Will We See Fewer Kickback Settlements With Rise of ACOs, Sunshine Act?

Just over a week ago, the Department of Justice announced that Medtronic had agreed to pay $9.9 million to settle accusations that the company had improperly paid physicians to get them to use more of its pacemakers and defibrillators.

The language of the announcement raises an interesting question. Here's what the press release from the DOJ said:

“Improper financial incentives have the potential to compromise physician medical judgment,” said Assistant Attorney General Stuart F. Delery of the Justice Department’s Civil Division. “This case demonstrates the Department of Justice’s commitment to pursue medical device manufacturers that use improper financial relationships to influence physician decision-making.”

Medtronic didn't admit to any guilt, and it's rare that companies ever do in these sorts of cases. They simply pay up, but guilt or innocence is beside the point. The DOJ doesn't want companies to influence physician decision-making.

I wonder whether this will become moot given that we are on the cusp of a new era where physicians won't have the exclusive power to make device purchasing decisions. Physicians are becoming hospital employees. Theoretically there should be more oversight from hospital administrators regarding what gets purchased.

Hospitals, physician group practices, hospital-physician joint ventures are becoming part of ACOs that are seeking to reduce treatment variation and physicians will be part of the conversation about what best protocols to follow and what effective devices should be used to get the best outcomes for patients while lowering cost. All the while following evidence-based guidelines for treatment.

Then there is the Sunshine Act by which medical device manufacturers are being required to disclose financial ties with physicians.

Could all these dynamics actually reduce the incidence of companies (allegedly) buying physician loyalty to their products? 

"I'm cautiously optimistic that systems focused on cost competitive quality care will negate sweetheart arrangements between pharmaceutical and manufacturing companies," said Jennifer Searfoss, CEO of Searfoss Consulting Group, in an email. "Couple that with the Sunshine Acts disclosures and it's even more likely."

But even she acknowledges while that is her hope, it will largely depend on how widespread clinical integration of medical practices becomes.

Not to mention that now instead of physicians, others can become targets of companies allegedly looking to get an improper and illegal boost in sales.

"Your premise assumes that it's the doctor interests that are only reviewed for anti-kickback [investigations]. Executives involved in the issues can also be influenced," Searfoss said. "So while we can hope, low cost leader deals can also be seen as kickbacks along with arrangements with non-clinical decision makers."

It's a sentiment that was repeated in a conversation with the new CEO of a Minnesota-based medtech industry association.

"The fraud prospect just moves to a different party," said Shaye Mandle of LifeScience Alley in an interview last week. "Now you have the hospital administrator that becomes the new prospect" or an entity that is arranging large amounts of purchase agreements between hospitals and device vendors.  

If that is indeed the case, let's hope the DOJ investigators are familiar with new market dynamics post healthcare reform and where the seat of purchasing power is moving.

[Photo Credit: iStockphoto.com user spxChrome]  

-- By Arundhati Parmar, Senior Editor, MD+DI


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