WEB EXCLUSIVE: Q&A
The medical device industry is under fire for inappropriate compensation to physicians. Several high-profile settlements with the government have created the impression that device companies pay physicians exorbitant fees for sham consulting arrangements, pay for their vacations under the guise of education, and otherwise improperly provide incentives for using their products. This of course is not true for the majority of device firms. But the current climate has placed a burden on firms to prove that they are not engaging in questionable arrangements with clinicians. It is one thing to have policies in place, but it is another to ensure and document that they are being enforced.
Michael Bell, founder and managing member of R-Squared (Princeton Junction, NJ), recognizes this changing landscape and is trying to provide a solution. His company has developed a series of programs that embed compliance enforcement into the day-to-day work flow of everyone at the firm, and document the steps taken. And it recently entered into a partnership with the Medical Device Manufacturers Association (MDMA) to provide members with access to its products at a discounted rate.
Bell, a lawyer by training, is a nationally recognized compliance expert who frequently consults, publishes, and presents on topics of healthcare corporate compliance, privacy, and third-party coverage and reimbursement. Before founding R-Squared, he practiced health law in Washington, DC. Bell spoke to MD&DI editor-in-chief Erik Swain in June.
Q: How long has inappropriate payments to physicians been a problem for the device industry? What caused the issue to get so much scrutiny?
A: It would be unfair and inaccurate to characterize this as a device-only phenomenon. Every healthcare industry sector that relies on physician referrals or needs to use physicians as contractors has been subject to allegations about inappropriate payments and related issues. It’s pretty much been going on forever in one form or another. The statute that the government is relying on, the federal antikickback statute, went into effect in 1972. The problem of inappropriate payments has been going on almost as far back as when Medicare was enacted in 1965.
But why is there so much scrutiny now? I believe it is a combination of various factors. It’s almost as if it’s the device industry’s time in the spotlight. The first sector to get this kind of scrutiny was laboratories, in the early-to-mid-1990s. Then the attention moved to national hospital initiatives. In the early part of this decade and today, the government has focused on pharmaceutical manufacturers. More recently, about three or four years ago, a number of federal prosecutors warned: “If you are a device company, look at your procedures, because you are up next.” So seemingly the government has systematically gone from one sector to another.
Further, there are a lot of whistle-blowers out there. The Medicare program is in financial trouble, there’s been a slew of bad press, and the industry, quite frankly, has made the prosecution’s job a bit easier than it should be.
First, a large number of the cases against device companies are whistle-blower-driven, and in many cases, the whistle-blowers are real insiders at companies. They are acting as a whistle-blower and working for the company at the same time, and through them, the government learns a lot about these allegedly inappropriate relationships. These individuals were often rebuked within their organizations for trying to do the right thing and now they’re telling their stories to federal prosecutors who are willing to listen. That these individuals could also be rewarded handsomely (generational wealth in some cases) further fuels other would-be whistle-blower.
Second, the Medicare program is going broke, so the government has become very vocal and aggressive about bringing every dollar it can back into the system. If it were pursuing allegedly inappropriate physician relationships on principle alone, it could simply use the federal antikickback statute. But instead, it is using alleged antikickback violations as the basis for False Claims Act actions, which bring in significant civil monetary recoveries. In fact, because of False Claims Act recoveries, the government can show it recovers $15 [in fines and penalties] for every dollar it spends on health fraud enforcement.
Add in all of the inflammatory press about physician conflicts of interest and large device industry profits, and you have a coalition of forces that seem to signal that this is the device-enforcement era. And it will be for at least the next couple of years.
When I say that industry has made the government’s job a bit easier, I mean that this industry has been somewhat behind the curve in implementing next-generation compliance controls. In many of these investigations there is not a ton of bad evidence [showing improper intent], but rather an absence of evidence that the organization did things right.
Q: The orthopedics industry in particular has received a lot of negative publicity about physician payments. Do these issues tend to inflict some sectors of the device industry more than others? If so, why?
A: I suspect that it’s just where a lot of the enforcement action has started. It’s where the first [solid] cases have come from. We knew as far back as 2005 that [orthopedics] was an area [the government] was looking at. As far as the negative publicity, that again probably has to do with where the highest-profile enforcement actions have been within this sector, including a high-profile physician case against an orthopedic surgeon from Arkansas. Some believe it may have to do with orthopedic surgeons being involved. I have worked with companies from across the spectrum of device manufacturing, and with a lot of people who have worked in different sectors. They talk about how certain physicians in certain specialties have historically been more aggressive [in seeking bloated compensation arrangements] than others. Orthopedic surgeons are one of those groups that have been mentioned.
Q: MDMA and AdvaMed have established codes of ethics to help address the problem. Have these programs helped?
