EXECUTIVE SUMMARY:  SPINAL DEVICES SUPPLIED BY PHYSICIAN-
OWNED DISTRIBUTORS:  OVERVIEW OF PREVALENCE AND USE  
OEI-01-11-00660 
 
WHY WE DID THIS STUDY 
 
This report responds to a congressional request to determine the extent to which 
physician-owned distributorships (PODs) provide spinal devices to hospitals.  PODs 
physician-owners can include the surgeons who implant the PODs devices; these owners 
have an opportunity to profit from using the devices their PODs sell.  Critics of PODs 
claim that such ownership creates a conflict of interest that may affect physicians 
clinical decisionmaking.  PODs assert that their devices cost less than devices provided 
by other spinal device companies. 
 
HOW WE DID THIS STUDY  
 
We selected a sample of 1,000 claims billed to Medicare in fiscal year (FY) 2011 that 
included spinal fusion surgery.  We asked each hospital associated with these claims to 
complete a questionnaire about its knowledge of physician ownership of spinal device 
suppliers. We also asked each hospital to complete a worksheet with details about the 
spinal devices used in each surgery in our sample. 
 
WHAT WE FOUND 
 
In FY 2011, PODs supplied devices used in nearly one in five spinal fusion surgeries 
billed to Medicare. Spinal surgeries that used POD devices used fewer devices but did 
not have lower per surgery device costs than surgeries that did not use POD devices.  
Among the hospitals in our sample, about a third reported buying spinal devices from 
PODs.  When hospitals in our sample began buying from PODs, their rates of spinal 
surgery grew faster than the rate for hospitals overall.  Finally, in FY 2012, surgeons 
performed more spinal surgeries at hospitals in our sample that purchased from PODs 
than at those that did not purchase from PODs. 
 
WHAT WE CONCLUDE  
 
PODs are a substantial presence in the spinal device market.  Our findings raise questions 
about PODs claim that their devices cost less than those of other suppliers.  Surgeons 
performed more spinal surgeries at hospitals that purchased from PODs, and those 
hospitals experienced increased rates of growth in the number of spinal surgeries 
performed in comparison to the rate for hospitals that did not purchase from PODs.  
Taken together, these factors may increase the cost of spinal surgery to Medicare over 
time.  Finally, hospitals policies varied in whether they required physicians to disclose 
ownership interests in PODs to either the hospital or their patients.  Thus the ability of 
hospitals and patients to identify potential conflicts of interest among these providers is 
reduced.  
   
   
   
 
TABLE OF CONTENTS 
 
Objectives ....................................................................................................1 

Background..................................................................................................1 

Methodology................................................................................................5 

Findings........................................................................................................8 

In FY 2011, PODs supplied the devices used in nearly one in five 
spinal fusion surgeries billed to Medicare .......................................8 

Spinal fusion surgeries that used PODs devices used fewer devices 

but did not have lower device costs .................................................8 

About a third of hospitals in our sample purchased spinal devices 
from PODs  .....................................................................................10 

When hospitals in our sample began purchasing devices from 

PODs, their rates of spinal surgery grew faster than the rate for 

hospitals overall .............................................................................13 

In FY 2012, hospitals in our sample that purchased from PODs 

performed more spinal surgeries than those that did not purchase 

from PODs  .....................................................................................16 

Conclusion .................................................................................................18 

Appendixes ................................................................................................19 

A: Detailed Methodology .............................................................19 

B: Confidence Intervals ................................................................25 

C: Distribution of Sampled Surgeries by State .............................26 

Acknowledgments......................................................................................27 

   
   
OBJECTIVES 
1. 	  To determine the extent to which spinal fusion surgeries used spinal 
devices provided by physician-owned distributors (PODs). 
2. 	  To determine whether the cost and quantity of spinal devices used in 
spinal fusion surgeries differed when spinal devices were supplied by 
PODs.  
3. 	  To determine the extent to which hospitals associated with a sample of  
spinal fusion surgeries purchased spinal devices from PODs. 
4.	   To determine whether the rates and complexities of spinal surgeries 
differed when hospitals associated with a sample of spinal fusion 
surgeries purchased spinal devices from PODs. 
BACKGROUND 
In fiscal year (FY) 2012, Medicare paid hospitals a total of $3.9 billion for 
178,789 spinal surgeries.  Medicare reimbursed hospitals an average of 
$21,613 for each of these surgeries.  On average, Medicare reimbursed 
hospitals $10,289 for the least complicated spinal surgeries and  
$34,676 for the most complicated surgeries. 
This report responds to a congressional request.  The requestors expressed 
concerns about the growth of physician-owned distributorships and the 
potential adverse effect that these entities could have on Medicare 
beneficiaries and Federal health care programs.  The requestors asked the 
Office of Inspector General (OIG) to examine a number of issues 
regarding PODs. In response, OIG stated that it would determine the 
extent to which PODs provide spinal devices to hospitals.  
Overview of Physician-Owned Device Companies  
Companies not owned by physicians most commonly supply spinal 
devices to hospitals through their staff or contracted sales representatives.  
These sales arrangements may also provide other services, such as 
operating-room technical support, inventory management, and coding 
assistance.  
Some physicians, including surgeons who implant spinal devices, have 
ownership stakes in spinal device companies.  For the remainder of this 
report, we will refer to such companies as PODs. 
Physicians invest in a variety of POD arrangements.  PODs vary in 
(1) whether their physician-investors practice in the hospitals to which 
they distribute devices, (2) whether they solely distribute devices or both 
manufacture and distribute their own devices, and (3) which services they 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   1 
   
   
offer along with the purchase of their devices.  Regardless of the business 
arrangement, PODs offer physician-investors the opportunity to profit 
from using the devices their PODs sell. 
Controversy Over PODs  
Benefits of PODs. PODs assert that they supply spinal devices at a lower 
cost than companies not owned by physicians.  They claim to reduce costs 
to hospitals by lessening the need for sales representatives, procuring 
inventory from smaller manufacturers, and increasing competition in the 
market for devices. 
Vulnerabilities of PODs. Critics of PODs claim that PODs create a 
conflict of interest that could affect physicians clinical decisionmaking.  
Ownership may encourage surgeons to perform unnecessary and 
inappropriate spinal surgeries to drive sales for their companies.  Critics 
claim that surgeons may also perform  more spinal refusion surgeries, also 
known as revision surgeries.  These surgeries sometimes involve removing 
previously implanted devices and replacing them with new devices.  
Critics claim that PODs may encourage surgeons to perform these 
surgeries.  
PODs potentially raise legal concerns under the Anti-Kickback Statute.  
The statute makes it a criminal offense to knowingly and willfully offer 
remuneration to induce, or in return for, referrals of items of services 
reimbursable by a Federal health care program.1  By its terms, the statute 
ascribes criminal liability to parties on both side of an impermissible 
kickback transaction.2  
In 2013, OIG released a Special Fraud Alert on Physician Owned Entities.  
OIG stated that PODs are inherently suspect under the Anti-Kickback 
Statute and set forth a number of suspect characteristics about which it is 
concerned.3  OIG is particularly concerned about PODs because surgical 
implants typically are physician preference items, meaning that both the 
choice of brand and the type of device may be made or strongly influenced 
by the physician, rather than the hospital where the procedure is 
performed.4  The Fraud Alert echoes OIG guidance from 2006 that 
specifically addressed physician investments in medical device 
manufacturers and distributors.  In that guidance, OIG acknowledged the 
strong potential for improper inducements between and among the 
 
