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Healthcare IT Editorial

A bill re-introduced in the U.S. House of Representatives this past week seeks to limit so-called self-referrals by doctors who own or have financial interests in imaging services such as MRI, CT and PET.

Introduced by Rep. Jackie Speier (D-CA), the bill represents the latest effort to modify one of the inherent conflicts between the “fee-for-service” compensation that forms the free-market foundation of the U.S. healthcare system, and the natural assumption of patients that doctors will act in patients’ best interests not in their doctors’ best interests. The bill comes on the heels of yet another study that added to the growing body of evidence showing that financial interests do play a role in the way doctors refer patients for other services.

In the study of back pain and MRI utilization conducted by Stanford researchers and published last week online in the journal Health Services Research, the data showed that self-referral not only led to more imaging, but also more treatment.

Orthopedists and primary care physicians who begin billing for the performance of MRI procedures, rather than referring patients outside of their practice for MRI, appear to change their practice patterns,” the authors wrote, “such that they use more MRI for their patients with low back pain. These increases in MRI use appear to lead to increases in low back surgery receipt and health care spending among patients of orthopedic surgeons, but not of primary care physicians.”

The finding confirms a flurry of studies in the past few years all showing that financial considerations often play a role in referring patients for services within the provider’s practice. A study in the Nov. 2010 Journal of Urology, showed that patients were twice as likely to undergo and x-ray, ultrasound, or other diagnostic imaging test after seeing a self-employed urologist as opposed to one employed and on a salary.

In a study published in the Dec. 2010 Health Affairs, Dr. Laurence Baker, chief of health services research at Stanford University showed that physicians ordered substantially more scans once they began billing for MRI. For example, after orthopedists began billing for MRI, the number of MRI procedures used within thirty days of a first visit increased by about 38 percent.

What may be missed in all this research is the identification of the underlying causes of this rise in self-referrals.

In an excellent analysis of the federal government’s efforts to slow rising costs, Princeton Economics Professor Uwe Reinhardt wrote a series of articles in the New York Times late last year showing that those efforts have largely been an exercise in “whack-a-mole.” Every effort of the government to curb costs in one place results in costs popping up somewhere else.

Reinhardt chronicled the government efforts starting with the Ethics in Patient Referrals Act of 1989, which became to be known as Stark I for Representative Pete Stark who crafted the bill. Under the bill, Medicare prohibited physicians from referring patients to diagnostic laboratory services in which they had direct financial interests. In 1993 Stark II expanded the prohibition to 10 designated health services, including a wide range of imaging services.

In addition, in response in part to a growing alarm about rising costs, Medicare began severely limiting increases in what it would pay for physician fees to just 7 percent between 2000 and 2009. During that period, Reinhardt says the Medicare Economic Index shows that costs for medical practices rose 34 percent. To recover the difference between the tiny increases in physicians’ fees, spending on physician services grew by 46 percent.

Over that period, the net incomes of primary care physicians grew only modestly, while that of physicians earning the bulk of their income by providing technical procedures, including diagnostic tests, MRIs, ultrasounds and CT scans rose at an average annual compound rate of 7.1 percent from 2000 to 2009.

Because such ancillary services provided by physicians in their offices, including imaging services, are exempt from Stark II, the market responded with a rise in investment in these imaging and other technologies, thus spawning the boom in self-referral and starting anew the cycle of studies leading to new government initiatives to curb healthcare costs, this time in the form of Speier’s bill to curb self-referral.

The bill brings into sharp focus the dilemma facing Americans as the Affordable Care Act struggles to forge a healthcare system that both provides high quality care that is accessible to all while preserving the free-market delivery system. Clearly the mountain of evidence shows that at least one of the major forces driving up U.S. healthcare costs is the system itself.

As providers compete with each other by acquiring technology, their costs go up and the pressure to pay for and profit from those investments ultimately results in delivering more services and charging more fees at the expense of patients who derive little added benefit from unnecessary tests and treatment. The result is a healthcare system that costs twice as much as that of other countries, while producing poorer overall outcomes.

By Michael O’Leary, contributing writer, Health Imaging Hub

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