Self-Referral Persists Despite Stark II Law

Loopholes in federal and state laws that curb physician referral to diagnostic imaging providers in which they have a financial stake (self-referral) are allowing physicians to stretch how they are paid and for what. Jean M. Mitchell, PhD, a professor of public policy at Georgetown University, gathered information on all providers (physicians, hospitals, independent diagnostic testing facilities) that billed a large private insurer in California in 2004 for magnetic resonance imaging (MRI) scans, computed tomography (CT) scans, and positron-emission tomography (PET) scans.

She found that providers had submitted two types of claims to the insurer: a claim for performing and interpreting the scan (global claim) and a claim for technical components of the scan (preparing the patient before the scan).

"The self-referral arrangements that exist today are very different from those in the early '90s," says Mitchell. "Physicians don't have ownership relationships with these facilities."

"These relationships work like this: I'm an orthopedic surgeon and I am part of a group. I approach a hospital, a radiology group, or an independent diagnostic facility and tell you that our orthopedic group will refer our patients to you for MRIs. You need to let us use your machine for a whole day, with your employees and everything, and we'll pay you $5,000 for the day. That machine is booked from 7 a.m. until 10 p.m. You just lease us the machine for the day."

She continues: "Another approach is that sometimes these diagnostic testing facilities approach the physician groups and say 'You refer your patients to us, you pay us $400 per scan, and then you bill the insurance company. Insurers pay you and you pocket the difference. That's called a sham lease arrangement," says Mitchell.

"I suspect at least 55 percent of the MRI providers who bill are self-referrals."

She found that 33 percent of doctors who submitted either global or technical bills for MRI scans were not radiologists. These physicians were practicing in small and medium-size groups (fewer than 100 physicians) and engaged in self-referral. In 2004, they accounted for 11.5 percent of total MRI volume paid by the insurer.

For CT scans, self-referral physicians made up 22 percent of the providers who submitted global or technical bills. Less than 7 percent of these scans were paid 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 the insurer paid for more than 25 percent of those bills.

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