OIG Fraud Alert: Cautioning Physicians With Skin In The Game

On March 26, 2013, OIG issued a Special Fraud Alert regarding physician-owned distributorships (“PODs”) involved in the sale of implantable medical devices.  OIG noted that a joint venture is “inherently suspect” from an Anti-Kickback perspective when it involves physician-owners who are also in the position to purchase these medical devices for use in surgical procedures.  The questionable features of PODs for implantable medical devices included: selecting investors in a position to generate business; requiring investors to surrender their investment when they are no longer in a position to purchase devices from the POD (i.e., no longer practicing in the area); and returns on investment that are disproportionate to the level of risk assumed by the physician investors.  The OIG is concerned that the connection between the physicians’ financial interest and the ability to impact the POD by purchasing devices for use in surgery will result in: “corruption of medical judgment, overutilization, increased costs to the federal health care programs and beneficiaries, and unfair competition.”

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