On March 26, 2013, the Office of Inspector General of the Department of Health and Human Services issued a special fraud alert about physician-owned distributorships. Physician-owned distributorships (PODs) are entities owned by physicians that sell implantable medical devices that are used by the physician owners. These entities have sprung up as hospitals and physicians seek ways to lower device costs, and physicians seek avenues to address falling compensation.
The legal framework surrounding PODs has always been somewhat murky. In April 2008, CMS specifically solicited comment about PODs. Since then, several prominent law firms have indicated that they believe PODs are defensible, while others have offered unrelenting criticism. The fraud alert suggests that both sides may have a point. The fraud alert is clearly designed to throw cold water on the use of PODs, although the alert does not claim that PODs are always illegal. Instead, it characterizes them as “inherently suspect” under the Medicare Anti-kickback Statute.