Publisher’s Letter September/October 2007

A Little Sunshine

Physician or supplier?

That is the question we explore in this issue of The Journal of Healthcare Contracting. I find the topic fascinating. Who better to help develop a product for patients than a front-line care-giver? Yet, isn’t it troubling to think that a surgeon could be making money every time he implants a device into a patient, regardless of whether that device is cutting-edge technology or a knock-off?

This issue has become such a concern that Iowa Republican Senator Charles Grassley and Wisconsin Democratic Senator Herb Kohl have introduced a bill mandating disclosure from physicians who have ownership stakes in device and drug companies to the Secretary of Health and Human Services. This act, called the Physician Payments Sunshine Act, only applies to companies of $100 million or more in revenues. That’s unfortunate, because many of the physician-owned manufacturers and distributors in question are well under $100 million in revenue. So, while the Sunshine Act would be a good start, it hardly addresses the vast majority of companies of concern.

Currently, there seems to be two checks that a physician-owned supplier must pass to ensure that legal lines are not crossed. First, the physician owner or investor must pay fair market value for a stake in the company. Secondly, the remuneration from the company to the physician must be based on the percent of ownership. How many IDNs and hospitals know these two issues about the surgeons and physicians practicing in their facilities?

Vicki Robinson, chief of the industry guidance branch of the Office of the Inspector General, recognizes the potential danger of physician-owned start-up companies, and warns that they can lead to improper inducement. I have tremendous faith in our nation’s physicians, and know in my heart the vast majority have pursued practicing medicine for all the right reasons.

I can’t think of many areas in which I promote government regulation, and I am not sure that is the answer here. I do know that IDNs and hospitals could greatly reduce the possibility of any impropriety by requiring full disclosure on the part of their physicians and making sure they have policies in place of what is acceptable.

As Senator Grassley put it on the Senate floor: “Let a little bit of sunshine in to this world of financial relationships – it is, after all, the best disinfectant.”

About the Author

John Pritchard
John Pritchard is the publisher of The Journal of Healthcare Contracting.