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OIG issues alert on physician-owned distributorships

April 4, 2013

The Department of Health and Human Services Office of Inspector General recently issued a special fraud alert focused on specific practices of physician-owned distributorships that the agency believes produce substantial fraud and abuse risk and pose dangers to patient safety. The alert reiterates OIG’s position that the opportunity for a referring physician to earn a profit, including through an investment in an entity for which he or she generates business, could constitute illegal remuneration under the anti-kickback statute. According to the alert, because the anti-kickback statute ascribes criminal liability to parties on both sides of an impermissible "kickback" transaction, hospitals that enter into arrangements with PODs also may be at risk under the statute. In evaluating these arrangements, OIG says it will consider whether one purpose underlying a hospital’s decision to purchase devices from a POD is to maintain or secure referrals from the POD’s physician-owners.