According to a congressional report, medical device distributorships owned by physicians present a conflict of interest that can threaten patient safety.

The 25-page report from Republicans on the Senate Finance Committee claims physician-owned distributorships (PODs) create financial incentives for using specific devices, which can lead surgeons to perform excessive operations to boost commissions.

Examining spinal surgery, where PODs are most prevalent, the committee’s report found that POD surgeons perform 94 percent more spinal fusion surgeries than non-POD colleagues.

“Spinal implants are generally ‘physician preference,’ meaning hospitals typically purchase the devices recommended by their surgeons,” the report said. “Spinal surgeons therefore have significant influence over both the frequency of spinal fusion surgeries and the devices used in those surgeries.”

In addition to affecting patient safety and quality of care, PODs can also lead to higher federal healthcare costs. In 2011, one in five spinal fusion surgeries were billed to Medicare.

“[B]y recommending surgeries that may not be necessary, such arrangements can also inflate federal healthcare costs at the expense of taxpayers,” said Senate Finance Committee Chairman Orrin Hatch, R-Utah. 

A 2015 report from the Department of Health & Human Services’ (HHS) Office of Inspector General (OIG) expressed similar concerns over PODs, noting physician relationships with distributorships can be complex and difficult to decipher.

“Transparency of ownership is important for [HHS] to ensure that providers do not violate the referral and billing prohibitions of the Stark Law (also known as the Physician Self-Referral Law) and that they comply with OIG exclusions and the Anti-Kickback Statute,” the report said.

Supporters of PODs claim the arrangements are entirely legal and allow doctors greater control over patient care.

“The American Association of Surgeon Distributors has established strict standards for Physician Owned Distribution which serve to ensure proper intent and cost savings, while also ensuring patient safety by appropriately managing conflict of interest,” said Paul Burton, DO, in a 2015 release. “When this model is operated in a legal, ethical and proper manner, patients, hospitals and the community all benefit.”