Healthcare Business News

Self-referrals costing Medicare millions, GAO report says

By Jaimy Lee
Posted: July 15, 2013 - 7:30 pm ET

(Story updated with industry comment at 2:30 p.m. ET Tuesday, July 16.)

Physicians who prepare and examine tissue samples in their own practices rather than referring them to labs report higher use of the services, suggesting that the financial incentives behind self-referrals may be driving the increase, according to the Government Accountability Office.

In a new report (PDF), the GAO concludes that Medicare would have saved $69 million on anatomic pathology services in 2010 if self-referring physicians performed biopsies at the same rate and referred the same number of services per procedure as non-self-referring providers.

The agency found that number of self-referred pathology services and Medicare expenditures on them rose at a faster rate than non-self-referred anatomic pathology services from 2004 to 2010.

“Today's GAO report sheds new light on the behavior of physicians reaping personal gain by referring patients to services at locations where they have an ownership interest,” Rep. Henry Waxman (D-Calif.) said in a news release. Waxman was one of four members of Congress who requested the report, joining Sen. Max Baucus (D-Mont.), Sen. Charles Grassley (R-Iowa) and Rep. Sandy Levin (R-Mich.).

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Almost all self-referred anatomic pathology services are performed by dermatologists, gastroenterologists and urologists, according to the GAO. The services are used to diagnosis cancer, gastroenteritis and other diseases. While biopsies are generally safe, the procedures can lead to complications such as bleeding, bruising and infections that may result in hospitalization.

Medical associations representing those specialties had not responded to requests for comment at deadline.

“This increase raises concerns, in part because biopsy procedures, although generally safe, can result in serious complications for Medicare beneficiaries,” the GAO concluded in the report. “Further, our analysis shows that across these provider specialties, providers' referrals for anatomic pathology services substantially increased the year after they began to self-refer.”

The GAO went on to recommend that the CMS require providers of anatomic pathology services to flag when the treatment was self-referred, develop a policy that ensure that biopsies performed by self-referring physicians are appropriate, and implement a new payment model for anatomic pathology services that would limit financial incentives.

HHS disagreed with the first two suggestions. Officials countered in a letter responding to the findings that neither strategy was likely to make much of a dent in the problem. President Barack Obama, the letter notes, asked Congress to narrow the Stark law exception that allows certain services to be self-referred. Obama's fiscal 2014 budget blueprint estimated that eliminating the loophole for certain services would save $6.1 billion over 10 years. Anatomic pathology services, HHS said, “may share certain characteristics with the services mentioned in the president's proposal.”

A 2012 GAO report also looked at the role of self-referrals among physicians who own diagnostic imaging systems and found those doctors made 400,000 more referrals in 2010 compared to physicians who do not own imaging equipment. Those referrals cost Medicare an additional estimated $109 million that year.

The GAO made similar recommendations for the CMS at that time.

Several organizations said the report's findings reinforced their concerns about physician self-referrals. The American Clinical Laboratory Association said Congress should pass legislation that would restrict self-referrals for anatomic pathology, advanced diagnostic imaging, radiationtherapy, and physical therapy services.

“This reform would restrict self-referral in order to safeguard patient safety and healthcare quality as well as to allow for better control of our nation's healthcare expenditures under Medicare,” ACLA President Alan Mertz in a statement.

Follow Jaimy Lee on Twitter: @MHjlee

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