- Associated Press - Sunday, November 23, 2014

SIOUX FALLS, S.D. (AP) - A group of Sioux Falls surgeons has stopped selling surgical implants at a local hospital amid concerns over conflicts of interest and legality.

Great Plains Surgical Distributors is owned by nine Orthopedic Institute surgeons who work at the nearby Sioux Falls Specialty Hospital, the Argus Leader (https://argusne.ws/1ywLI9G ) reported. The hospital management launched an inquiry into the distributor this summer and ordered a cease and desist.

The Sioux Falls surgeons who own Great Plains Surgical Distributors claim such physician-owned distributorships can lower health care costs because it cuts out the middle man. The doctors also say they have been closely following federal laws.

Critics allege the financial rewards for doctors who profit from the devices they use in surgeries gives them an incentive to do more procedures.

Physician-owned distributorships have been subject of increasing federal scrutiny after the Office of Inspector General issued a “special fraud alert” regarding the operations. Federal laws prohibit doctors from receiving kickbacks on products they use.

That’s why some doctors at Sioux Falls Specialty Hospital reported suspicious that a physician-owned distributorship was operating at the facility. They said they were concerned about the quality of implants the owners were using on patients at the hospital.

Dr. Blake Curd, one of the Orthopedic Institute doctors who started Great Plains, said the hospital’s review of the operation included three lawyers, who determined it was in compliance with federal law.

“They said, ‘We think you did everything right,’” Curd said. “But, they said in this environment, you might want to reconsider.”

Dr. Reuben Setliff, a partner at Sioux Falls Specialty Hospital, was among the doctors at the hospital who spoke out against the physician-owned distributorship, or POD.

“The people who did the POD studied the thing for a long time,” Setliff said. “They got every legal opinion known to man. They were very careful in terms of being in compliance with every rule and regulation concerning the formation of a POD. Subsequent investigation has confirmed that they did indeed - quote - do it right.”

Setliff said he agreed with the hospital’s decision to order a cease and desist with Great Plains because “legal is not always prudent.”

“I give them high marks for doing it right,” he said. “But I question whether it should have been done at all. The risk-benefit ratio didn’t sound good to me.”

Great Plains is changing its business model to eliminate doubts about its legality, said Dr. Peter Looby, one of the owners.

“The outside legal review came back,” Looby said. “What we are looking at right now is changing the model. It’s important for the surgeons and the patients that the implants be as high a quality as possible.”

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