This article originally appeared in the November 2011 issue of DOTmed Business News

When a physician purchases his own X-ray and MRI equipment or becomes part-owner in a radiology clinic, does it mean he will order more procedures just so he can profit from using the equipment?

According to research, the resounding answer is yes, and although the federal government and medical associations are attempting to curb the practice — known as self-referral — the battle is still waging within the health care community.
The first government step to intervene was the passage of the Physician Self-Referral Prohibition Statute (or “Stark Law”) in the 1990s, meant to prevent doctors from ordering tests or services on equipment they own.

In general, the Stark Law prohibits physicians from referring Medicare patients to health services at a location where the physician or an immediate family member has a financial relationship. But there were exceptions to the rule that allowed doctors to refer “designated health services,” such as imaging, at centers they have a stake in — as long as it was done by a doctor in the same physician group, at the same offices.

This exception in the legislation has proven a big enough loophole to warrant House Bill H.R.1476, introduced in April by Rep. Jackie Speier (D-Calif.), which seeks to close it. The bill is now in review with the health subcommittee.

The Centers for Medicare & Medicaid Services (CMS) also passed new regulations this year, requiring doctors giving patients a referral to include a written list of at least five competing groups in the doctor’s area.
CMS officials say they are hopeful that federal legislation is making a difference and is changing physicians’ habits.

“The Physician Self-Referral Law is in place and we expect that providers and suppliers are complying with the law,” says Don McLeod, a CMS spokesman.
He notes that the CMS is unaware of a vast number of instances where physicians may still be skirting the self-referral laws.

“We don’t have specific data on the level of noncompliance with the law, but we do have the Voluntary Self-Referral Disclosure Protocol that went into effect last year,” says McLeod.

The Voluntary Self-Referral Disclosure Protocol allows providers and suppliers to disclose to the CMS identified noncompliance with the law and seek to resolve that noncompliance through a negotiated resolution, explains McLeod. And some physicians have taken advantage of the offer.

“We have received disclosures under the protocol indicating that, in certain situations, there have been incidents of noncompliance,” says McLeod.
Some states have also taken steps to contain physicians who are not complying. Just this March, the Maryland Board of Physicians mailed warning letters to all physicians in possible violation of the law. Physicians who received a warning letter were ordered to provide, within 10 business days, current information about the practice, ownership in both the practice and MRI equipment and whether he/she refers patients to practice-owned MRI equipment. If the board found the physician was indeed in violation, a 60-day deadline to cease self-referrals was imposed.

So what about the ethics involved?

The American Medical Association thought it was enough of a concern to address the issue in its Code of Medical Ethics. The AMA’s written opinion states that business arrangements among physicians in the health care marketplace can be “ethically challenging when they create opportunities for self-referral in which patients’ medical interests can be in tension with physicians’ financial interests.”

The opinion goes on to say that, “…such arrangements can undermine a robust commitment to professionalism in medicine, as well as trust in the profession.”
However, when contacted to provide comment on the challenges of curbing self-referral, the AMA would not provide a statement.

There appears to be little debate, however, on whether or not physician self-referrals impact the use of health care services. Recent research has linked self-referrals to a definite increase in health care spending. A study in the July issue of the Journal of the American College of Radiology compared the frequency of referrals made by clinicians who have imaging equipment on-site with clinicians who do not. The study found that non-radiologists who self-referred patients for medical imaging were almost 2.5 times more likely to order imaging than clinicians with no financial interest. The estimated cost of increased imaging in the setting of self-referral was $3.6 billion, according to 2006 Government Accountability Office data.

In the October issue of Health Services Research, a group of Stanford University researchers found that when orthopedists acquire their own MRI equipment, the chances that they will perform surgery on their patients with lower back pain increased by 34 percent.

The authors also concluded that orthopedists and primary care physicians who begin billing for performing MRI procedures, rather than referring patients outside of their practice for MRI, “appear to change their practice patterns such that they use more MRI for their patients with low back pain.”
“We wanted to demonstrate that there is not only increased use of MRIs, but also that this increased use of MRI could lead to something called a treatment cascade, where patients can receive subsequent procedures which are of low value to the patient and that can also drive up health care expenditures,” lead author Jacqueline Shreibati told the Stanford Daily.