Doctor Owned Device Firms

It’s not easy these days for those who practice medicine. Physicians are standing on shifting sand. It’s a tough and demanding profession. They have to be super smart and go through a grueling educational process that too often leaves them staggering under a mountain of debt. The traditional Fee For Service model that dominates American medicine pushes doctors to see more and more patients and tack on as many services as possible. It’s not a giant leap from there for doctors to have a financial interest in a medical entity or device. Makes sense, we invest in what we know. And there is nothing wrong with that.

But therein lies an ethical and legal quagmire. Let’s say a surgeon specializes in implantable pacemakers and defibrillators. It wouldn’t be unusual to favor and use a particular manufacturer’s models exclusively; nothing wrong with that. The red flags go up when a cozy relationship with the manufacturer evolves into a deal netting the doctor a profit on each device sold. The potential for doctors to call the shots on medical supply purchases is defensible when their motivation is to maintain high quality goods and services. It is indefensible when they have a financial interest.

While blatantly ethically challenged behavior of this nature would seem rare in a profession like medicine, apparently it is common enough to trigger last month’s (2013.03.26) “Special Fraud Alert: Physician-Owned Entities,” from The Office of the Inspector General of the Department of Health and Human Services. Their concern on this issue dates to the late 1980s when they issued their first fraud alert under a statute covering kickbacks in the medical field. While the current alert covers implantable devices, the kickback statute looks at any situation where medical personnel have an interest in a device or facility resulting in usage or referrals that puts money in their pocket.

In addition to the smarmy side of these issues there is an obvious concern that healthcare costs will be driven up by a proliferation of physician owned facilities. Costs driven by an excess number of such facilities where there is little market supply and demand restraint. And when the doctors own the imaging facility, the testing laboratory, the dialysis facility, or any other medical service that they can feed patients into, there is a potential for abuse. It shouldn’t have to be a federal case, but those who will not live within their own ethical boundaries can expect a visit from the law.