A group of major players in the orthopedics products sector in late March received subpoenas from the Department of Justice (DoJ), the subpoenas demanding documents related to the consulting and service fees paid by the companies to physicians. Receiving the subpoenas in what looks to be the start of a widespread investigation concerning practices in the sector were Stryker (Kalamazoo, Michigan); Biomet (Warsaw, Indiana); the DePuy division (also Warsaw) of Johnson & Johnson (New Brunswick, New Jersey); Smith & Nephew (London), whose Smith & Nephew Orthopedics unit is located in Memphis, Tennessee); and Zimmer (also Warsaw). The subpoenas came as no particular surprise, according to analysts covering the sector, who said that rumors of an investigation of this type had been circulating for some time.
The subpoenas apparently focus on possible payment of kickbacks to the surgeons using these companies' products. And there have been similar recent government initiatives alleging the practice. Another device company currently under the government microscope is Advanced Neuromodulation Systems (ANS; Plano, Texas).
On the pharmaceutical side, four executives of Serono Laboratories (Boston) in mid-April were indicted for providing free trips to a conference in Cannes, France, in return for providing increased prescriptions for Serono's drug Serostim, the trade name for the generic drug somatropin, a form of recombinant human growth hormone.
Joanne Wuensch, device analyst with Harris Nesbitt, noted the variety of recent investigations into such practices recently launched by the government and that the subpoenas to the orthopedics firms was "no surprise." She cited investigations of the pharmaceutical industry over the past 10 years and "the May 2004 announcement by the Department of Health and Human Services that it would accelerate investigations into medical device makers over the next 18 months."
Among the companies acknowledging the subpoenas were Stryker and Biomet. Stryker said that the DoJ was seeking documents for the period January 2002 through the present. It said that the request is for "any and all consulting contracts, professional service agreements, or remuneration agreements between Stryker Corporation and any orthopedic surgeon, orthopedic surgeon in training, or medical school graduate using or considering the surgical use of hip or knee joint replacement/reconstruction products manufactured or sold by Stryker Corporation." Biomet said it had received, through the U.S. Attorney for the District of New Jersey, a request for documents "related to any consulting and professional service agreements with orthopedic surgeons using or considering the use of Biomet's hip or knee implants." Both companies pledged cooperation with the investigations.
In commenting on the overall effect of the DoJ subpoenas for the orthopedic sector, Wuensch noted that stocks in this sector have declined for the year somewhat more than 3%, in an apparent response to "pricing pressure from hospitals on implants, and we expect this news to contribute to further multiple contraction." But she predicted the government probe "shall pass" without greatly impacting the orthopedics firms that Harris Nesbitt covers, which include ArthroCare (Sunnyvale, California), Biomet, Stryker and Zimmer.
CMS effort pushes EHR for small practices
Many issues affect the widespread adoption of electronic health records (EHRs) cost, interoperability, compatibility, data safety, just to name a few (see stories beginning on pages 5 and 9). For small- to medium-sized physician practices, the waters can be even murkier. Compared to large hospitals and healthcare systems, small practices often can't afford the technology, which can cost around $20,000, though prices are dropping. And offering these systems are numerous vendors, all with competing propriety software. Additionally, implementation of these systems can overwhelm a small, already overworked practice with limited technical resources.
Now, a pilot project funded by the Centers for Medicare & Medicaid Services (CMS; Baltimore) is reaching out to small- and medium-sized physician offices to help them move from paper-based health records to EHRs. The Doctors' Office Quality Information Technology project, or DOQ-IT, is intended to educate physician offices on EHR system solutions and alternatives as well as provide information on the costs, risks and benefits of IT adoption. Eighteen months into the two-year project, quality improvement organizations (QIOs) have been working with practices in four states Arkansas, California, Massachusetts and Utah to conduct a needs assessment and to identify EHR systems from multiple vendors that meet specific office needs.
Technical and quality improvement assistance includes uploading data, acquiring reports, and reorganizing physician office workflow to integrate and optimize IT use. Quality information gathered using the technology will be transmitted to CMS for review.
