Is the Hip Bone Connected To a Fee?

An investigation alleges some orthopedics makers have showered surgeons with fees and perks

In early November, medical device maker Zimmer Holdings (ZMH ) posted a document on its Internet home page that sheds new light on the often-criticized relationship between surgeons and medical equipment providers. It's an exhaustive 14-page list showing that Zimmer, a Warsaw (Ind.)-based manufacturer of artificial hips and knees, has paid 771 doctors, hospitals, and medical associations more than $86 million this year for a variety of consultant-like services.

Zimmer's list was part of an unusual settlement the U.S. Justice Dept. reached with five device manufacturers this fall. The government had alleged that some of the consulting fees device makers paid to surgeons violated federal anti-kickback laws because the payments were really just inducements for doctors to use certain products. The other companies--Stryker (SYK ), Smith & Nephew (SNN ), Biomet, and Johnson & Johnson (JNJ ) subsidiary DePuy Orthopaedics--also posted lists of their paid consultants. Stryker escaped monetary penalties by cooperating with the investigation, but the other four paid settlements ranging from $26.9 million to $169.5 million. The biggest settlement was paid by Zimmer, which declined to discuss the matter with BusinessWeek. Christopher J. Christie, the U.S. Attorney in New Jersey who handled the case, says he's still investigating individual doctors and smaller device makers.

The settlement and continued monitoring of physicians represent the latest efforts by regulators to clean up conflicts of interest in medicine. The government's investigation revealed that some surgeons were showered with perks such as expensive trips, and that some allegedly took consulting fees after doing little or no work for the companies that paid them. Other fees were collected by surgeons as royalties on medical inventions, which may have been perfectly legitimate. But Christie claims he found evidence some device makers rewarded heavy usage of their products by paying out fees that were described as royalties, even when there was no invention. The physicians didn't disclose the consulting deals to their hospitals or patients, he alleges.

In settling, the companies didn't admit wrongdoing, but they agreed to regularly update the consultant lists they post on their Web sites. And federal monitors will oversee all consulting agreements signed over the next 18 months. The idea, says Christie, is to make companies and physicians think twice about the millions of dollars changing hands, and to make patients aware of exactly how much these deals are netting for their surgeons. "Whether or not a consulting arrangement is causing a physician to use that company's device exclusively, it's something a patient should know," Christie says.

The American Academy of Orthopaedic Surgeons (AAOS) recommends that its members disclose paid consulting deals to patients, but surgeons on the front lines say most payments remain under wraps. "I don't think they're telling patients: I am reimbursed by the company that makes this knee,'" says Dr. James H. Herndon, past president of AAOS and a practicing surgeon in Boston who does not receive payments from device manufacturers.

The new information posted on company Web sites is a step toward greater transparency. But it's still limited. Patients might notice, for example, that New York surgeon Chitranjan S. Ranawat has received more than $2.3 million total from DePuy, Smith & Nephew, and Stryker this year. Published reports say that Ranawat, chairman of orthopedic surgery at Lenox Hill Hospital in New York, has developed several knee and hip products. But the lists provide no details about those inventions or whether the payments are related to royalties on patents. Ranawat did not return several calls seeking comment.

Some prestigious hospitals are improving disclosure so patients can make better decisions. At the Mayo Clinic in Rochester, Minn., 22 physicians have received a total of $3.9 million this year from three of the orthopedic companies, with the majority going to six doctors who consulted for DePuy. Mayo spokesman Lee Aase says 82% of the DePuy payments were for royalties on hip and knee devices the doctors invented. Still, the hospital is rolling out an extensive new disclosure program, under which patients will receive details about physicians' consulting and royalty payments related to products prescribed for them. A spokesperson for J&J declined to comment on individual contracts. But the company did release a statement saying it had "begun to institute changes in the way our business interacted with surgeons to ensure that relationships were...appropriate."

One device maker decided it needed to do more than just attach dollar sums to physician names. Biomet, in Warsaw, Ind., posted a separate list that lays out what services each of its physician-consultants provided. William C. Kolter, Biomet's senior vice-president for commercial operations, says: "Working with surgeons in a consulting capacity is absolutely necessary, and we will continue to do it." But, he adds, the company is "evaluating things that perhaps we need to reconsider."

By Arlene Weintraub

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