Rising physician self-referral rates has resulted in higher utilization of certain services, report says

July 11, 2008

The number of physician-owned facilities has increased substantially in the past decade, and physician self-referral has resulted in higher utilization of services, especially imaging services, according to a new report issued by the Robert Wood Johnson Foundation?s Synthesis Project.

This material originally appeared in the June 27, 2008, issue of Health Lawyers Weekly, a publication of the American Health Lawyers Association.

The number of physician-owned facilities has increased substantially in the past decade, and physician self-referral has resulted in higher utilization of services, especially imaging services, according to a new report issued by the Robert Wood Johnson Foundation’s Synthesis Project.

The report, "Physician Self-Referral and Physician-Owned Specialty Facilities," examines the growth of self-referral and physician-owned specialty facilities, as well as its effect on healthcare quality, costs, and the organization of healthcare, according to a report abstract on the Foundation’s website. The report was authored by Synthesis Project researchers Lawrence P. Casalino, MD, PhD, and Sarah Goodell.

Researchers found the number of physician-owned specialty hospitals more than doubled between 2002 and 2007. Moreover, according to the report, between 1999 and 2003, the volume of diagnostic imaging services has grown more rapidly than other physician services, with a 45 percent cumulative growth rate for diagnostic imaging services, as compared to a growth rate for testing services, other procedures, and major procedures of 36 percent, 26 percent, and 14 percent, respectively.   

The report concluded that “strong evidence” indicates physician ownership is related to self-referral patterns, and that self-referral results in higher utilization of services.

“The higher the percentage of physician ownership, the more likely a physician is to refer patients to a specialty hospital rather than a general hospital,” according to a policy brief.

The report cited studies showing that spinal surgical rates are significantly higher in markets with orthopedic hospitals, as compared to markets without such specialty hospitals. Other research indicates that rates of cardiac surgery are moderately higher in markets with cardiac hospitals, as compared to markets without such hospitals.

In recent years, particularly high increases in utilization rates have been seen in the areas of advanced imaging tests, such as PET scans, CT scans, and MRI scans, according to the report. “Between 2000 and 2005 total Medicare charges for advanced imaging . . . nearly tripled,” the policy brief said.

“Much of the increase involves physician self-referral . . . driven primarily by imaging performed in physician offices, independent diagnostic testing facilities, and through lease, time-share, and ‘pay-per-click’ arrangements between physicians and separately owned imaging facilities,” researchers said in the report.

The report acknowledged, however, that “research is scarce” on whether increased utilization resulting from physician self-referral is clinically appropriate or inappropriate.

“The rapid growth of key forms of physician self-referral is fueled by payment policies that make it much more profitable to provide some services than others,” researchers concluded in the report.

The report suggested payment policy reforms directed at making likely profit margins more equal across different types of care and sites of care to “encourage the creation of facilities only when they are able to provide high-quality, cost-efficient care.”

With regard to quality of care issues, researchers found that, for the types of patients treated, the quality of care provided by specialty hospitals and ambulatory surgical centers is comparable to that of general acute-care hospitals.

However, the report also found that “little is known” about the quality of care of imaging services performed in physician offices and independent diagnostic testing facilities.

The report also recommended the adoption of policies designed to increase the quality of services provided by physician-owned facilities.

As to the effect of physician self-referral on general acute-care hospitals, the report noted concerns that the loss of more profitable services could hamper general hospitals’ ability to cross-subsidize.

The report also noted, however, evidence that general hospitals overall are maintaining their profit margins. “General hospitals appear to have adapted by entering into joint ventures with physicians, by employing physicians who might otherwise compete with the hospital and by expanding their own focus on profitable service lines.”

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