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Mark Brager
March 26, 2013

AdvaMed Praises OIG Warning on Physician-Owned Entities

Special Fraud Alert Highlights Ethical, Legal Concerns

WASHINGTON, D.C. – Christopher L. White, senior executive vice president, general counsel & secretary, for the Advanced Medical Technology Association (AdvaMed), issued the following statement today after the HHS Office of the Inspector General issued a Special Fraud Alert concerning physician-owned entities:

“AdvaMed applauds the action taken today by the HHS Office of the Inspector General (OIG) in recognizing the inherent conflict-of-interest risks posed by physician-owned distributors (PODs). We agree that – as OIG states in their Special Fraud Alert – PODs ‘produce substantial fraud and abuse risk and pose dangers to patient safety.’”

“PODs are controversial business arrangements in which physician-investors form companies that purchase medical devices from third-party manufacturers and sell them to hospitals, often to the hospitals at which the POD physician-investors practice.

“Transparent, ethical interactions between health care professionals and medical technology companies are critical to innovation and improved patient care. However, the emergence of companies with equity investments by physicians, who are also major revenue generators for the companies, raises important legal and policy issues relating to the potential effect on clinical decisions by physicians. 

“Today’s OIG Alert highlights some of the many problematic characteristics of these arrangements and describes the high degree of fraud and abuse risk they present. AdvaMed first raised concerns regarding PODs and sought OIG clarity in 2006, and we have long shared concerns expressed previously by OIG, as well as the Centers for Medicare and Medicaid Services, that physician-owned entities create conflicts of interest between physicians’ responsibility to act in the best interests of patients and physicians’ equity interests, and can lead to the corruption of medical judgment and overutilization. Today’s OIG Alert makes that clear.

“AdvaMed would also like to recognize Sens. Orrin Hatch (R-Utah), Max Baucus (D-Mont.), Chuck Grassley (R-Iowa), Bob Corker (R-Tenn.) and former Sen. Herb Kohl (D-Wis.) for their interest and leadership on this issue and their calls in 2011 for OIG and CMS to analyze PODs.”

A recent legal analysis by Morgan Lewis describing the risks inherent in PODs can be obtained here.

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AdvaMed member companies produce the medical devices, diagnostic products and health information systems that are transforming health care through earlier disease detection, less invasive procedures and more effective treatments. AdvaMed members range from the largest to the smallest medical technology innovators and companies. For more information, visit