The agency says it is working on a pay-for-performance demonstration program through the DOQ-IT effort, in which physicians will report improvements for different chronic diseases. CMS's QIO program consists of a national network of 53 contract organizations that work with consumers, physicians, hospitals and other caregivers to refine care delivery systems and improve quality of care.
"The reason we're all in this is that we want to improve the quality of healthcare," said Jo Ellen Ross, president and CEO of Lumetra (San Francisco), lead QIO for the project and QIO in California. "Our success will be measured on the basis of looking at the data that comes out of the physician office in the area of quality."
Ross made a presentation about the DOQ-IT project at a healthcare quality summit sponsored by the Agency for Healthcare Research and Quality (Rock-ville, Maryland), a division of the Department of Health and Human Services, and held in Washington last month. The four-state project will lead to national implementation with QIOs in each state beginning in August, Ross told The BBI Newsletter. The funding CMS provided for the project was about $3 million for California and about $1.7 million each for the other three states. Lumetra has been working with about 125 practices in California.
Ross said offices frequently have to be redesigned because they're organized for paper-based records management, which often can be "stuck in the 1950s." She said "the thing that surprised me the most is that we thought it would be difficult to recruit physicians to work with us in this developmental stage." [Physicians] are so eager to move in this direction and see the value in this long-term." Justin Graham, MD, associate medical director for quality and information at Lumetra, called the interest by the vendor community another "surprise."
The American Academy of Family Physicians (AAFP; Leawood, Kansas) has been one of the partners participating in the DOQ-IT program. David Kibbe, MD, director of AAFP's Center for Health Information Technology, and someone involved with the project since the beginning, told BBI that he's experienced "very good response" from vendors as well.
Kibbe said AAFP has been working with EHR software vendors on issues surrounding interoperability and commonality to ensure quicker adoption by physician practices. "We are seeing adoption becoming less and less problematic for these doctors. We have over 15% of the members of the academy using electronic health records and all of the vendors are telling us that they are selling systems in record rates to family physicians."
He said he expects 30% of AAFP's members to have EHR systems by 2006 "And that's probably a conservative estimate," he added.
Firms team to create 'trauma pods'
Automated medical treatment on the front lines of battle, requiring no human medical personnel. That's one of the current visionary goals almost sci-fi-like in scope of the Defense Sciences Office (DSO) of the Defense Advanced Research Projects Agency (DARPA). And the agency said it has taken a "significant step" toward the goal with a two-year, $12 million award to SRI International (Menlo Park, California), a pioneering developer of telesurgery systems now given the task of leading a multi-organization team to develop this revolutionary system for the battlefield.
This groundbreaking program is "an important step," SRI said, toward ensuring a future generation of battlefield-based, unmanned medical treatment systems called "trauma pods" to stabilize injured soldiers within minutes after a battlefield injury. The pods will be used to administer life-saving medical and surgical care prior to and during evacuation. The two-year contract is for the first phase of the program, which is designed for proof-of-concept, said John Bashkin, SRI's director of business development for the program.
"It's really a phased development, and what we're trying to do in this first phase is take components - at least from an engineering standpoint that don't all exist today, but they're readily achievable in that timeframe," Bashkin told BBI. "The goal is to use those components to demonstrate proof of concept." The initial phase which, if successful, will then lead to further work is an effort to develop the robotic technology of the unmanned trauma pod. Essentially an OR, the pod will be small enough to be carried by a medical ground or air vehicle. Using a system of surgical manipulators, a human surgeon will conduct all the required procedures from a remote location.
Besides SRI as the lead system integrator of the project, the other organizations of the team include General Dynamics Robotic Systems (Westminster, Maryland), a leader in unmanned ground vehicle systems and developer of the automated pharmacy system; Oak Ridge National Laboratory (Oak Ridge, Tennessee), a leader in weapons and material handling robotics; the University of Texas (Austin), focused on software control systems for material disposal and space manipulators; the University of Washington (Seattle), a research leader in surgical robotics; the University of Maryland (College Park), a research leader in the Operating Room of the Future; and Robotic Surgical Tech (New York), developers of the first robotic nurse systems for the operating room.
The Trauma Pod program is being funded by DARPA through the Telemedicine and Advanced Technology Research Center, part of the U.S. Army Research and Materiel Command.