[Congressional Record Volume 141, Number 42 (Tuesday, March 7, 1995)]
[Extensions of Remarks]
[Pages E534-E535]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]


PATIENTS BEWARE: SELF-SERVING PHYSICIANS URGE REPEAL OF PHYSICIAN SELF-
                             REFERRAL LAWS

                                 ______


                        HON. FORTNEY PETE STARK

                             of california

                    in the house of representatives

                         Tuesday, March 7, 1995
  Mr. STARK. Mr. Speaker, the following list of physician self-referral 
studies highlights the urgent need to uphold self-referral laws. Greedy 
physicians, interested more in personal gain than in their patient's 
welfare, have mounted an effort to repeal these laws.
  Physician self-referral is one of the most significant cost drivers 
in American medicine. According to some experts, billions of dollars 
are wasted each year on referrals motivated by physicians' financial 
gains and not strictly by their patients' medical needs. The following 
studies represent just some of the evidence that demonstrates when 
physicians are in a self-referring situation, they order more tests and 
charge more money for services than non-self-referring physicians. The 
evidence is convincing--patients need protection.
           [From the Department of Health and Human Services]

                         Self-Referral Studies

       A. Financial Arrangements Between Physicians and Health 
     Care Businesses: Office of Inspector General--OAI-12-88-01410 
     (May 1989)
       In 1989, the Office of Inspector General (OIG) issued a 
     study on physician ownership and compensation from entities 
     to which they make referrals. The study found that patients 
     of referring physicians who own or invest in independent 
     clinical laboratories received 45 percent more clinical 
     laboratory services than all Medicare patients in general, 
     regardless of place of service. OIG also concluded that 
     patients of physicians known to be owners or investors in 
     independent physiological laboratories use 13 percent more 
     physiological testing services than all Medicare patients in 
     general. Finally, while OIG found significant variation on a 
     State by State basis, OIG concluded that patients of 
     physicians known to be owners or investors in durable medical 
     equipment (DME) suppliers use no more DME service than all 
     Medicare patients in general.
       B. Physicians Responses to Financial Incentives--Evidence 
     from a For-Profit Ambulatory Care Center; Hemenway D, Killen 
     A, Cashman SB, Parks CL, Bicknell WJ: New England Journal of 
     Medicine, 1990:322;1059-1063
       Health Stop, a chain of for-profit ambulatory care centers, 
     changed its compensation system from a flat hourly wage to a 
     system where doctors could earn bonuses that varied depending 
     upon the gross income they generated individually. A 
     comparison of the practice patterns of fifteen doctors before 
     and after the change revealed that the physicians increased 
     the number of laboratory tests performed per patient visit by 
     23 percent and the number of x-ray films per visit by 16 
     percent. The total charges per month, adjusted for inflation, 
     grew 20 percent, largely due to an increase in the number of 
     patient visits per month. The authors concluded that 
     substantial monetary incentives based on individual 
     performance may induce a group of physicians to increase the 
     intensity of their practice, even though not all of them 
     benefit from the incentives.
       C. Frequency and Costs of Diagnostic Imaging in Office 
     Practice--A Comparison of Self-Referring and Radiologist-
     Referring Physicians; Hillman BJ, Joseph CA, Mabry MR, 
     Sunshine JH, Kennedy SD, Noehter M. New England Journal of 
     Medicine, 1990:322;1604-1608
       This study compared the frequency and costs of the use 
     diagnostic imaging for four clinical presentations (acute 
     upper respiratory symptoms, pregnancy, low back pain, or (in 
     men) difficulty in urinating) as performed by physicians who 
     used imaging equipment in their offices (self-referring) and 
     as ordered by physicians who always referred patients to 
     radiologists (radiologist-referring). The authors concluded 
     that self-referring physicians use imaging examinations at 
     least four times more often than radiologist-referring 
     physicians and that charges are usually higher when the 
     imaging is done by the self-referring physicians. Those 
     differences could not be attributed to differences in the mix 
     of patients, the specialties of the physicians or the 
     complexity of 
     [[Page E535]] the complexity of the imaging examinations 
     performed.
       D. Joint Ventures Among Health Care Providers in Florida: 
     State of Florida Cost Containment Board (September 1991)
       This study analyzed the effect of joint venture 
     arrangements (defined as any ownership, investment interest 
     or compensation arrangement between persons providing health 
