Physicians Referring Patients to a Diagnostic Facility They Own

by Bob Doherty
Federal law generally prohibits physicians from referring their own patients to a diagnostic facility in which they have an ownership issue – a practice called “self-referral” – unless the facility is located in their own practice.  This exemption exists to allow patients with access to a laboratory test, x-ray, or other imaging test at the same time and place as when patients are seeing their physician for an office visit. Less inconvenience and speeder diagnosis and treatment – what could be wrong with that?  Much, say the critics, if it leads to over-utilization and higher costs and doesn’t really represent a convenience to patients. This is the gist of two studies by staff employed by the American College of Radiology, published in the December issue of Health Affairs.

One study analyzes Medicare claims data and concludes that patients aren’t really getting “one-stop-shopping” convenience when their physician refers them to an imaging facility that qualifies for the “in-office” exemption.  “Specifically, same-day imaging was the exception, other than for the most straightforward types of x-rays. Overall, less than one-fourth of imaging other than these types of x-rays was accompanied by a same-day office visit. The fraction for high-tech imaging was even lower—approximately 15 percent.”  The authors say that “a likely explanation is that the equipment required for high-tech imaging is expensive, typically costing $0.5–$2.0 million per machine, and it is inefficient for such equipment to be idle and available to patients on an essentially walk-in basis. Rather, the norm is to schedule appointments ahead of time, to maximize use of the equipment. It is ironic that a major justification for self-referrers’ acquiring this expensive equipment is to provide same-day convenience to their patients—but, presumably to keep their costs down, the physicians inconvenience the vast majority of their imaging patients by scheduling scans for a later date.”

The second study, also from employees of the American College of Radiology, found that with the exception of office X-rays, self-referral provides no health benefit to patients but substantially higher costs:  “Our study provides broad evidence that physician self-referral for imaging typically is not associated with substantial benefits in treatment duration or costs. We found that self-referral for imaging is associated with significantly and substantially higher total care costs in the majority of medical conditions and imaging types we examined. Additionally, we found that self-referral is not associated with shorter illnesses, except in the case of self-referred x-rays for some conditions.”

The authors of both studies conclude that Congress should narrow the “in-office” ancillary services exemption to federal ban on self-referral only to office x-rays.  It should be noted that the American College of Radiology has had a long-standing agenda of wanting to ban physician self-referral, going back to 2003, if not longer. This doesn’t mean that the research done by the ACR’s staff is invalid or biased – it evidently met Health Affairs’ peer review standards – but the fact that they work for an organization that has a political agenda to ban self-referral is relevant.

The American College of Cardiology is fighting back against efforts to eliminate the in-office exemption, maintain that “patients are best served by having a physician who is familiar with a patient’s medical history. In the ideal case, a qualified physician selects the optimal study to perform, interprets the image, and is able to integrate the results with the full knowledge of the patient’s clinical condition before communicating with the patient and establishing a treatment plan. This is inherently the most efficient and comprehensive approach to care. In the case of heart disease, a cardiologist is the most appropriate physician to perform and interpret cardiac imaging studies.”

The American College of Physicians supports a ban on “any financial arrangement that links income generation explicitly or implicitly to the volume or revenues generated by the investor-physicians; referrals if there is no valid medical need for the referral; any arrangement that involves an explicit or implicit inducement or encouragement of physicians by the management of the entity to increase the volume of referrals to the facility; and referrals to any entity (except those specifically exempted by law) unless disclosure has been made to patients of the physician’s financial interest in the facility and, to the extent practicable, a list of alternative facilities from which the goods or services can be obtained.” But ACP also argues that “certain arrangements … should be exempt from regulation … including: such services as those provided by physicians (or physicians in the same group) principally to their own patients (e.g. in-office laboratories and x-ray facilities); other professional and incidental services provided by physicians and their employees in the same group practice as the referring physician.”

There is a risk that the public could view the inter-specialty fights over self-referral as an unseemly fight among doctors in different specialties over who controls the huge amounts of money that can result from referrals to imaging facilities. But the issue, though, really is finding the right balance – of cost, convenience, and the competence of given physicians to perform and interpret a particular imaging test.
Today’s questions: What is your reaction to the Health Affairs studies? Do you think the exemption for in-office imaging should be kept as is or limited only to in-office X-rays and labs?

Bob Doherty is Senior Vice President of Governmental Affairs and Public Policy, American College of Physicians and blogs at The ACP Advocate Blog.

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