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Special Fraud Alert: Physician-Owned Entities

On March 26, 2013, the Office of the Inspector General for the Dept. of Health and Human Services issued a Special Fraud Alert warning for physician-owned entities (PODs) that they could be violating anti-kickback laws by using medical devices in which they have an investment.  The Fraud Alert actually stated that these entities are “inherently suspect under the [federal] anti-kickback statute.”  PODs put patients at risk because they allow doctors to financially profit from the medical devices they use in their patients.  Similarly, the financial incentives created by PODs can lead to unnecessary and invasive procedures for patients; physicians who have a financial interest in the number of devices sold are more likely to perform procedures that are not medically necessary.

The Fraud Alert is a firm and direct warning to physicians who operate medical device distributorships to think twice before putting patient safety ahead of their own profits.  The Fraud Alert makes it very clear that the opportunity for a referring physician to earn a profit through an investment in a company for which he or she generates business could be considered an illegal payment under the anti-kickback statute.

The Fraud Alert, spurred by a bipartisan report from the Senate Finance Committee in June 2011, affects both patient safety and Medicare/Medicaid fraud.

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