1 Section 1128B(b)  of the Social Security Act. 

2 Ibid. 

3  OIG Special Fraud Alert, Physician Owned Entities (Mar. 2013).  Accessed at 

http://oig.hhs.gov  on  May 13, 2013. 

4 Ibid. 
  
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physician investors, the entities, device vendors, and device purchasers 
and stated that such arrangements should be closely scrutinized under 
fraud and abuse laws.5  
The Sunshine Act  
Hospitals and patients may be unaware of physicians investment in 
PODs. However, regulations that the Centers for Medicare & Medicaid 
Services (CMS) recently issued under the Physician Payments Sunshine 
Act will require PODs to become more transparent. 6   As of August 1, 
2013, CMS requires manufacturers and group purchasing organizations to 
report all physician ownership and investment interests to CMS annually.7   
The regulations define group purchasing organizations as including most 
PODs, but CMS may determine, on a case-by-case basis, whether it 
considers a particular POD arrangement to be a group purchasing 
organization under the final rule.8  CMS will make a database of  
compensated physicians publicly available. 
Spinal Procedures and Devices Associated With Spinal Surgeries  
Spinal surgery often involves implanting devices that immobilize or 
reduce pressure on the spine.  Some of the indications for spinal surgery 
are disc degeneration, spinal stenosis, fractures, tumors, and vertebral 
instability.9   Two common spinal proceduresspinal fusion and 
decompressionoften involve implanting medical devices and biologics 
(such as bone grafts). Each spinal surgery may involve one or more spinal 
procedures. 
Spinal Fusion Procedures. Spinal fusion is considered either simple or 
complex depending on the number of vertebrae fused.  Simple spinal 
fusion joins two or three vertebrae to one another, often using both bone 
grafts and devices to immobilize the vertebrae.  Complex spinal fusion 
involves fusing more than three vertebrae using similar devices and 
grafting techniques.10  
Decompression Procedures. Decompression is performed to relieve 
pressure on the spinal cord and/or nerve roots. To do this, surgeons might 
remove bone spurs and part or all of a lamina, vertebra, or spinal disk.  
 
5 Ibid.  
6 The Physician Payments Sunshine Act was part of the Patient Protection  and Affordable 

Care Act, P.L. 111-148    6002, Social Security Act,   1128G. 

7 42 CFR   403.906.  

8  42  CFR  403.902; 78  Fed  Reg 9458, 9493 (Feb. 8, 2013). 

9 OrthoInfo,  Spinal Fusion. Accessed at http://orthoinfo.aaos.org/ on Oct. 20, 2013. 

10  We  defined complex spinal  fusion and simple spinal fusion according to the 
 
International Classification of Diseases, Ninth Revision, Clinical Modification (ICD-9-
CM) procedure codes. 
 
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Surgeons might also use a device to expand the openings where nerves 
exit the spinal cord.  Surgeons can perform a spinal fusion in conjunction 
with decompression, depending upon the extent of the decompression 
procedure and its impact on the stability of the spine.11  
Spinal Devices. Spinal procedures may involve implanting a number of 
different spinal devices, including plates, screws, pedicle screws, rods, 
cap/set screws, and interbody cages.  Plates and screws are used in 
conjunction with one another to properly align vertebrae.  Surgeons 
stabilize the spine either by affixing the plate directly to the vertebral bone 
with screws or by inserting pedicle screws into adjacent vertebrae and 
connecting screws with rods. Cap/set screws are used to affix rods to 
pedicle screws. Interbody cages are implanted between vertebrae to host 
the bone graft used to fuse adjacent vertebrae.  The interbody cage helps 
maintain height between vertebrae as the bone graft hardens. 
Medicare Payment for Spinal Surgery Using Spinal Devices 
Medicare covers only spinal implant surgery performed in the inpatient 
setting. It makes separate payments for surgeons professional fees and 
for hospitals facility charges.  Medicare Part B pays surgeons under the 
Medicare Physician Fee Schedule. Medicare Part A pays the hospitals 
under the Inpatient Prospective Payment System (IPPS). 
Under the IPPS, Medicare classifies each case into one of 747 medical 
severity diagnosis related groups (MS-DRG).  These groups are based on 
the beneficiarys diagnoses and the procedures performed, as well as other 
factors reported by the hospital on the claim.  Payment for the MS-DRG 
covers nearly all costs associated with the hospital stay, including any 
spinal devices implanted into the beneficiary.    
 
11 The Cleveland Clinic, Spinal Decompression Surgery, Treatments and Procedures. 
Accessed at http://my.clevelandclinic.org on Oct. 14, 2011. 
 
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METHODOLOGY 
This study used Medicare claims and enrollment data, a review of the 
spinal devices implanted during a representative sample of spinal fusion 
surgeries billed to Medicare, and questionnaire responses from the 
hospitals that billed for Medicare for these surgeries.  See Appendix A for 
a full discussion of our methodology. 
Scope 
This study is national in scope. For the purposes of this study, we defined 
spinal surgery as spinal decompression and spinal fusion.  Our sample 
of claims included surgeries that involved a spinal fusion procedure and 
were billed to Medicare during FY 2011.  We sampled such claims  
because surgeries involving spinal fusion were more likely to use 
implanted spinal devices than surgeries that involved only decompression.  
We did not make any judgment on the legality of hospitals relationships  
with PODs or on the appropriateness of spinal surgeries performed by 
hospitals.  
Sample Selection 
We selected a simple random sample of 1,000 claims for spinal fusion 
surgery from Medicares Standard Analytical File of 100-percent inpatient 
claims for FY 2011.  After clearing the 615 hospitals associated with these 
claims with OIGs Office of Investigations, we removed 29 claims from   
19 hospitals from our sample.  Our data collection sample included  
971 claims from 596 hospitals. 
Data Collection 
We administered a questionnaire to hospitals and asked them to complete 
an invoice worksheet using secure Web-based survey software.  We made 
three attempts to obtain responses.  Of the 596 hospitals that we asked to 
complete the questionnaire, 589 hospitals responded.  These hospitals also 
provided invoice information for 963 of the 1,000 claims included in our 
sample.12  Our overall response rate was 96 percent. 
Hospital Questionnaire. We asked each hospital that billed for one or 
more spinal surgeries in our sample to answer a series of questions about 
the entities from which it purchases spinal devices.  As part of those 
questions, we asked each hospital about its awareness of physician 
ownership among its suppliers of spinal devices.  We defined physician 
owners as those with a partial or full ownership stake through private 
investment, excluding stock in a publicly traded company. 
 
