EXECUTIVE SUMMARY: SPINAL DEVICES SUPPLIED BY PHYSICIANOWNED 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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 2 
 

 

 

 

 

 

 

 

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 procedures—spinal fusion and 

decompression—often 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.
 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 3 
 

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 beneficiary’s 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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 4 
 

 

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 Medicare’s Standard Analytical File of 100-percent inpatient 

claims for FY 2011. After clearing the 615 hospitals associated with these 

claims with OIG’s 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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 5 
 

 

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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 6 
 

 

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) 7 
 

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 hospital’s Medicare reimbursement 

through increased device costs in its cost reporting. 

Table 1: Average Cost of Spinal Devices by Device Type 

Device Type Cost of POD 

Devices 

Cost of NonPOD Devices 

Statistically 

Significant 

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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 9 
 

 

 

 

 

 

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 

Hospital Type Number of 

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 crossreference 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 

Source: OIG analysis of hospital questionnaire responses, 2013. 

0 

20 

40 

60 

80 

100 

120 

140 

Hospitals (#)

Year 

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 company’s devices 

after they gain familiarity and experience with that company’s 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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 11 
 

Figure 1: Factors That Influenced Hospitals’ Decisions To Purchase From PODs 

 

 

 

 

 

Surgeon device preference Device quality Services PODs provide 

94% 

reported surgeon 

preference 

influenced their 

decision 

65% reported that 

surgeon preference 

had a major influence 

29% reported that 

surgeon preference 

had some influence 91% 

reported device 

6% reported that quality influenced 

surgeon preference their decision 

had no influence 

60% reported that 

device quality had a 

major influence 

31% reported that 

device quality had 

some influence 21%

reported services 

9% reported that PODs offered 

device quality had no influenced their 

influence decision 

8% reported that 

services PODs offered 

had a major influence 

13% reported that 

services PODs offered 

had some influence 

79% reported that 

services PODs offered 

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 

40% of hospitals 

bought only from

PODs that 

manufacture 

their own 

devices 

36% of 

hospitals 

bought 

from both 

hospitals

bought

only

from 

PODs 

that 

buy

devices 

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 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 12 
 

 

 

 

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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 13 
 

 

 

 

 

 

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 surgery—which includes spinal 

decompression only, spinal fusion, and spinal revision—grew 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 fusions—surgeries that are 

more likely to use spinal devices—grew 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 selfreported 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 

Code 

ICD-9 Procedure Code Description 

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 CMS’s 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 entity’s 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. 

Spinal Devices Supplied by Physician-Owned Distributors: Overview of Prevalence and Use (OEI-01-11-00660) 21 
 

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 crossreferencing 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 

Variable Unweighted N Weighted N Point 

Estimate 

95% Confidence Interval 

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 

State Number of 

Spinal Surgeries 

Number of 

Surgeries Using 

POD Devices 

Percentage of 

Surgeries Using 

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: 

Office of Audit Services 

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. 

Office of Evaluation and Inspections 

The Office of Evaluation and Inspections (OEI) conducts national evaluations to provide 

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 

economy, efficiency, and effectiveness of departmental programs. To promote impact, OEI 

reports also present practical recommendations for improving program operations. 

Office of Investigations 

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. 

Office of Counsel to the Inspector General 

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 

legal support for OIG’s internal operations. OCIG represents OIG in all civil and 

administrative fraud and abuse cases involving HHS programs, including False Claims Act, 

program exclusion, and civil monetary penalty cases. In connection with these cases, OCIG 

also negotiates and monitors corporate integrity agreements. OCIG renders advisory 

opinions, issues compliance program guidance, publishes fraud alerts, and provides other 

guidance to the health care industry concerning the anti-kickback statute and other OIG 

enforcement authorities.