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Physician Self-Referral: Banned, But Surprisingly Common

In Health Affairs Article, Researcher Details High Self-Referral Rate
Among Nonradiologist Physicians Billing California Insurer
For Diagnostic Imaging Services

Bethesda, MD -- A study published today on the Health Affairs Web site provides the first empirical evidence concerning how often physicians are stretching federal and state laws -- and perhaps breaking them -- by referring patients to imaging providers with whom they have a financial relationship.

“Laws enacted during the early 1990s to curb physician self-referral were a major step toward addressing the concerns about these arrangements; however, they contain exceptions that could enable self-referral to reappear,” writes study author Jean Mitchell, a Georgetown University professor of public policy. “The findings presented here, which are based on a comprehensive list of providers who billed a large private insurer in California for advanced imaging procedures in 2004, indicate that prohibition exceptions have enabled self-referral to persist, but in new forms” tailored to fit the exceptions.

Mitchell gathered information on all providers (physicians, hospitals, independent diagnostic testing facilities) who billed the California insurer in 2004 for three types of diagnostic imaging scans, either “globally” for both the scan and its interpretation or just for the “technical” components of the scan itself. These diagnostic procedures were magnetic resonance imaging (MRI); computed tomography (CT); and positron-emission tomography (PET). She focused particularly on nonradiologist physicians practicing in small to medium-size medical groups (under 100 physicians), a group “of particular interest, given concerns about the conflict of interest and financial incentives associated with self-referral arrangements.”

Overall, Mitchell found that 33 percent of the providers who submitted either global or technical bills for MRI scans were nonradiologist physicians practicing in small and medium-size groups and engaged in self-referral. In 2004, these self-referral providers accounted for 11.5 percent of total MRI volume in California reimbursed by the insurer. For CT scans, such self-referral physicians represented 22 percent of the providers who submitted global or technical bills to the insurer but less than 7 percent of statewide volume paid for by the insurer. Self-referral physicians accounted for 17 percent of the providers who submitted global or technical bills to the insurer for PET scans but more than 25 percent of statewide volume paid by the insurer. For all three highly reimbursed technologies, the share of statewide volume stemming from self-referrals paid for by the insurer had increased dramatically since 2000.

Using The “In-Office” Exception
To Self-Referral Laws To Bill For Off-Site Scans

Like the federal “Stark II” law, California’s ban on physician self-referral exempts procedures performed in the physician’s office on equipment owned by the physician. However, many -- in fact, most -- of the global billers for MRIs and CT scans did not own the equipment involved, and it was not located on site. Only among the far smaller number of PET scan global billers did a majority own the scanning equipment used.

“The in-office exception in current law was justified under the assumption that when physicians provide imaging to patients within their offices, they do so for patients’ convenience and to monitor quality of care,” Mitchell writes. “However, the majority of self-referral providers for MRIs and CT scans (61 percent and 64 percent, respectively) did not have the imaging equipment in their offices in 2004. Rather, physicians have figured out how to take advantage of the exemptions in existing law by establishing referral arrangements with other imaging facilities that involve minimal financial risk for the referring physician.”

These kinds of arrangements have recently been subject to heightened scrutiny by federal and state law enforcement authorities, but Mitchell says that the self-referral situation is probably worse today than it was in 2004. She also notes that arrangements tailored to fit exceptions in self-referral bans extend beyond the three types of advanced imaging procedures examined in this study and include other types of services such as clinical laboratory tests.

Because of the abundant evidence that physician self-referral leads to increased utilization and cost, Mitchell says that her findings “should be of considerable concern to policymakers, employers, insurers, and consumers who recognize the need to control rapidly escalating health care spending.” Anecdotal evidence strongly suggest that self-referral arrangements designed to fit exceptions in current law are not limited to California. Mitchell calls for additional research to rigorously determine how common these arrangements are in other states.

You can read Mitchell’s article at
http://content.healthaffairs.org/cgi/content/abstract/hlthaff.26.3.w415


ABOUT HEALTH AFFAIRS:

Health Affairs, published by Project HOPE, is the leading journal of health policy. The peer-reviewed journal appears bimonthly in print with additional online-only papers published weekly as Health Affairs Web Exclusives at www.healthaffairs.org.

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©2007 Project HOPE–The People-to-People Health Foundation, Inc.