12 Five  of the hospitals in  our sample refused  to provide invoice information detailing 
spinal devices implanted  during eight inpatient stays covered  by Medicare.  We will refer 
these hospitals to  CMS. 
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Invoice Review. We asked each hospital to complete a worksheet for each 
of its spinal surgeries in our sample.  The worksheet compiled detailed 
data about the spinal devices used for the surgery and the entities that 
supplied them to the hospital. We asked hospitals to substantiate the data 
they provided on the worksheets by sending us hard copies of supporting 
documents, such as invoices and purchase orders. 
Data Analysis  
We analyzed data from the invoice review and the hospital questionnaire 
responses to determine the extent to which spinal surgeries used spinal 
devices provided by PODs and whether the cost or quantity of spinal 
devices used in these surgeries differed for POD-provided devices. 
To determine the extent to which hospitals associated with our sample of  
claims purchased spinal devices from PODs, we analyzed data from the 
questionnaire responses and the invoice review.  We counted hospitals as 
purchasing from PODs if they self-identified as using PODs in the 
responses or invoice review or if we identified such purchasing by 
cross-referencing these two data sources. 
We analyzed data from the questionnaire responses to explain why 
hospitals purchased spinal devices from PODs and determine the extent to 
which they had policies on physician disclosure of ownership in medical 
device companies.  
To determine whether rates and complexities of spinal surgeries differed 
when hospitals purchased from PODs, we analyzed hospitals Medicare 
claims to describe their spinal surgery caseloads both (1) before and after 
they began purchasing from PODs and (2) in FY 2012.  We used three 
measures to describe the complexity of hospitals caseloads:  the 
percentage of spinal surgery caseload that was spinal fusion, the 
percentage that was complex spinal fusion, and the percentage that was 
refusion surgery.  
Limitations 
This study relies on Medicare claims and the hospital questionnaire 
responses, which were self-reported by hospitals.  We did not 
independently verify these data.   Certain findings are limited to the 
hospitals associated with our sample of claims and are not generalizable.  
We describe changes in utilization rates over time, but did not determine 
the cause of those changes. We relied on ICD-9-CM procedure codes 
reported by hospitals on Medicare claims to determine the type and 
complexity of spinal procedures.  We also did not assess the clinical 
benefits or equivalency of POD devices and non-POD devices. 
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Standards 
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
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FINDINGS 
In FY 2011, PODs supplied the devices used in 
nearly one in five spinal fusion surgeries billed to 
Medicare  
PODs supplied spinal devices for 19 percent of the spinal fusion surgeries 
billed to Medicare in FY 2011.  Of the surgeries that used POD devices, 
about two-thirds used a mix of such devices and devices that were not 
from PODs.  About one-third of these surgeries used only POD devices. 
The distribution of surgeries that used POD devices varied geographically 
(see Appendix C).  Surgeries from California and Texas composed one 
quarter of the surgeries in our sample that used POD devices, with  
14 and 11 percent, respectively.  Just over a quarter were performed in 
Missouri (6 percent), Florida (6 percent), Pennsylvania (5 percent) 
Alabama (5 percent), and Georgia (5 percent). 
 
Spinal fusion surgeries that used POD devices 
used fewer devices but did not have lower device 
costs 
Critics of PODs argue that because PODs link surgeons compensation to 
the number of devices they implant, they have the potential to increase 
the number of devices used during spinal surgeries.  However, proponents 
of PODs claim that PODs reduce the cost of spinal devices by lessening 
the need for sales representatives and increasing competition in the spinal 
device market.  Medicare payment is tied to the MS-DRG classification 
of the hospital stay, so any difference in device costs would not 
immediately affect the amount Medicare or the beneficiary paid for a 
given stay.  However, Medicare payment to hospitals could change over 
time as device costs are factored into hospitals Medicare reimbursement  
through cost reporting. 
Surgeries that used POD devices used about two fewer 
devices per surgery than surgeries that did not use POD 
devices  
Overall, surgeries that used POD devices implanted an average of  
12.3 spinal devices compared to an average of 14.2 spinal devices for 
surgeries that did not implant POD devices.  The number of devices 
implanted during complex spinal fusion surgeries accounts for this 
difference.  Complex spinal fusion surgeries that used POD devices 
implanted an average of 16.5 devices compared to an average of  
23 devices for complex spinal fusion surgeries that did not implant POD 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   8 
   
   
devices.13  
Device costs for surgeries that used POD devices were not 
lower than those for all other surgeries  
We did not find a statistically significant difference between the average 
total device cost for spinal surgeries that used POD devices and those that 
that did not use POD devices.14  
Furthermore, none of the six types of spinal devices we examined was less 
costly per unit when provided by PODs, and one was more costly when 
provided by PODs (see Table 1).  Using data from the invoice review, we 
determined and compared the prices that hospitals paid PODs and 
distributors not owned by physicians for rods, cap/set screws, pedicle 
screws, interbody fusion devices, spinal plates, and other screws.  We  
found no statistical difference between the price hospitals paid PODs and 
distributors not owned by physicians for rods, cap/set screws, pedicle 
screws, other screws, and interbody fusion devices.  However, we found 
that hospitals paid $845 more for spinal plates from PODs.  This 
difference could eventually raise a hospitals Medicare reimbursement 
through increased device costs in its cost reporting.  
Table 1: Average Cost of Spinal Devices by Device Type  
 
Statistically  
Cost of POD   Cost of Non- 
Device Type   Significant 
Devices  POD Devices  
Difference 
Spinal plates  *   $2,475   $1,630   $845  
Other screws       $699     $620   -
Interbody fusion  devices, non-bone     $2,821   $2,998   -
Pedicle screws       $942     $892   -
Rods      $345     $360   -
Cap/set screws       $142     $148   -
Source:  OIG  analysis of  hospital  questionnaire  responses and invoice worksheet data, 2013. 
*  Denotes a statistically significant  difference at the  p<.05 level.  
  Denotes no  statistically significant difference  at the p<.05 level.  
   
