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Report: When physicians have a financial incentive, health care spending increases

by Glenda Fauntleroy, DOTmed News | December 12, 2011
From the November 2011 issue of HealthCare Business News magazine

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.

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