Self Referral: Another Installment

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This month’s Archives of Surgery (Harvard Link)   has an impressive article showing that orthopedists who own their own ambulatory surgery centers are substantially more likely to recommend surgery compared to physicians who don’t have an ownership interest in the surgery center.

The author, Jean Mitchell, went through state filings and insurance company records and made phone calls to ascertain physician ownership of surgery centers. She then analyzed claims data from a large private insurer (representing about 40% of the Idaho market) and determined what percentage of patients with specific presenting complaints had a surgical procedure.  She reports on the differences in behavior between owners and nonowners.

Surgery rates were 33-100% higher for shoulder rotator cuff surgery, and 27-78% higher for arthroscopic surgery. The differences among surgeons increased dramatically around 2005, as more surgery centers were opened. (The exception is carpal tunnel surgery, where the orthopedists who owned centers did far more surgery, but the difference predated the surgery centers opening).

The increase in utilization when physicians financially gain from self-referral has been well documented for years.  See this post for a review of the literature as of a few years ago.  

In 1995, Idaho had 37 hospitals and 4 specialty hospitals owned by physicians.  By 2005, there were 42 ambulatory surgery centers, 39 of which are owned entirely by referring physicians.

There is no easy answer.  Regulations have not proven to be especially effective.  Physicians opened up “limited use” or single specialty hospitals because federal legislation prohibited referral physician ownership of general use ambulatory facilities. High margins are one of the problems – if surgery was not over-reimbursed, it’s not likely that capital would be available to set up such centers. We don’t see a self-referral problem for low margin procedures.  The AMA and physician specialty societies could take a stand against this self-dealing, but this self-referral increases the income of many leading specialists. It’s hard to take income away from physicians.

Speaking of conflict-of-interest, this study was funded by the American Hospital Association.  Hospitals have been the big losers as physicians have built competing ambulatory surgery centers, which drain the higher margin procedures from the hospital.  The Archives of Surgery fully discloses this potential conflict.  Not all the physicians who own surgical facilities disclose this potential conflict to their patients.

ADDENDUM: USA Today notes that health care reform will force physician-owners to disclose their ownership interest when they refer patients to their own imaging equipment, and offer nearby options.

Ethics, self referral, and cost of care

The New York Times’ ethicist Randy Cohen opined on Sunday  that a physician should not refer a patient to a radiology center in which he has an ownership interest (and should certainly always be up front in informing patients of the conflict).   Cohen concerns himself with the ethics, and doesn’t mention the ultimate cost to our health care system of physician self referral.

I did a review of this topic a few years ago.  Some relevant facts:

- Imaging self referral associated with increased imaging utilization by factor of 1.7 to 7.7  (Hillman BJ, Olson GT, Griffith PE, et al. Physicians’ utilization and charges for outpatient diagnostic imaging in a Medicare population. JAMA 1992;268:2050-4;Hillman BJ, Joseph CA, Mabry MR, Sunshine JH, Kennedy SD, Noether M. Frequency and costs of diagnostic imaging in office practice—a comparison of self-referring and radiologist-referring physicians. N Engl J Med 1990;323:1604-8.)

-The GAO estimated that self referral is  associated with increased imaging utilization by factor of 1.95 and 5.13 (Referrals to physician-owned imaging facilities warrant HCFA’s scrutiny: report to the Chairman, Subcommittee on Health, Committee on Ways and Means, House of Representatives. GAO/HEHS-95-2. Washington, DC: U.S. General Accounting Office; 1994.)

-          Financial incentives led to physicians in a primary care practice increasing their imaging ordering by 16% (Hemenway D, Killen A, Cashman SB, Parks CL, Bicknell WJ. Physicians’ response to financial incentives. Evidence from a for-profit ambulatory care center. N Engl J Med 1990;322:1059-63.)

-          In the late 1990s, most of the increase in noninvasive imaging was for tests read by nonradiologists (Maitino AJ, Levin DC, Parker L, Rao VM, Sunshine JH. Practice patterns by radiologists and nonradiologists in noninvasive diagnostic imaging utilization among the Medicare population between 1993 and 1999. Radiology. 2003;228:795-801)

Cohen quotes Katie Watson, a Northwestern professor, who says “I trust my physicians…t.o be human beings, which means they’re vulnerable to subconscious influences and incentives just like the rest of us.”

Clearly, having physicians earn higher income when they recommend tests performed at facilities that they own is troubling.  It’s also expensive.