New OIG Special Fraud Alert Declares PODs To Be “Inherently Suspect”

On March 26, 2013, the Department of Health and Human Services Office of Inspector General (OIG) issued a Special Fraud Alert advising that the OIG considers physician-owned distributorships (“PODs”) as “inherently suspect” under the federal Anti-Kickback Statute. In the strongly worded guidance, the OIG defines PODs as physician-owned entities that sell or arrange for the sale of implantable medical devices ordered by the physician-owners for use in procedures the physician-owners perform on their patients at hospitals or ambulatory surgery centers (ASCs). The OIG says its comments also apply to any other type of physician-owned entity. While the OIG does not declare all PODs unlawful, acknowledging that whether a POD violates the Anti-Kickback Statute depends on the intent of the parties, it does list suspect characteristics that it identifies with PODs. These suspect characteristics include distributions not being in proportion to ownership interest and physician-owners conditioning referrals to hospitals and ASCs on the purchase and use of devices from the POD. The OIG also warns hospitals and ASCs that enter into arrangements with PODs, that they may be at risk under the Anti-Kickback statute if one purpose of the arrangements is an attempt to maintain or secure referrals from the POD’s physician-owners. Physician-owners of existing PODs, as well as hospitals and ASCs that have arrangements with PODs, are well-advised to review those arrangements given the negative tone of this latest guidance from the OIG.