 
13  Complex spinal fusion  surgeries make up  over a fifth both of surgeries that use POD 
devices and surgeries that do  not use POD devices (21 and 25 percent, respectively). 
14 The average total device cost for surgeries that used POD devices was $11,601 and the 
average total device cost for surgeries that did not use POD devices was $11,383. The 
difference between these two averages is not statistically significant at the .05 level. 
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About a third of hospitals in our sample 
purchased spinal  devices from PODs  
 
Thirty-four percent of hospitals in our sample (203 of 589 hospitals) 
purchased spinal devices from PODs.  About three-fifths, or 119, of those 
hospitals self-identified on the questionnaire responses as having 
purchased from PODs.  We identified the remaining two-fifths, or  
84 hospitals, by cross-referencing PODs that hospitals identified in their 
responses with device suppliers that hospitals reported on their invoice 
worksheets (see Table 2).  
Table 2: Types of Hospitals in Our Sample  
 
Number of  
Hospital Type  
Hospitals  
Hospitals that purchased  from  PODs   203 
Self-identified hospitals   119  
Cross-referenced hospitals   84  
Hospitals that did not purchase  from  PODs   386 
All hospitals in  our  sample   589 
Source:  OIG analysis of hospital questionnaire  responses  and invoice review,  2013.  
The following analysis is limited to the 119 hospitals that reported in 
their questionnaire responses that they used PODs.  We analyzed this 
subset of hospitals because our questionnaire collected additional 
details about hospitals interactions with PODs only when hospitals 
self-identified as purchasing from  PODs.  We were unable to collect 
these details for the hospitals that we identified through our cross-
reference as purchasing from PODs. 
Most hospitals began purchasing spinal devices from PODs in 
the last 10 years 
 
Hospitals reported purchasing from  PODs as early as 1997.  However,  
the majority (88 percent) of hospitals that purchased from PODs began 
doing so after 2005. Nearly half (41 percent) of hospitals that purchased 
from PODs began doing so recently, between 2010 and 2012 (see  
Chart 1 on the following page). 
   
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   10 
   
   
Chart 1:  Hospitals in Our Sample That Purchased Spinal Devices From 
PODs, by Year  
 
140 
120 
100 
 )
#
  s( 80 
al
t
pi 60 
s
o
H
40 
20 
0 
Year 
 
Source: OIG analysis  of  hospital questionnaire  responses,  2013.  
Hospitals identified surgeon preference as the strongest 
influence on their decisions to purchase spinal devices from 
PODs 
 
Ninety-four percent of hospitals that purchased from PODs reported 
that surgeon preference influenced their decision to purchase from  
PODs. Surgeons often develop a preference for a companys devices 
after they gain familiarity and experience with that companys devices.  
Hospitals ranked surgeon preference over quality and effectiveness of 
devices as factors that influenced their decision to purchase spinal 
devices from PODs. About 90 percent of hospitals reported that quality 
and effectiveness also influenced their decision.  Although about three 
quarters of hospitals that purchased devices from PODs reported that 
they received additional services from them, only about 20 percent of 
hospitals reported that those services influenced their decisions to 
purchase from PODs (see Figure 1 on the following page).15  
 
 
 
 
15 In addition to  supplying devices,  PODs  and distributors not owned by  physicians often  
provide services to  hospitals, such as technical and administrative support. About three 
quarters of  hospitals reported that they  received technical support from  PODs  in the 
operating room. Thirty-one percent of hospitals received assistance from PODs  to 
manage their inventory  of spinal  devices.  Ten percent of hospitals received help from  
PODs with  coding  to  bill for their devices. Non-physician  owned companies offer similar 
services. 
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Figure 1: Factors That Influenced Hospitals Decisions To Purchase From PODs  
Surgeon device  preference  Device quality  Services PODs provide 
        
65%  reported that   60%  reported that   8%  reported that  
surgeon preference    device quality  had a   services PODs offered 
had a  major influence  major influence  had a  major influence 
  29% reported that   31% reported that   13% reported that  
94%  surgeon preference    91%  device quality  had  21% services PODs offered 
had some influence  some influence  had some influence 
reported surgeon   reported device  reported services 
preference  6% reported that   quality influenced   9% reported that   PODs offered  79% reported that  
influenced their  surgeon preference    their decision  device quality  had no  influenced their  services PODs offered 
decision  had no influence  influence  decision  had no influence 
 
Source: OIG analysis of hospital questionnaire responses,  2013. 
Many hospitals purchased spinal devices from PODs owned 
by physicians practicing in their hospitals 
PODs are owned by physicians practicing inside or outside the hospitals 
they sell spinal devices to. About two-thirds of hospitals reported that 
they purchased from PODs owned by physicians practicing in their 
hospitals.  
PODs also varied by whether they distributed devices that they 
manufactured or devices manufactured by others.  Three-quarters of 
hospitals purchased spinal devices from PODs that manufactured their 
own devices (see Figure 2). 
Figure 2: Hospitals Use of PODs by  PODs Manufacturing Capabilities 
 
 
 
19% of  
  hospitals
bought 
  40% of hospitals  only 
bought only from 36% of  from 
  PODs that  hospitals   PODs 
   mtdheaevniircu oefawsc ntu re  frobmou bgohtt h         devibcthueasyt   
from  
  other  
entities 
 
 
5% of hospitals were unclear whether 
  PODs  manufactured  their own devices 
 
Source:  OIG analysis  of hospital questionnaire responses, 2013. 
 
Most hospitals did not purchase exclusively from PODs.  Ninety-four 
percent of hospitals that purchased spinal devices from PODs also 
purchased devices from companies not owned by physicians. 
Hospitals were not always aware of physician investment in spinal 
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device companies.  About 40 percent of hospitals that purchased from  
PODs were uncertain whether one or more of their other suppliers were 
PODs.  
 
Over half of hospitals had policies requiring physicians to 
disclose ownership stakes in device companies to the 
hospitals; far fewer required physicians to disclose to patients 
Although Federal law does not require physicians to disclose ownership 
stakes in device companies to hospitals they practice in, 65 percent of 
hospitals had policies requiring them to do so.  Disclosure policies can 
help hospitals and patients identify whether their physicians have 
potential conflicts of interest through investment in medical device 
companies. 
Hospitals disclosure policies varied.  Some hospitals noted only 
requiring physicians to disclose ownership during the credentialing or 
hiring process. Furthermore, some  hospitals noted that they required 
disclosure only from certain types of employees, such as managers and 
administrators. 
 