     care) on access, costs, charges, utilization, and quality. 
     The results indicated that problems in one or more of these 
     areas existed in the following types of services: (1) 
     clinical laboratory services; (2) diagnostic imaging 
     services; and (3) physical therapy services-- rehabilitation 
     centers. The study concluded that there could be problems or 
     that the results did not allow clear--
      conclusions with respect to the following health care 
     services; (1) ambulatory surgical centers; (2) durable 
     medical equipment suppliers; (3) home health agencies; and 
     (4) radiation therapy centers. The study revealed no 
     effect on access, costs, charges, utilization, or quality 
     of health care services for; (1) acute care hospitals; and 
     (2) nursing homes.
       E. New Evidence of the Prevalence and Scope of Physician 
     Joint Ventures; Mitchell JM, Scott E: Journal of the American 
     Medical Association, 1992:268:80-84
       This report examines the prevalence and scope of physician 
     joint ventures in Florida based on data collected under a 
     legislative mandate. The results indicate that physician 
     ownership of health career businesses providing diagnostic 
     testing or other ancillary services is common in Florida. 
     While the study is based on a survey of health care 
     businesses in Florida, it is at least indicative that such 
     arrangements are likely to occur elsewhere.
       The study found that at least 40 percent of Florida 
     physicians involved in direct patient care have an investment 
     interest in a health care business to which they may refer 
     their patients for services; over 91 percent of the physician 
     owners are concentrated in specialities that may refer 
     patients for services. About 40 percent of the physician 
     investors have a financial interest in diagnostic imaging 
     centers. These estimates indicate that the proportion of 
     referring physicians involved in direct patient care who 
     participate in joint ventures is much higher than previous 
     estimates suggest.
       F. Physicians' Utilization and Charges for Outpatient 
     Diagnostic Imaging in a Medicare Population; Hillman BJ, 
     Olson GT, Griffith PE, Sunshine JH, Joseph CA, Kennedy SD, 
     Nelson WR, Bernhardt LB: Journal of the American Medical 
     Association, 1992:268:2050-2054
       This study extends and confirms the previous research 
     discussed in section C, above, by focusing on a broader range 
     of clinical presentations (ten common clinical presentations 
     were included in this study); a mostly elderly, retired 
     population (a patient population that is of particular 
     interest with respect to Medicare reimbursement); and the 
     inclusion of higher-technology imaging examinations. The 
     study concluded that physicians who own imaging technology 
     employ diagnostic imaging in the evaluation of their patients 
     significantly more often and as a result, generate 1.6 to 6.2 
     times higher average imaging charges per episode of medical 
     care than do physicians who refer imaging examination to 
     radiologists.
       G. Physician Ownership of Physical Therapy Services; 
     Effects on Charges, Utilization, Profits, and Service 
     Characteristics; Mitchell JM, Scott E: Journal of the 
     American Medical Association, 1992:268:2055-2059
       Using information obtained under a legislative mandate in 
     Florida, the authors evaluated the effects of physician 
     ownership of freestanding physical therapy and rehabilitation 
     facilities (joint venture facilities) on utilization, 
     charges, profits, and service characteristics. The Study 
     found that visits per patient were 39 to 45 percent higher in 
     facilities owned by referring physicians and that both gross 
     and net revenue per patient were 30 to 40 percent higher in 
     such facilities. Percent operating income and percent markup 
     were significantly higher in joint venture physical therapy 
     and rehabilitation facilities. The study concluded that 
     licensed physical therapists and licensed therapist 
     assistants employed in a non-joint venture facilities spend 
     about 60 percent more time per visit treating patients than 
     those licensed workers in joint venture facilities. Finally, 
     the study found that joint ventures also generate more of 
     their revenues from patients with well-paying insurance.
       H. Consequences of Physicians' Ownership of Health Care 
     Facilities--Joint Ventures in Radiation Therapy; Mitchell JM, 
     Sunshine, IH; New England Journal of Medicine 1992; 327; 
     1497-1501
       This study examined the effects of the ownership of 
     freestanding radiation therapy centers by referring 
     physicians who do not directly provide services (``joint 
     ventures'') by comparing data from Florida (where 44 percent 
     of such centers were joint ventures during the period of the 
     study) to data from elsewhere (where only 7 percent of such 
     centers were joint ventures). The analysis shows that the 
