U.S. Senate Finance Committee Chairman and Ranking Member Write to HHS-OIG Regarding Physician-Owned Distributorships' Potential Failures Under the Physician Payment Sunshine Act

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In a letter dated March 19, 2019, U.S. Senate Finance Committee Chairman Chuck Grassley of Iowa and Ranking Member Ron Wyden of Oregon wrote to the Department of Health and Human Services (HHS) Office of Inspector General (OIG) regarding potential failures of physician-owned distributorships (PODs) to disclose physician ownership or investment interests under the Physician Payment Sunshine Act. The Physician Payment Sunshine Act requires group purchasing organizations, including PODs (which are arrangements in which a physician purchases ownership interests in an entity that sells implantable medical devices for use in the physician’s surgeries), to report ownership or investment interests to the Centers for Medicare and Medicaid Services (CMS).

According to a Special Fraud Alert issued by HHS OIG in March 2013, POD arrangements are inherently suspect due to the potential for the arrangement to incentivize physicians to perform unnecessary surgeries or to choose a device in which they have a financial interest for the purpose of increaing profits for themselves and the POD. The letter from Senators Grassley and Wyden also follows special advisories sent by CMS in August 2018 to physicians and PODs to remind them of the requirements to report ownership and investment interest payments associated with the POD. The letter asks HHS OIG to respond to the following questions by no later than April 15:In 2015, HHS OIG issued a memorandum titled, “Overlap Between Physician-Owned Hospitals and Physician Owned Distributorships.” In this memorandum, HHS OIG described plans to monitor CMS’s Sunshine Act database and determine how best to assess its impact on transparency within Medicare.

What actions have HHS OIG and CMS taken to enforce the March 2013 HHS OIG special fraud alert?

    • Has HHS OIG conducted a detailed review and audit of the CMS sunshine database to determine whether PODs are reporting physician ownership or investment interest? If so, please provide these to the Committee?
    • Please describe the steps that HHS OIG has taken, or plans to take, to ensure the quality of data reported under the Sunshine Act relating to PODs.
    • Will CMS commit to conducting a detailed review of Sunshine Act filings to determine the extent to which the 2018 special notices had an effect on POD-related disclosures?
    • How can the Sunshine Act be improved to ensure that PODs are reporting physician ownership or investment interest?
  • Has HHS OIG updated its Compliance Program (CPG) for hospitals and other healthcare entities to account for PODs? If so, please provide a copy of that guidance. If not, please explain.
  • When HHS OIG is alerted that a POD failed to report a physician’s ownership or investment interest to CMS’s sunshine database, what steps does HHS OIG take to validate these claims?

The letter concludes with a statement that Senators Grassley and Wyden “look forward to working with the Administration to ensure that the Sunshine Act is up-to-date and that the penalties for non-disclosure are implemented against bad actors who fail to report.”

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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