Your physician’s business relationships may be hazardous to your health

Consumers today need to take ownership understanding their physician’s motivation when they recommend surgery especially when it entails implantable products for surgical procedures such as a spinal fusion, knee or hip replacement. This motivation may be more than to help address a patient’s medical issue. It may also be a means for the physician to increase their personal income.

There is a growing trend in the healthcare industry that some physicians would not like consumers to know about. This trend is the development of physician owned distributors (PODs).  A physician owned distributor is a medical products supplier to hospitals that is partially owned by a physician or group of physicians. The primary role of the physician owned distributor is to provide products to its physician investors at the hospitals they practice medicine.

An example would be an orthopedic surgeon that performs hip and knee replacement surgery. This surgeon is an investor in the physician owned distributor that supplies the implantable hips and knees to the hospital where they perform surgery. Therefore, as patients have their hip or knee replaced by the physician at this hospital, he or she is also generating personal income by using the products supplied by the distributor they partially own.

The conflict of interest is the physician that makes the decision on which patients receive surgery, also makes the decision on what implantable product will be used and the supplier that provides the implantable product.  This supplier is partially owned by the physician and is generating income for its investors. Anecdotal evidence highlighted in a senate finance committee minority report1 noted an increase in the number of surgeries performed at hospitals that use the supplies from a physician owned distributor. What is also concerning is the influence these physicians may wield at the hospitals where they practice medicine in determining which implantable products are used and the preferred supplier to purchase these products. This situation can put a hospital in a compromising position especially if the physician generates significant revenue for this hospital. If a hospital does not accommodate the physician’s requirements, they could lose business as the physician takes his or her patients to a competing hospital that agrees to use the physician owned distributor.

This issue has caught the attention of congress and they are inquiring into the implications of these types of distributors and are they legal. A senate finance committee minority report compiled by the staff of Utah Senator Orrin Hatch dated June 2011 on the proliferation of physician owned distributors noted that these business entities operate in at least 20[1]  states with more than 40 operating in the state of California.

So the bottom line is how can we as consumers protect ourselves from becoming victims of a physician that has their financial interests ahead of our health and welfare. Ask the following questions to the physician that will be performing your surgery:

Do you have any direct or indirect financial relationship with the supplier or manufacturer of products that will be used in my surgery?

If the physician answers “yes”, look for someone else to perform the surgery not affiliated with the physician or the physician’s group practice.

If the physician says “no”, contact the administrators at the hospital where the surgery is to be performed and ask them if they have a business relationship with a physician owned distributor for products that may be used in your type of surgery. If they answer “yes”, look for another physician and hospital not affiliated with this type of distributor. Until the proper laws are put in place to protect consumers from these types of business practices, we need to take ownership in asking these questions to those physicians recommending which procedures to be performed and products used. The first and most critical step in managing our healthcare is asking the right questions of our caregivers to protect ourselves and family members.

Link to senate finance report –


[1] An Inquiry by the Senate Finance Committee Minority Staff U.S. Senator Orrin Hatch, (R-Utah), Ranking Member June 2011, 3, Physician Owned Distributors (PODs): An Overview of Key Issues and Potential Areas for Congressional Oversight

3 comments Add your comment


July 7th, 2011
10:04 am

Just another reason why the AMA monopoly over professional licensure MUST be ended. Americans need to have freedom restored so that they no longer have to trust the corrupt system of state licensure, restricted medical school enrollment, restricted residency access, and all the other protectionist schemes the medical profession has come up with to limit the number of practicing physicians in this country. A true free market in medical care delivery would provide the much needed competition that would suppress this kind of under the table relationship that jeopardizes everyone’s health and well-being. And end to the FDA-BigPharma incestuous relationship would also serve the health needs of every american as well. There is certainly no need for such an unconsitutional government entity. A more effective approach could be achieved by independent certification agencies that would actually suffer liability consequences for bad judgements versus the criminal FDA that suffers no consequences no matter how many die from their poor judgements.

Bob Wells, executive in healthcare technology

July 10th, 2011
10:30 pm

I agree that there is an artificial monopoly in creating the number of physician seats in medical schools. I have seen this through medical college associations (American College of Radiology). Keeping supply down intentionally increases costs for everyone. The healthcare system needs to devise an approach of increasing the supply of physicians, maintaining a high level of education standards and reducing the cost of education. I believe physicians should be compensated well for their commitment to years of education and serving others. We want to attract the best and brightest minds. One of the keys to reducing the cost of healthcare and discouraging inappropriate behavior of some individuals is to develop a means for physicians to reduce their cost of education. If physicians feel that they are being appropriately compensated for their commitment, they will focus their energy on how to grow their business and serve the community through ethical means. There will always be a few individuals that decide following an ethical path is not sufficient. For those individuals and others that even consider unethical practices an option, we need to have strong regulation, oversight and penalties in place. Therefore, physicians thinking about inappropriate behavior will assess if the benefit justifies the risk.

As payment reform is starting to take hold and a culture of change within healthcare, we want to create an environment and reward systems for those that innovate in a manner that everyone benefits. The patient’s issues are addressed in a timely and high quality manner with the best outcomes at the lowest cost. I want physicians motivated to use their intellectual capacity to do the right thing and excel the advancement of medicine versus try to figure out how to drive up their personal income at the cost of patients’ health and society.

Greed has its rewards I guess!

September 21st, 2011
1:04 pm

Great article Bob Wells. Please continue to expose this practice in more detail as we need to determine our level of trust in the healthcare system, starting with our treating physician!