Only 8 percent of hospitals that purchased from PODs reported that they 
required physicians to disclose to their patients whether they have 
ownership stake in the device companies they use.16 Federal law does 
not require physicians to disclose such ownership to their patients. 
When hospitals in our sample began purchasing 
devices from PODs, their rates of spinal surgery 
grew faster than the rate for hospitals overall 
 
The presence of PODs may encourage surgeons to perform more 
surgeries or more complex surgeries to increase device sales.  To  
explore this issue, we compared rates of spinal surgeries performed at 
hospitals in the sixth month before they started purchasing from PODs 
and in the sixth month after they started purchasing from PODs.  We  
compared changes in these rates between two groups of hospitals:  all 
hospitals that billed Medicare for spinal surgery and the hospitals in our 
sample that self-identified in the questionnaire responses that they 
 
16  In the questionnaire, we  asked all 589 hospitals in our sample about their disclosure  
policies, regardless of  whether they purchased from  PODs. Overall, 60  percent of  
hospitals reported that they had policies in place to require  physicians to  disclose  to the 
hospitals whether they have an ownership stake in medical device companies and 13 
percent had  policies requiring  disclosure  to patients. 
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purchased spinal devices from PODs.17   We limit our consideration to 
these hospitals because they told us in the responses when they began 
purchasing from PODs.  This analysis spans from FY 2004 to FY 2012.  
The growth in the rate of spinal surgery after hospitals began 
purchasing from PODs was three times that for all hospitals  
Hospitals overall rate of spinal surgerywhich includes spinal 
decompression only, spinal fusion, and spinal revisiongrew more 
quickly for the group of hospitals in our sample that purchased from  
PODs.  Before these hospitals started purchasing from PODs, they 
performed 95 spinal surgeries per 1,000 surgical discharges.  This rate 
grew to 110 spinal surgeries per 1,000 surgical discharges after these 
hospitals began purchasing from PODs, an increase of 16 percent.  Over 
matched time periods, the rate for hospitals overall grew by only  
5 percent, from 57 to 60 spinal surgeries per 1,000 surgical discharges 
(see Chart 2). 
Chart 2:  Types of Spinal Surgeries Performed Before and After Hospitals 
Started Purchasing Spinal Devices From PODs  
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Source:  OIG analysis  of  hospital  questionnaire  responses  and the Medicare  Standard Analytical  File,  2013.  
Furthermore, hospitals rate of spinal fusionssurgeries that are 
more likely to use spinal devicesgrew more than twice as fast 
among hospitals that used PODs compared to the rate for 
hospitals overall.  The rate of spinal fusions among hospitals that 
used PODs increased by 21 percent (from 62 to 75 spinal fusions 
 
17  We  excluded  17 of the 119 hospitals  that  self-identified that they used  PODs from  this  
analysis because  we did not have claims  data available for the periods  before  and after 
they  began purchasing  from PODs.  
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)  14 
   
   
per 1,000 surgical discharges) compared to 9 percent at all 
hospitals (from 34 to 37 spinal fusions per 1,000 surgical 
discharges).  
The complexity of hospitals  caseloads of spinal surgeries 
remained largely unchanged after they began purchasing from 
PODs  
We used three measures to describe the complexity of hospitals caseloads 
of spinal surgeries:  the percentage of caseload that was spinal fusion, the 
percentage that was complex spinal fusion, and the percentage that was 
spinal refusion. 
The complexity of the spinal surgery caseload at hospitals in our 
sample that used PODs shifted slightly after they began purchasing 
from PODs, but not across all measures.  For example, the 
percentage of spine surgery (either simple or complex) that was 
spinal fusion shifted in favor of spinal fusions after hospitals began 
purchasing from PODs.  Prior to hospitals purchasing from PODs, 
spinal fusion and decompression-only accounted for 61 and 39 
percent of their spine caseloads, respectively.   After hospitals began 
purchasing from PODs, spinal fusion increased to 65 percent of 
their caseloads while decompression-only fell to 35 percent.  For 
hospitals overall, spinal fusion increased slightly from 60 percent 
to 62 percent of their spinal caseloads over the same time periods.  
Examining growth in this measure also highlights the potential for 
increased device usage because spinal fusion, which fuses 
vertebrae together, is more likely to involve implanted devices than 
decompression-only.  
Two other measures of complexity remained unchanged and 
decreased slightly, respectively,  after hospitals began purchasing 
from PODs.  The percentage of complex spinal fusion accounted 
for 14 percent of hospitals spinal caseloads both before and after 
they began purchasing from PODs.  At hospitals overall, the 
percentage of complex spinal fusion increased slightly, from   
12 to 13 percent over the same time periods.  The percentage of 
spinal refusion, which involves refusing a fusion that failed 
previously or fusing additional vertebrae after a previous surgery,  
decreased from 6 percent of spinal surgeries before hospitals 
started purchasing from PODs to 5 percent afterward.  At hospitals 
overall, the percent of spinal refusion remained unchanged at  
4 percent over the same time periods. 
   
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   15 
   
   
In FY 2012, hospitals in our sample that 
purchased from PODs performed more spinal 
surgeries than those that did not purchase from 
PODs 
 
We compared hospitals rates and caseloads of spinal surgery in FY  
2012 between two groups of hospitals:  the 203 hospitals in our 
sample that purchased from PODs and the 386 hospitals in our 
sample that did not purchase from PODs.  For this analysis, 
hospitals that purchased from PODs included those that self-
reported in the hospital questionnaire responses that they purchased 
from PODs and those we identified through our cross-referencing 
of data from the responses and invoice review. 
 
Hospitals that purchased devices from PODs performed over a 
quarter more spinal surgeries than hospitals that did not 
purchase from PODs 
 
Hospitals that did not purchase spinal devices from PODs performed  
99 spinal surgeries per 1,000 surgical discharges in FY 2012.  Hospitals 
that purchased spinal devices from PODs performed 28 percent more 
spinal surgeries, or 131 spinal surgeries per 1,000 surgical discharges (see 
Chart 3). 
Chart 3:  Type of Spinal Surgeries Performed in FY 2012 at Hospitals in Our 
Sample  
 
Source: OIG  analysis of hospital questionnaire  responses, invoice review  data,  and the  Medicare  Standard  
Analytical File,  2013.  
The complexity of hospitals caseloads of spinal surgeries was 
slightly higher for hospitals that purchased devices from 
PODs than that for hospitals that did not purchase from PODs 
 
On each of the three measures we used to describe the complexity of 
hospitals caseloads, hospitals that purchased from PODs had a slightly 
more complex caseload than other hospitals.  
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)  16 
   
