Significant legal and ethical concerns arise from the inherent conflict of interest that exists when referring physicians secure a revenue stream from the implantable medical devices they order for their own patients through ownership in medical device supply chain companies.

Whether structured as product sellers (distributors or purported manufacturers), group purchasing organizations, independent sales agent distributors, or in some other form, these physician-owned companies (POCs) – sometimes called POIs (physician-owned intermediaries), and most recently PODs (physician-owned distributors, a kind of POC that simply shares commissions with referring physicians) – put at risk the investing physicians, the hospitals where they refer their implant procedures, and the medical device manufacturers who deal with them.

As recognized repeatedly by the HHS Office of Inspector General (OIG)1 and the Centers for Medicare and Medicaid Services (CMS),2 the POC business model of giving referring physicians a profit from the medical devices they order to implant in their patients presents serious concerns of patient and health care program abuse under the federal Anti-kickback and “Stark” laws. The abuse stemming from physician investment in POCs is particularly evident in the implantable medical device space, where physician preference drives implant ordering. In these situations, a physician has a strong and almost irresistible incentive to direct implant ordering towards the entity in which he or she has a financial stake.

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