Surgeons' Royalty Payments Come Under Scrutiny

A Wall Street Journal investigation into Medicare costs found that seven Kentucky spine surgeons were among the largest recipients of royalty and other payments from medical-device maker Medtronic Inc.

Medtronic and the surgeons told the Journal the payments were mostly royalties earned for helping the company design its spine-fusion device. Medtronic is the biggest maker of spinal implants, with sales of $3.5 billion last year, or half of the roughly $7 billion spinal-implant market, the Journal said.

The Fridley, Minn., medical-device maker said it can't develop new medical products without the help of surgeons, and that the royalties paid are legitimate. Medtronic didn’t provide Journal reporters with details about what intellectual property each recipient contributes, but said it doesn't pay surgeons royalties on the devices they use in their patients.

Medtronics publishes an online physician registry that lists royalty, advisory, training and education and research and development payments made to physicians nationwide. The company began releasing information about its payments to surgeons in June, after its payments practices came under scrutiny from Sen. Charles Grassley (R., Iowa).

Steven Glassman of Norton Hospital in Louisville, Ky., one of the seven physicians cited in the Journal report, said the surgeons inform their patients of their financial ties with Medtronic and the hospital has policies "to prevent direct conflicts of interest."

The investigation suggests that the financial incentives for surgeon to perform spine fusion surgeries can be strong. Hospitals often lose money when the procedure is performed on Medicare patients because the cost of the implants is so high, but surgeons can make as much as $12,000 per surgery, the Journal reported. Consulting and royalty arrangements with device makers also can account for a significant chunk of their income, the Journal reports, though disclosure of these payments is hard to come by.

To read more about the Journal investigation, click here.