   
First, hospitals in our sample that purchased from PODs performed 
more spinal fusion and less decompression-only surgery than hospitals 
that did not purchase from PODs.  Spinal fusion made up 76 percent of 
the spinal surgery caseload at hospitals that purchased from PODs.  It 
made up 69 percent of the caseload at hospitals that did not purchase 
from PODs.  Conversely, decompression-only made up 25 percent of 
the spinal surgery caseload at hospitals that purchased form PODs and 
31 percent of the caseload at hospitals that did not purchase from PODs. 
The other measure of complexity that was slightly higher for hospitals 
that purchased from PODs was the percentage of caseload that was 
complex spinal fusion.  At hospitals that purchased from PODs, 
complex spinal fusion made up 18 percent of the spinal surgery caseload 
compared to 16 percent at hospitals that did not purchase from PODs. 
Our final measure of complexity, percentage of caseload that was spinal 
refusion, was similar between hospitals that purchased from PODs and 
those that did not purchase from  PODs.  Spinal refusion made up  
7 percent of the caseloads at hospitals that purchased from PODs and  
6 percent of the caseloads at hospitals that did not purchase from PODs. 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   17 
   
   
CONCLUSION 
PODs have a substantial presence in the spinal device market. PODs 
provided devices used in nearly a fifth of the spinal surgeries billed to 
Medicare in FY 2011, and over a third of the hospitals in our sample 
purchased spinal devices from PODs.  Many of these hospitals began 
purchasing from PODs after 2009.  Also, few hospitals in our sample 
required physicians to disclose their ownership in device companies, 
such as PODs, to their patients. 
In FY 2012, hospitals that purchased from PODs performed more spinal 
surgeries and had slightly more complex spinal surgery caseloads than 
hospitals that did not purchase from PODs.  After they began purchasing 
from PODs, hospitals experienced increased rates of growth in the 
number of spinal surgeries performed as compared to the growth rate for 
hospitals overall.  Determining the cause for the increased rate of spinal 
procedures was beyond the scope of our review. 
In addition, our findings raise questions about PODs claims that their 
devices cost less than other suppliers.  Within the device categories we 
examined, PODs devices either cost  the same as or more than devices 
from companies not owned by physicians.  This, combined with the 
volume of spinal surgeries we found at hospitals that purchase from  
PODs, may increase the cost of spinal surgery to the Medicare program  
and beneficiaries over time.  Further, hospitals inconsistently required 
physicians to disclose ownership interests in PODs to either the hospitals 
or their patients.  Thus the ability of hospitals and patients to identify 
potential conflicts of interest among these providers is reduced. 
The Sunshine Act may improve the ability of hospitals and patients to 
identify physicians investment in device companies.  The Act will 
require most PODs to report to CMS all physician ownership and 
investment interests.18  CMS plans to list these companies and their 
payments on a publicly available Web site. 
This report is being issued directly in final form because it contains no 
recommendations.    
 
18 42 CFR  403.906. 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   18 
   
   
APPENDIX A 
Detailed Methodology 
This study used Medicare claims and enrollment data, a review of the 
invoices for spinal devices implanted by a representative sample of spinal 
fusion surgeries billed to Medicare, and questionnaire responses from the  
hospitals that billed for Medicare for these surgeries.  
Scope  
This study is national in scope. For the purposes of this study, we defined 
spinal surgery as spinal decompression and spinal fusion.  Our sample 
of claims included surgeries that involved a spinal fusion procedure and 
were billed to Medicare during FY 2011.  We focused our sample on 
spinal fusion because surgeries involving these procedures were more 
likely to use implanted spinal devices than surgeries that involved only 
decompression.  See Table A-1 for the complete list of procedures we 
used. We did not make any judgment on the legality of hospitals  
relationships with PODs or on the appropriateness of spinal surgeries 
performed by surgeons.   
Table A-1: ICD-9 Codes Used To Identify Spinal Surgeries  
ICD-9 
Procedure   ICD-9 Procedure Code Description  
Code  
81.0 / 81.3   Spinal fusion/refusion 
81.00 / 81.30   Spinal fusion/refusion, not otherwise specified 
81.01 / 81.31   Atlas-axis spinal fusion/refusion 
81.02 / 81.32   Other cervical fusion/refusion of the anterior column, anterior technique 
81.03 / 81.33   Other cervical fusion/refusion of the posterior column, posterior technique 
81.04 / 81.34   Dorsal and dorsolumbar fusion/refusion of the anterior column, anterior technique  
81.05 / 81.35   Dorsal and dorsolumbar fusion/refusion of the posterior column, posterior technique  
81.06 / 81.36   Lumbar and lumbosacral fusion/refusion of the anterior column, anterior technique  
81.07 / 81.37   Lumbar and lumbosacral fusion/refusion of the posterior column, posterior technique 
81.08 / 81.38   Lumbar and lumbosacral fusion/refusion of the anterior column, posterior technique  
81.39   Refusion of spine, not elsewhere classified  
81.62   Fusion or refusion of 2-3 vertebrae  
81.63   Fusion or refusion of 4-8 vertebrae  
81.64   Fusion or refusion of 9 vertebrae  
84.51   Insertion of interbody spinal fusion device 
 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   19 
   
   
Sample Selection 
The sample universe for this file is all inpatient claims with discharge 
dates in FY 2011.  We created our sampling frame by limiting the file to 
claims that reported one or more ICD-9-CM procedure codes for spinal 
fusion (see Table A-1 for the complete list of procedures we used).  This 
resulted in population file of 127,547 claims for spinal surgery.  From this 
file, we drew a simple random sample of 1,000 claims billed by  
615 hospitals.  
We used data from CMSs Certification and Survey Provider Enhanced 
Reporting (CASPER) database to get the name and address of each 
hospital in our sample and then forwarded these data to our Office of 
Investigations for review.  As a result of this review, we removed  
29 claims from 19 hospitals from our sample, leaving our data collection 
sample with 971 claims from 596 hospitals.  
Data Collection 
We administered the hospital questionnaire and asked hospitals to 
complete an invoice worksheet using secure Web-based survey software 
from November 2012 through February 2013.  To initiate the data 
collection, we sent each hospital with a claim in our sample an invitation 
packet via a trackable delivery service.  Each packet contained an 
invitation letter; a printed copy of the hospital questionnaire; a printed 
copy of the invoice review worksheet; detailed instructions, including a 
secure hyperlink and login credentials to the Web-based survey; and 
identifying information for the sampled claim(s) from that hospital.  We  
made three attempts to obtain responses from hospitals.  Of the  
596 hospitals associated with claims in our data collection sample,  
589 hospitals completed the questionnaire.  These hospitals also provided 
invoice worksheet information for 963 of the 971 claims included in our 
sample.19  Our overall response rate was 96 percent.  
Hospital Questionnaire.   We requested each hospital that billed for one or 
more spinal surgeries in our sample to answer a series of questions about 
the entities it purchases spinal devices from.  We asked each hospital about 
its awareness of physician-ownership among its suppliers of spinal 
devices. In doing so, we differentiated between PODs owned by 
physicians practicing inside the hospital and those owned by physicians 
practicing outside the hospital. We defined physician-owners as those 
 
