Hospitals that use spinal-surgery devices supplied by physician-owned distributors (PODs) were much more likely to perform such surgeries, a report by the Department of Health and Human Services' watchdog finds.
The report by the department's office of inspector general found that nearly 1 in 5 spinal fusion surgeries billed to Medicare used POD devices. The surgeries that used such devices used fewer devices but this did not have lower per-surgery device costs.
According to the study, 94 percent of hospitals that purchased devices from PODs reported that surgeon preference influenced decisions to perform surgeries and two-thirds of hospitals reported that they purchased devices from PODs owned by doctors practicing in their hospitals.
The report, released last week, suggested that doctors and surgeons who own shares in these PODs are prescribing unnecessary surgical remedies for patients in order to bolster their company sales with government money.
The OIG found that in fiscal 2012, hospitals that purchased spinal devices from their doctors' PODs performed 28 percent more spinal surgeries than hospitals that didn't use PODs. In addition, the number of spinal surgeries performed by hospitals that purchased PODs increased by 16 percent from 2004 to 2012, while the overall rate of spinal surgeries grew by only 5 percent.
But IG's office said that, despite the counterintuitive finding that surgeries that purchased from PODs used fewer devices than those that didn't, there was still no statistically significant difference in costs for devices between the two types of surgeries.
The study, which was requested by five members of the Senate Finance Committee including Sens. Orrin G. Hatch, Utah Republican, and Max Baucus, Montana Democrat, is based on a sample of 1,000 claims for spinal surgery, including spinal-fusion procedures, billed to Medicare in fiscal 2011 and 2012. Hospitals associated with these claims were asked to fill out a questionnaire about their knowledge of physician ownership of spinal-device suppliers and details about the spinal devices used in each surgery.
"My deep-seated skepticism that physician-owned distributors operate in the best interest of patients and save taxpayers money has been confirmed by this nonpartisan report. Seniors on Medicare deserve a surgeon who makes these life-changing health care decisions based on what is best for the patient, not what is best for the surgeon's bottom line," Mr. Hatch said.
California orthopedic surgeon Dr. John Steinmann argued in a report from the American Academy of Orthopedic Surgeons that the POD system was an effective model because it encourages volume pricing, controls costs and fosters competition.
Dr. Steinmann, who has ownership interest in a POD, said that where PODs have been introduced, substantial cost savings have resulted.
"If 10 different implants all provide the same outcome, why shouldn't doctors negotiate directly with companies to obtain cost savings?" Dr. Steinmann said.
One of the major concerns is that surgeons will choose their own devices for personal gain.
"We must ensure that physician-owners of these medical device distributorships play within the rules and are not allowed to profit at the expense of patients and taxpayers," Mr. Baucus said.
A representative for Centers for Medicare and Medicaid Services told The Washington Times that CMS would be reviewing the report and will consider whether changes to its policies or regulations are appropriate.
In fiscal 2012, Medicare paid hospitals a total of $3.9 billion for 178,789 spinal surgeries. Medicare reimbursed hospitals an average of $21,613 for each of these surgeries. On average, Medicare reimbursed hospitals $10,289 for the least-complicated spinal surgeries and $34,676 for the most-complicated surgeries.
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