumption is PODs inspiration for physician-investors to perform medically unnecessary procedures, which increase surgical volumes and compensation, leading to avoidable patient harm. Reports also suggest surgeries using devices purchased from PODs did not have lower device costs. The lawsuit delves deeper than concerns regarding the device costs.

“Improper payments to physicianscan alter a physician’s judgment about patients’ true health care needs and drive up health care costs for everyone. The Justice Department is committed to enforcing the laws that prohibit such payments,” said 2 ADMINISTRATIVE ETHICS PAPER Assistant Attorney General Stuart F. Delery for the Justice Department’s Civil Division (The United States Department of Justice, 2014). The lawsuit, filed in U. S. District Court in Los Angeles, alleges that Reliance Medical Systems, a Utah-based holding company that operates 14 PODs; its two owners: one non- physician investor; and Dr.

Aria Sabit, a physician-investor, violated the anti-kickback statute by submitting Medicare claims tainted by illegal payments made to physician investors. (C|C Whistleblower Lawyer Team 2014). The government further alleges that Reliance operated a second distributor, Kronos, insouthern California, which made improper payments to twoother physicians, Drs.

Ali Mesiwala and Gowriharan Thaiyananthan. Allegedly, Reliance’s owners were recorded telling a potential Kronos investor that Reliance was formed as partof a plan to “get around” the federal Anti-Kickback Statute, which prohibits such improper payments, and that Reliance pays its physician-investors enough in the first month or two to “put their kids through college”.

(The United States Department of Justice, 2014). Addressing the Big White Elephant PODs and Hospitals do not see Obviously, hospitals and facilities should establishmore stringent policies around conflict of interest between physicians, device companies or organizations unaware of such relationships. According to Modern Healthcare writer Jaimy Lee (2014), “Steps for addressing conflicts of interest related to physician-owned distributorships include: develop a policy, clarify who receives disclosure, audit the medical necessity of procedures, and involve the board. ”

When you think about Lee’s suggestions: ?assess whether medically inappropriate utilization is occurring. ?HOSPITALS SHOULD VIEW INAPPROPRIATE FINANCIAL RELATIONSHIPS BETWEEN PODS AND SURGEONS as a governance issue because they pose legal and regulatory risks (Lee, 2014). Is it worth the Risk? These lawsuits illustrate illustrates the government’s emphasis on combating health care fraud and marks another achievement for the Health Care Fraud Prevention and Enforcement Action Team (HEAT) initiative, which was announced in May 2009 by the Attorney General and the Secretary of Health and Human Services.

The partnership between the two departments has focused efforts to reduce and prevent Medicare and Medicaid financial fraud through enhanced cooperation. One of the most powerful tools in this effort is the False Claims Act. Since January 2009, the Justice Department has recovered a total of more than $22. 4 billion through False Claims Act cases, with more than $14. 2 billion of that amount recovered in cases involving fraud against federal health care programs (The United States Department of Justice, 2014). However, not all hospitals are disengaging themselves from their relationships with PODs.

The physicians’ preference regarding particular devices or implant influences the purchasing decisions. Alliance Surgical Distributors, based in Redlands, California defends the POD model and has no plans to unravel its business relationships. The company formed in 2008 by a group of surgeons who had been successful with one POD, it now operated 13 PODs in eight states. Its surgeon-owners presented an analysis of the costs of its implants at the American Academy of Orthopaedic Surgeons; annual meeting in 2009, reporting that hospitals that purchased implants from the POD saved 34% on the costs of the devices.

Conclusion 4 ADMINISTRATIVE ETHICS PAPER If the government is successful in its lawsuit, experts say there will be more investigations of PODs, physicians and possibly hospitals where those physicianshave staffprivileges. However, the recent attention of the lawsuits has not stopped PODs from continuing to operate. In multiple earnings calls during the spring earnings season, more than one device executive said traditional manufacturers stillhad not taken back market share held by PODs despite the regulatory scrutiny (Lee, 2014).

“Not all pods are formed equally,” says Dr. John Steinmann, CEO atAlliance Surgical Distributors. “If you enter for personal or financial gain that is when you see problems develop. ” One would think that as intelligent as our physicians and surgeons are, they would not want to jeopardize all of the time, and money they invested into obtaining their education, starting their practices, and building their reputations only to make unethical decisions based upon greed.

References The C|C Whistleblower Lawyer Team. (2014, September 12). DOJ “Catch of the Week” – Reliance Medical Systems. Retrieved from http://www. whistleblower-insider. com/doj- catch-week-reliance-medical-systems/#. VCoD-BbjFjs 5 ADMINISTRATIVE ETHICS PAPER Lee, J. (2014). Cracking down on PODS. Modern Healthcare, 44(38), 22-25.

Retrieved from http://www. modernhealthcare. com/article/20140920/MAGAZINE/309209981 The United State Department of Justice. (2014, September 8). United States Pursues Claims Against Neurosurgeon, Spinal Implant Company, Physician-Owned Distributorships and Their Non-Physician Owners for Alleged Kickbacks and Medically Unnecessary Surgeries | OPA | Department of Justice. Retrieved from http://www. justice. gov/opa/pr/united-states- pursues-claims-against-neurosurgeon-spinal-implant-company-physician-owned 6.

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