19 Five  of the hospitals in  our sample refused  to provide invoice information detailing 
spinal devices implanted  during eight inpatient stays covered  by Medicare.  We will refer 
these hospitals to  CMS. 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   20 
   
   
with a partial or full ownership stake through private investment, 
excluding stock in a publicly traded company.  
If a hospital acknowledged purchasing from a POD, we asked it to identify 
the extent to which certain factors influenced its decision to purchase from  
a POD: cost savings on devices, quality of devices, clinical effectiveness,  
preference of surgeons, and additional services.  We also asked whether 
PODs provided services to the hospital, including inventory management, 
operating room technical support, and coding assistance.  We asked each 
hospital to estimate the date it began purchasing from a POD and asked 
that it identify the name and ownership structure (i.e., manufacturer,  
distributor, or unknown type of entity) of the POD(s) it purchased from.  
Finally, we asked whether the hospital was physician owned and asked 
about its policies on physician disclosure of ownership in medical device 
companies.  
Invoice Review.  We asked each hospital to complete a worksheet for each 
spinal surgery it had in our sample.  To help hospitals identify each 
surgery, we provided them with the dates of admission from the claims  
and identified the beneficiaries treated with data from the Medicare 
Enrollment Database.  The worksheet compiled detailed data about the 
spinal devices used for the surgery.  These data included the number and 
types of devices implanted during the surgery and the price per device net 
of any manufacturer/distributor discounts or rebates.  The worksheet also 
collected information about the entity that supplied the hospital with the 
devices, including what the entitys  name was, whether the entity was a 
manufacturer or distributor, and whether the entity was a POD.  We asked 
hospitals to substantiate the data they provided on the worksheet by 
sending us hard copies of supporting documents, such as invoices and 
purchase orders. In our analysis, we used only data substantiated by 
hospitals in this manner.  
Pre-Test.   Prior to our data collection effort, we pre-tested the hospital 
questionnaire and invoice review with four hospitals.  We purposively 
selected one spinal procedure claim from each hospital and sent each 
hospital a test version of our invitation packet.  We held a conference call 
with each hospital after it completed the pretest to discuss its experience 
with the questionnaire and invoice review and any recommendations for 
improvement that arose from the pretest.  The pretest enabled us to 
improve our data collection instruments and gather data that informed our 
sampling plan. 
   
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Data Analysis  
To determine the extent to which spinal surgeries used spinal devices 
provided by PODs and to determine whether the cost or quantity of spinal 
devices used in these surgeries differed for PODs, we used data from the 
invoice review.  We supplemented the invoice review with data provided 
on the hospital questionnaire responses. Specifically, we cross-referenced 
PODs that hospitals reported in questionnaire responses to suppliers that 
hospitals reported on the invoice review to identify suppliers that hospitals 
may not have identified on the invoice review as being PODs.  Our 
findings on spinal surgeries are generalizable to the population of 
surgeries involving spinal fusion and spinal revisions billed to Medicare 
during FY 2011. 
To determine the extent to which hospitals associated with our claims  
sample purchased spinal devices from PODs, we used data from the 
questionnaire responses and the invoice review.  We counted hospitals as 
purchasing from PODs if they self-identified as using PODs on the 
responses or invoice review or if we identified them through our cross-
referencing of these two data sources.  When hospitals reported publicly 
traded companies as PODs, we excluded those companies from our 
analysis. The responses identified 119 hospitals that reported purchasing 
spinal devices from PODs, and our cross-referencing identified a further 
84 hospitals, for a total of 203 hospitals in our sample that purchased from 
PODs.  
We also analyzed the questionnaire responses to learn why hospitals 
purchase spinal devices from PODs and determine the extent to which 
they have policies on physician disclosure of ownership in medical device 
companies.  Our findings from this analysis are generalizable to the  
119 hospitals in our sample that self-identified as using PODs in the 
responses. 
To determine whether rates and complexities of spinal surgeries differed 
when hospitals purchased from PODs, we first categorized hospitals  
spinal surgery claims by complexity of the surgical procedures reported on 
them.  To do so, we used the ICD-9 procedure codes reported on the 
claims to classify them from least to most complex:  decompression-only,  
simple spinal fusion, or complex spinal fusion.  When the procedure codes 
on a claim reported multiple procedures, we classified that claim on the 
basis of the most complex procedure reported.  For example, when a claim 
contained procedure codes for both decompression and simple fusion, we 
classified the claim as simple fusion.  We also created a flag for increased 
complexity when simple or complex fusions were also spinal revisions 
(repeats or add-ons to prior fusion surgeries).  We used these 
classifications to create rates by type of spinal surgery and three measures 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   22 
   
   
to describe complexity of hospitals spinal surgery caseloads:  the 
percentage of caseload that was spinal fusion, the percentage that was 
complex spinal fusion, and the percentage that was spinal revision.  We  
then conducted two separate analyses of hospitals claims data. 
Our first analysis compared the hospitals caseload of spinal procedures 
performed before and after hospitals began purchasing devices from  
PODs. This analysis examined the rate and complexity of spine surgeries 
performed by hospitals that purchased from PODs in the sixth month 
before and in the sixth month after they began purchasing from PODs.  As 
a comparison against these hospitals, we analyzed the spinal surgery 
caseload at all hospitals for the same before and after time periods.  For 
example, if Hospital A started buying from PODs in March 2011, we 
calculated its rate of spine surgeries before it began purchasing from PODs 
using all spine surgeries performed by Hospital A in September 2010.  We  
calculated the all-hospital rate using the rate of spine surgeries performed 
in September 2010, but across all hospitals, not only at Hospital A.  Our 
findings from this analysis are generalizable only to the hospitals in our 
sample that self-identified as using PODs in the questionnaire responses 
and that also told us when they first began purchasing spinal devices from  
PODs.  We excluded 17 of the 119 hospitals that self-identified that they 
used PODs from this analysis because we did not have claims data 
available for the periods before and after they began purchasing from  
PODs.  
The second analysis compared the spinal surgery caseload during FY 2012 
between the 203 hospitals in our sample that purchased from PODs and 
the remaining 386 hospitals that responded to the questionnaire.  Similar 
to our first analysis, this analysis considered rate and complexity of 
surgeries for these two groups. 
Limitations  
This study relies on Medicare claims and the hospital questionnaire 
responses, which were self-reported by hospitals.  We did not 
independently verify these data.   Certain findings are limited to the 
hospitals associated with our sample of claims and are not generalizable.  
We describe changes in utilization rates over time, but did not determine 
the cause of those changes. We relied on ICD-9-CM procedure codes 
reported by hospitals on Medicare claims to determine the type and 
complexity of spinal procedures.  We also did not assess the clinical 
benefits or equivalency of POD devices and non-POD devices. 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   23 
   
   
Standards  
This study was conducted in accordance with the Quality Standards for 
Inspection and Evaluation issued by the Council of the Inspectors General 
on Integrity and Efficiency. 
   
