Warnken, LLC Attorneys at Law, Attorneys & Lawyers, Pikesville, MD

POD’s and Misdiagnosis

A new concept has come across our desk, and it warrants discussion. Physician Owned Distributorships.

What are PODs?

Profit maximization in the healthcare industry is becoming more and more commonplace, and nothing exemplifies this more than the recent influx of physician owned medical device distributors (PODs). Since doctors can generate referrals that benefit the company (that they own a share in), a POD is often formed by a group of physicians to distribute devices to hospitals or surgical centers where the physician-investors perform procedures with those same devices. In doing so, PODs enable doctors to have greater control over what medical devices are used during a procedure and reap a profit when they purchase those devices.

What are the Issues?

  • PODs can create an ethical conflict of interest by incentivizing doctors to order devices that will benefit them financially, rather than order another device that may be the best product for their patients.
  • PODs can incentivize overutilization because the more procedures that a physician performs, the more commissions that physician can earn from the sale of the product. This increases the likelihood of unnecessary, or unnecessarily device-intensive, procedures.
  • PODs may increase the cost or lower the quality of available devices. If the physicians are less interested in a lower cost option or if they put their financial benefit above the quality of the device, there can be mixed motivations.
  • PODs may violate the federal Anti-Kickback Statute (“AKS”) or the Stark law prohibition on compensation arrangements.
    • PODs often benefit from the “in-office ancillary services exception” of the Stark law. The exemption states that physicians can make referrals for Medicare-covered designated health services within their context of their own practices (in their office area). This means that physicians who are part of a POD can refer their patients to other physicians in their practice on site who use the devices in which they have invested. This is hugely profitable for the POD and may violate the AKS if off site.

Higher Risk of Misdiagnosis

When physicians refer patients to their own devices in their own offices, the ordering physicians may also interpret the results of the procedures, even though they may not be trained in that arena. For example, an orthopedic surgeon may interpret an MRI scan performed in his/her office even though they are not credentialed to do so at the hospital in which they have privileges. While the orthopedic surgeon may be trained to perform back surgery, he may not be properly trained to read MRIs of related areas of the body or of areas of the body (kidneys, liver, ovaries, uterus) that are included in the field of view of the back MRI (which may be causing the patient’s pain). Radiologists are the specialists skilled to read such scans (of all parts of the body) as part of their accredited training. When a self-referring clinician not trained in whole body interpretation reads a study with a biased view of the potential source of the back pain it could lead to a missed diagnosis (such as when the cause of the pain is actually a kidney stone).

We know that missed diagnosis is one of the most common medical errors, and, unfortunately, POD’s have the possibility of exacerbating the problem.

David Yousem, Chief of Neuroradiology at Johns Hopkins Hospital, contributed to this piece.