FREQUENTLY ASKED QUESTIONS
1. Is physician ownership in medical device distribution legal?
Similar to all physician owned ancillary services, there are federal and state laws that must be complied with in structuring a physician owned distribution company. Alliance has engaged the services of the largest healthcare firm in America dedicated exclusively to healthcare law to interpret these laws and to provide on-going review and compliance of our business model. Furthermore, the structure of our model has been extensively reviewed and accepted by many prominent law firms on behalf of the hospitals we do business with. Alliance will structure your distribution company compliant with all relevant federal and state laws governing such relationships.
2. Is physician ownership in medical device distribution ethical?
Ethics is the rules of conduct and moral principles that should govern the actions of any physician and intent is a reasonable standard to evaluate consistency with those rules and principles. If the intent is to bring about necessary change in an unreasonably expensive industry then it is ethical. If the intent is to invest time and effort and capital in order to improve the efficiency of medical device distribution and lower healthcare costs to society, then it is ethical. If the intent, on the other hand is to profit from the position you have as the decision maker without creating a greater good for society, then it may be unethical. Alliance will only participate in the formation of ethical distribution companies that serve to benefit patients and those that care for them.
3. Does this present a conflict of interest?
Conflicts of Interest are common in medicine. Surgeons are paid as a result of the decisions they make in a fee for service system. Insurance companies and Health Maintenance Organization’s profits are affected by access to care. The medical device industry is rewarded for sales growth not for finding more cost effective products.
Community standards of care and peer review, as well as the requirement by the Food and Drug Administration (FDA) that all products marketed show substantial equivalence, serve to protect the appropriateness of product selection. Alliance ensures that quality patient care remains a first priority and that requisite disclosures are made. Alliance will only distribute products that meet or exceed the quality of alternative systems in the marketplace. No surgeon investor is ever required to use products that their distribution company owns and are always encouraged to choose the best alternative for their patient on a case by case basis.
4. Can you distribute any implants?
Some companies have exclusive, regional distribution contracts that may preclude them from selling product to your distributorship. There does exist, however, a large number of outstanding product companies that are not limited by distributor contracts and are able to negotiate very favorable purchase agreements with your distribution company. Alliance will only enter negotiations for those products whose quality meet or exceed all other like products on the market.
5. Does physician ownership in distribution comply with the American
Academy of Orthopedic Surgeons, Standards of Professionalism?
The American Academy of Orthopedic Surgeons (AAOS) requires that: “Drugs and devices should be prescribed primarily on the basis of medical considerations.” Alliance distributes only products that meet or exceed the quality of alternative products for that particular patient.
In addition, the AAOS Standards require that “surgeons should accept no direct financial inducements.” Alliance assists in the development of fully operational distribution companies that require investment risk and ongoing management. There does not exist any guarantee of profitability nor does there exist any direct inducement. The physician owned distribution company performs functions that are currently being performed by the medical device companies such as hospital education, product distribution, inventory management and hospital invoicing.
Finally, the AAOS requires disclosure. Alliance requires the same of all physician partners and ensures that appropriate language is communicated prior to any elective surgical event.
6. How does Alliance assure quality in the products they distribute?
Prior to deciding to contract with a medical device manufacturer, Alliance, in conjunction with its partnering surgeons, will perform an extensive review of the product to include:
•FDA clearance documents and relevant testing data.
•Consistency with current state of the art, medically proven design criteria
•Efficiency of instrumentation.
•Reputation of the manufacturer and possibly, an on site visit of the manufacturing facility.
In every case, only those products of equal or better quality than alternative products, with efficient instrumentation sets and a willingness to negotiate bulk purchasing are considered.
7. Why do I need to invest and buy inventory?
At Alliance, we believe that the primary reason to create a physician owned distribution company is to improve the efficiencies of medical device distribution resulting in savings to your local healthcare system. To remain compliant with self referral laws and to achieve the most competitive pricing, investment on behalf of the owners of the distribution company is essential. Physician owned distribution is held to a higher standard and must not allow for any “pass through” reimbursements. Investment is part of every physician owned distribution company developed by Alliance.
8. Can I use the same representative that I have come to trust?
There will be cases where your representative has become accustomed to a salary level you will choose not to support. If your current representative is interested in working for your distributorship and is not bound by a non-compete clause, then you can and should hire that individual. There are many very competent individuals trained in the medical field who can perform the necessary functions of the product representative.
9. Why should I be interested in hospital profitability?
You, and more importantly, your patients, benefit if your hospital is profitable. Profits allow for retention of your best nurses and other medical support positions. Profits allow your hospital to maintain state of the art facilities that allow you to provide the very best available treatment.
Over the past twenty years, technology and medical device companies insensitive to reasonable pricing constraints have consumed a significant portion of your local hospital profits. Physician owned distribution companies created by Alliance reclaim those diverted healthcare dollars and return them to local healthcare institutions for the benefit of your patients.
10. Do I need to partner with Alliance Surgical Distributors or can I do this myself?
If you choose to form your own physician owned distribution company you will need to replicate the considerable expense and time that Alliance has put into this business plan. In partnering with Alliance your distributorship will have:
• An extensive legal analysis supporting the Alliance physician owned distribution company business plan.
• Turn-key business set-up.
• Access to a number of current manufactures under contract.
• Experience in contracting with medical device manufacturers.
• Experience in contracting with your local hospitals and a track record with numerous other hospitals that will serve to earn more rapid acceptance of the model.
• A medical device information system and accounting system that will streamline your business.
• Operations manuals, policy and procedure manuals and representative training manuals.
Alliance would like to partner with you to create an efficient streamlined successful distribution company that is legally compliant, profitable, and beneficial to your local hospitals and to your patients.
11. How will this change my practice?
If you choose to partner with Alliance, you will enjoy a streamlined transition from your current distribution relationships to your own product representative. You will need to define the optimal design characteristics of the products you use. You will need to evaluate competitive products to insure they meet or exceed the quality of your current product choices. You will need to evaluate the legal requirements and business Pro Forma. You will then need to meet every other month to review product performance, rep performance, financials and any new products.
12. How much does this cost?
Every physician owned distribution company is different. Alliance will review all pertinent data and provide for you an extensive Pro Forma that will outline your upfront costs and your expected return on investment. Alliance Surgical Distributors has been successful in creating highly efficient and profitable distribution companies.