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Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use


This report responds to a congressional request to determine the extent to which physician-owned distributorships (PODs) provide spinal devices to hospitals. PODs' physician-owners can include the surgeons who implant the PODs' devices; these owners have an opportunity to profit from using the devices their PODs sell. Critics of PODs claim that such ownership creates a conflict of interest that may affect physicians' clinical decisionmaking. PODs assert that their devices cost less than devices provided by other spinal device companies.


We selected a sample of 1,000 claims billed to Medicare in fiscal year (FY) 2011 that included spinal fusion surgery. We asked each hospital associated with these claims to complete a questionnaire about its knowledge of physician ownership of spinal device suppliers. We also asked each hospital to complete a worksheet with details about the spinal devices used in each surgery in our sample.


In FY 2011, PODs supplied devices used in nearly one in five spinal fusion surgeries billed to Medicare. Spinal surgeries that used POD devices used fewer devices but did not have lower per surgery device costs than surgeries that did not use POD devices. Among the hospitals in our sample, about a third reported buying spinal devices from PODs. When hospitals in our sample began buying from PODs, their rates of spinal surgery grew faster than the rate for hospitals overall. Finally, in FY 2012, surgeons performed more spinal surgeries at hospitals in our sample that purchased from PODs than at those that did not purchase from PODs.


PODs are a substantial presence in the spinal device market. Our findings raise questions about PODs' claim that their devices cost less than those of other suppliers. Surgeons performed more spinal surgeries at hospitals that purchased from PODs, and those hospitals experienced increased rates of growth in the number of spinal surgeries performed in comparison to the rate for hospitals that did not purchase from PODs. Taken together, these factors may increase the cost of spinal surgery to Medicare over time. Finally, hospitals' policies varied in whether they required physicians to disclose ownership interests in PODs to either the hospitals or their patients. Thus the ability of hospitals and patients to identify potential conflicts of interest among these providers is reduced.