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   24 
   
   
APPENDIX B 
Confidence Intervals  
95% Confidence Interval  
Point 
Variable   Unweighted N   Weighted N  
Estimate  
Lower Bound   Upper Bound 
Percent of Surgeries Using PODs Devices   926  118,109  18.8%   16.3%   21.3%  
Mean Number of Devices Used   
For POD Surgeries  174  22,193  12.3  11.2  13.4 
For Non-POD Surgeries   752  95,915  14.2  13.5  15.0 
For POD Complex Spinal Fusion Surgeries   36  4,592  16.5  13.5  19.4 
For Non-POD Complex Spinal Fusion Surgeries   187  23,851  23.0  20.8  25.1 
Mean Total Device Cost   
For POD Surgeries  174  22,193  $11,601   $10,448   $12,754  
For Non-POD Surgeries   752  95,915  $11,383   $10,705   $12,062  
Mean Cost of Devices For POD Surgeries  
Spinal plates  82  90  $2,475   $2,183   $2,768  
Other screws   91  293  $699   $602   $795  
Interbody fusion devices, non-bone  95  128  $2,821   $2,455   $3,187  
Pedicle screws  63  206  $942   $836   $1,048  
Rods  74  110  $345   $232   $458  
Cap/set screws  60  302  $142   $119   $165  
Mean Cost of Devices For Non-POD Surgeries  
Spinal plates  251  263  $1,630   $1,477   $1,784  
Other screws   883  2,806  $620   $589   $652  
Interbody fusion devices, non-bone  376  476  $2,998   $2,820   $3,177  
Pedicle screws  557  1,693  $892   $856   $928  
Rods  544  871  $360   $340   $380  
Cap/set screws  365  2,261  $148   $135   $162  
Source:  OIG analysis  of  hospital questionnaire responses  and invoice review  data, 2013. 
   
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   25 
   
   
APPENDIX C 
Distribution of Sampled Surgeries by State 
Number of   Percentage of  
Number of  
State   Surgeries Using   Surgeries Using  
Spinal Surgeries 
POD Devices  POD Devices  
California  76  24  32%  
Florida   73  11  15%  
Texas   65  19  29%  
Georgia  44  8  18%  
North Carolina   42  5  12%  
Pennsylvania  39  9  23%  
Michigan  38  4  11%  
Ohio   37  6  16%  
Missouri  34  11  32%  
Illinois   28  5  18%  
Minnesota  26  2  8%  
New York   26  6  23%  
Alabama  25  9  36%  
Tennessee   25  4  16%  
Virginia  25  4  16%  
Oklahoma   23  6  26%  
South Carolina   22  3  14%  
Indiana  21  3  14%  
Kansas  19  1  5%  
Maryland   19  2  11%  
Colorado   17  3  18%  
Massachusetts   16  1  6%  
New Jersey   15  0  0%  
Washington  15  1  7%  
Kentucky  13  1  8%  
Louisiana  13  0  0%  
Connecticut  12  0  0%  
Arizona  11  1  9%  
Idaho   11  3  27%  
Nevada   11  6  55%  
Arkansas  8  1  13%  
Mississippi   8  4  50%  
Oregon   8  0  0%  
Wisconsin  8  0  0%  
Iowa   7  0  0%  
Nebraska   6  2  33%  
South Dakota   6  3  50%  
Utah   6  3  50%  
Delaware   4  0  0%  
Montana   3  0  0%  
North Dakota   3  0  0%  
New Hampshire   3  0  0%  
Wyoming  3  1  33%  
Alaska   2  0  0%  
Hawaii  2  0  0%  
Maine  2  0  0%  
New Mexico  2  1  50%  
District of Columbia  1  0  0%  
Rhode Island   1  0  0%  
Vermont   1  1  100%  
West Virginia   1  0  0%  
Total   926  174  19%  
Source:  OIG analysis of hospital questionnaire responses and  invoice  review  data, 2013.  

Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)
   26 
   
   
ACKNOWLEDGMENTS 
This report was prepared under the direction of Joyce Greenleaf, Regional 
Inspector General for Evaluation and Inspections in the Boston regional 
office; Kenneth Price, Deputy Regional Inspector General; and Russell 
Hereford, Deputy Regional Inspector General.  
Jesse Valente served as the team leader for this study, and Alyson Cooper 
served as the lead analyst.  Other Office of Evaluation and Inspections 
staff from the Boston regional office who contributed to this study include 
Tim Chettiath, Melissa Hafner, and Elizabeth Havener.  Central office 
staff who provided support include Clarence Arnold, Heather Barton, 
Berivan Demir Neubert, and Christine Moritz. 
Spinal Devices Supplied by Physician-Owned Distributors:  Overview of Prevalence and Use (OEI-01-11-00660)   27 
   
Office of Inspector General
http://oig.hhs.gov  
 
The mission of the Office of Inspector General (OIG), as mandated by Public Law 95-452, as  
amended, is  to protect the integrity of the Department of  Health and Human Services  
(HHS)  programs, as well as the health and welfare of beneficiaries  served by those 
programs.  This statutory mission  is  carried  out through  a nationwide network  of  audits, 
investigations, and inspections conducted by the  following operating components: 
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The Office  of  Audit Services  (OAS) provides auditing services  for HHS, either by  conducting  
audits  with its own audit resources or by  overseeing  audit work done by others.  Audits  
examine the performance of HHS programs and/or its grantees and contractors in carrying  
out their respective responsibilities and are intended  to provide independent assessments of 
HHS programs and operations.  These assessments help reduce waste, abuse, and  
mismanagement and promote economy and efficiency  throughout  HHS. 
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HHS, Congress, and the public with timely, useful, and reliable information on significant 
issues.  These evaluations focus on preventing fraud,  waste, or abuse  and promoting  
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reports also present practical recommendations for improving program operations.  
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The Office of Investigations (OI) conducts criminal, civil, and administrative investigations  
of  fraud and misconduct  related to HHS programs, operations, and beneficiaries.  With 
investigators working in all 50 States and the District of Columbia, OI  utilizes its resources 
by actively  coordinating with the Department  of Justice  and other Federal, State, and local 
law enforcement authorities.  The investigative efforts of OI often lead to  criminal 
convictions, administrative sanctions,  and/or  civil monetary  penalties.  
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The Office of Counsel to the  Inspector  General (OCIG) provides general legal services to 
OIG, rendering  advice and opinions on HHS programs and operations and  providing all  
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