According to the report, which is based on interviews and the review of thousands of pages of documents, PODs first appeared in 2003 in Northern California and have now expanded to 21 states where there are an estimated 150 PODs. Proliferation of PODs is attributed to the reduction in physician reimbursements, which have sent physicians seeking alternative revenue sources. The POD distributor model is being used "very aggressively" in rural areas, the report says.
The report notes ancillary evidence concerning the increased utilization of spinal fusion surgery has coincided with the expansion of PODs. The report cites an April 2010 study in the Journal of the American Medical Association that found a 15-fold increase in the number of spinal fusion surgeries performed for Medicare patients between 2002 and 2007.
And there is a lot of money is involved. Kim Grant, chief healthcare investigative counsel for the Senate Finance Committee, said that in 2008 spinal fusion surgery was a $15 billion industry with Medicare accounting for $2 to $3 billion of that amount. Grant says that while not all PODs are necessarily bad, in rural areas there were cases where the same surgeons were performing 100% of the surgeries and then pocketing 100% of the revenues from the sale of the medical devices to their patients and hospitals. "Hospitals said they felt like hostages because the surgeons would threaten to leave if the hospital complained about the POD."
The Levinson letter requests that the structure of PODs be reviewed in terms of the federal anti-kickback laws, which are designed to protect patients and federal healthcare programs from the potential influence of financial arrangements. The letter also asks Office of Inspector General to clarify its stance on PODs in terms of "policy statements, guidance or visible enforcement proceedings that demonstrate…the extent of the government's concerns with the ways that PODs differ from physician joint ventures to provide legitimate healthcare services."
The Berwick letter asks CMS to review ACO regulations to make sure there are no inadvertent loopholes that allow "less reputable POD models to fall under the Stark and Anti-Kickback law waiver." It also requests that the ACO regulations "prohibit ACOs from purchasing products or services from entities that are owned by physicians participating in the ACO."
Chris White, general counsel and executive vice president for AdvaMed, a trade organization for medical device manufacturers, issued this statement regarding the committee's actions: "AdvaMed welcomes this inquiry and looks forward to reviewing the final results. We have long expressed concerns that physician owned distributorships raise ethical and legal concerns, specifically issues relating to the anti-kickback statute." He added that "AdvaMed supports the Senators' view that physician owned distributorships should be held to the same Physician Payments Sunshine transparency standards as physician owned manufacturers and physician owned GPOs."