A: Yes. Absolutely. I have no doubt about that. Especially when they are combined with the Office of Inspector General’s compliance program guidance. They have generated an awareness and comprehension of these issues unlike any I’ve seen before. They have really raised industry consciousness to set parameters on permissible and impermissible relationships with physicians. The before-and-after effect of these codes and guidelines is fairly profound. If you look back 10–12 years ago at the nature of education programs, the lavish trips and gifts, the compensation for time, you realize that what was going on back then is more or less a thing of the past. While enforcement and voluntary compliance have helped as well, the codes have been a driving force as far as how we arrived at where we are today.
Q: How have device firms been able to wean themselves off of inappropriate practices?
A: For many organizations, it has been a slow and uneasy process, with constant calls from the field that “our competitors are doing it.” For many others, there has been culture by enforcement or culture by settlement, meaning it has taken a big enforcement action or settlement to serve as a wake-up call. Regardless, most device manufacturers have implemented changes and improvements. And a big part of those changes have come from adherence to codes. The rapid transformation we’ve seen in industry compliance practices likely would not have occurred but for the fact that the industry moved in concert and in alignment with industry codes and guidelines.
Q: Your firm just announced a partnership with MDMA. How did that come about, and what tasks will you be performing?
A: Mark Leahey, MDMA’s executive director, has been a vocal advocate for ethical and compliant industry practices for a long time. MDMA developed its guidelines and address compliance issues at almost every formal meeting. I have been a speaker at MDMA events for years. A few years back, I realized that companies needed tools and technology that could help them navigate the complexity of these laws and guidelines, and [such tools] didn’t really exist. So I designed a product and started a company to get it out there. I was fortunate enough at that time to already have implemented the solution at a few MDMA member organizations, which provided Leahy with very positive feedback. He thought that all of his members should have access to the technology, and we formed a partnership. Under this arrangement, MDMA members will have special access to our services and products, discounted pricing, and industry best practices and benchmarks.
Q: What advice would you give to device companies to achieve the level of compliance needed?
A: You should try to embed compliance safeguards and controls in a company’s processes and operations. You should incorporate rules enforcement into the workflow to prevent problems from occurring. You have to build in controls that provide checks, flags, and reminders during the normal course of working on these matters. You have to allow users, in their day-to-day business, to be reminded of these things, and to not be able to proceed until all compliance checks are cleared, or an exception is made and documented. And you have to make sure the appropriate data are captured along the way.
Q: You preach the virtues of evidence-based compliance. To what extent has the device industry adopted that approach?
A: If you have a compliance program by itself (policies, training, etc.), it doesn’t demonstrate for the government whether it’s effective. The government’s expectations have changed. It not only wants to see a program in place, it also wants to know that it’s working. And it will ask you to produce evidence that it is working. When a lot of companies implement a program, it makes a good splash, but then it loses momentum and becomes less effective. Companies need to keep gathering evidence that shows they are improving and that the program is working.
To what extent has evidence-based compliance been adopted? All of healthcare and life sciences are moving in that direction. This is what happens when the government publicly tells you what it expects with regard to compliance controls that should be implemented. Industry is taking heed. There has long been a mantra in provider-side compliance that, “If it wasn’t documented, it didn’t happen.” Slowly we are seeing that attitude adopted in this industry, too, as it applies to adherence to corporate policy.
Q: What are the essential components of an evidence-based compliance system?
A: At its core, the organization needs to maintain data that show that its compliance controls are working. Take physician-consulting relationships, for example, which are a hot area of enforcement. Here, manufacturers should create and maintain evidence that its relationships with physicians comply with applicable laws and company policies. The organization should be able to demonstrate that there is a need for the physician’s service. Then show that the physician selected has the right credentials for the job. And it should show that the company is receiving value for the services that it is paying for. It also should capture important data throughout the life cycle of the relationship. Notably, these rich data can and should be used for purposes other than compliance, such as continuous business improvement initiatives.
Given that laws and best practices change, I would encourage companies to implement a system that is flexible enough to adapt to and keep up with the ever-evolving landscape.
Q: How are physicians reacting to evidence-based compliance systems?
A: It’s been interesting. We have rolled out our method in health systems and hospitals, which are also demanding evidence of physician compliance with contractual requirements. So physicians are not just seeing this from device companies. Everyone is doing it at the same time, so that’s a benefit to all. You might see doctors who have relationships with several device manufacturers, as well as a hospital or two where they perform contractual services, and each is starting to require greater evidence of performance. The biggest change was not so much moving to an electronic-based system as it was to get them to start documenting their activities. Getting some of them to complete time records is still a challenge, but they are becoming more aware that without it, they won’t get paid. Physicians are coming onboard somewhat grudgingly, but it is happening anyway. Technology seems to help with the transition.
Q: Will the device industry be allowed to reform itself, or will it have reforms forced upon it by legislators and the plaintiffs’ bar?
A: A sound bet is that it will be a joint effort. I expect the Physician Payment Sunshine Act to be passed in the near future. We will see more settlements, more corporate integrity agreements, and more investigations come to fruition. In the meantime, we will also see many manufacturers take on voluntary efforts to improve. These events will work in parallel, and the environment will evolve at a brisk pace. The future is shaped by both government enforcement and industry best practices.