     joint ventures in Florida provide less access to poorly 
     served populations (rural counties and inner-cities) than 
     non-joint venture facilities. The frequency and costs of 
     radiation therapy treatments at free-standing centers in 
     Florida were 40 to 60 percent higher than in non-joint 
     venture facilities; there was no below-average use of 
     radiation therapy at hospitals or higher cancer rates to 
     explain the higher use or higher costs. Some indicators 
     (amount of time spent by radiation physicians with patients 
     and mortality among patients with cancer) show that joint 
     ventures cause either no improvement in quality or a decline.
       I. Increased Costs and Rates of Use in the California 
     Workers' Compensation System as a Result of Self-Referral by 
     Physicians; Swedlow A, Johnson G, Smithline N, Milstein A; 
     New England Journal of Medicine, 1992;327;1502-1506
       The authors analyzed the effects of physician self-referral 
     on three high-cost medical services covered under 
     California's workers compensation physical therapy, 
     psychiatric evaluation and magnetic resonance imaging (MRI). 
     They compared the patterns of physicians who referred 
     patients to facilities of which they were owners (self-
     referral group) to patterns of physicians who referred 
     patients to independent facilities (independent-referral 
     group). The study found that physical therapy was initiated 
     2.3 times more often by the self-referral group than those in 
     the independent-referral group (which more than offset the 
     slight decrease in cost per case). The mean cost of 
     psychiatric evaluation services was significantly higher in 
     the self-referral group (psychometric testing, 34 percent 
     higher, psychiatric evaluation reports, 22 percent higher) 
     and the total cost per case of psychiatric evaluation 
     services was 26 percent higher in the self-referral group 
     than in the independent-referral group. Finally, the study 
     concluded that of all the MRI scans requested by the self-
     referring physicians, 38 percent were found to be medically 
     inappropriate, as compared to 28 percent of those requested 
     by physicians in the independent-referral group. There were 
     no significant difference in the cost per case between the 
     two groups.
       J. Medicare: Referrals to Physician-Owned Imaging 
     Facilities Warrant HCFA's Scrutiny (GAO Report No. B-253835; 
     October 1994)
       The U.S. General Accounting Office (GAO) issued a report 
     regarding: (1) referrals by physicians with a financial 
     interest in joint-venture imaging centers; and (2) referrals 
     for imaging provided within the referring physicians' 
     practice settings. The analyses are based on information 
     collected by researchers in Florida for the Florida Health 
     Care Cost Containment Board and include information on 1990 
     Medicare claims for imaging services ordered by Florida 
     physicians. GAO analyzed approximately 1.3 million imaging 
     services performed at facilities outside the ordering 
     physicians' practice settings and approximately 1.2 million 
     imaging services provided within the ordering physicians' 
     practice settings. These results are significant because they 
     are based on a large-scale analysis of physician referral 
     practices.
       GAO found that physician owners of Florida diagnostic 
     imaging facilities had higher referral rates than nonowners 
     for almost all types of imaging services. The differences in 
     referral rates were greatest for costly, high technology 
     imaging services; physician owners ordered 54 percent more 
     MRI scans, 27 percent more computed tomography (CT) scans, 37 
     percent more nuclear medicine scans, 27 percent more 
     echocardiograms, 22 percent more ultrasound services, and 22 
     percent more complex X rays. Referral rates for simple X rays 
     were comparable for owners and nonowners. In addition, while 
     referral practices among specialities differed, physician 
     owners in most specialties had higher referral rates than 
     nonowners in the same specialty.
       GAO also compared the imaging rates of physicians who have 
     in-practice imaging patterns (i.e., more than 50 percent of 
     the imaging services they ordered were provided within their 
     practice affiliations) with physicians with referral imaging 
     patterns (i.e., more than 50 percent of the imaging services 
     they ordered were provided at facilities outside their 
     practice affiliations). GAO found that physician with in-
     practice imaging patterns had significantly higher imaging 
     rates than those with referral imaging patterns--the imaging 
     rates were about 3 times higher for MRI scans; about 2 times 
     higher for CT scans; 4.5 to 5.1 times higher for ultrasound, 
     echocardiography, and diagnostic nuclear medicine imaging, 
     and about 2 times higher for complex and simple X rays.
     

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