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Senators request probe of surgeons

The Wall Street Journal, June 9, 2011

Five U.S. senators asked the Inspector General of the Department of Health and Human Services to open an investigation into physician-owned distributorships, middleman entities that allow surgeons to profit from the medical devices they use on their patients, to determine whether they are legal. The senators' request was accompanied by the release of a Senate Finance Committee report compiled by the office of Utah Sen. Orrin Hatch, the top Republican on the committee, on the proliferation of such entities in spine and orthopedic surgery. Physician-owned distributorships, or PODs, now exist in at least 20 states, with more than 40 operating in California alone, according to the report. By creating "financial incentives for physician investors to use those devices that give them the greatest financial return," they may violate an anti-kickback statute and other federal fraud and abuse laws, the report warns. Distributorships act as links between medical-device makers and hospitals: In exchange for marketing and stocking the devices, they get a cut of each sale. When surgeons own a distributorship, that commission goes into their pockets.