A study [free access for two weeks] 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.”

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.”

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 those “who recognize the need to control rapidly escalating health care spending,” particularly since self-referral arrangements appear to extend beyond California and beyond the specific imaging procedures Mitchell studied.