Self-referrals and conflicts of interest: 2011 will focus on reimbursement for technology and facility ownerships

Douglas W. Jackson

by Douglas W. Jackson, MD

Physician self-referral is a term currently used in the media to imply a conflict of interest. By definition, self referral is when a physician schedules tests or recommends procedures on a patient that are performed by that surgeon and/or from a facility in which he or she receives financial incentives for that referral. Examples of this in orthopedic practices would include ordering X-rays, imaging studies and physical therapy performed at a facility owned or leased by the ordering physician. Self-referral is also considered by some to be recommending a surgical procedure that the physician performs after coming to a diagnosis and treatment plan with the patient.

There is a growing trend in the press and among regulators of questioning all physician-owned ancillary services where we may send our patients. These types of self-referrals are being stigmatized and blamed by many experts in health care as contributing to unnecessary and excessive utilization of medical resources and contributing to our soaring national health care costs.

There are scandals exposed periodically of fraudulent billings from self-owned facilities as well as published reports implying that in certain circumstances physical therapy is recommended twice as often by physicians with a stake in the therapy centers than physicians with no financial ties to the facilities. In addition, critics have implied that nearly 40% of body scans ordered by physicians who owned imaging centers were deemed unwarranted, in comparison to a rate of 28% requested by independent doctors.

Stark legislation

The Stark laws were written and passed by Congress with the intent of decreasing the ability to self-refer and reduce overutilization and unnecessary testing. Exceptions included in that legislation allowed testing in physicians’ offices which critics feel neutered the intent of the law. Under the in-office exception, many orthopedic surgeons utilize digital roentgenogram equipment, MRI scanners and, on occasion, CT scanners in their offices. I would anticipate that Stark or other legislators will attempt to write new legislation in an attempt to further curtail some aspects of self referral related to ancillary services. In addition, there are ongoing lobbying efforts from hospital associations and radiologists to restrict physician ownership of ancillary and imaging services.

The increase in self-referrals to physician-owned ancillary services was occurring simultaneously as declining reimbursements for surgical procedures and “cognitive” physician care. Besides patient convenience and quality control, ancillary services were added to keep physicians’ practices as financially viable as possible. In some current incidences, the income stream from ancillary services approach and even exceeds that earned by the physicians from direct patient care. Ancillary services in the office offer convenience to the patient and often can be done less expensively than in hospital and other radiology facilities.

Need for comparative effectiveness research

Let us look at two examples of self-referral that will be getting more attention in 2011: One is outside of orthopedics and one within. As the result of the rising cost for Medicare and its increasing percentage of our federal budget, cost cutting measures will be vigorously explored in 2011. While Medicare has been prohibited from publishing individual physician billings, there will be much more published of composite billings and regional variations as well as flagrant examples of fraud.

These two examples I have chosen are presented to stimulate your thinking in the controversial area of deciding on Medicare-covered treatments: prostate cancer treatment and the use of spinal fusion surgery. It is not my intent to comment on the varied scientific and patient issues impacting reasons to neither choose these technologies nor make any comments on the issue of royalties. There are respected surgeons on both sides of the issues for using this new technology in Medicare cases.

These are medical conditions that do not have the natural history clarified in the Medicare population and there is a lack of agreement for optimal treatment. Under these circumstances, we will see forces outside of organized medicine making many of the future utilization decisions. If Medicare will not reimburse for a new technology in the senior age group, the use of the specific technology with drop off significantly.

The issue driving this debate is the high reimbursement for new technology that is still awaiting definitive outcomes to justify the additional costs. In the case of the 190,000 American men who are diagnosed with prostate cancer each year, the best treatment in the older population remains controversial as prostate cancer tends to grow slowly. Many victims will die from other causes. A new and appealing treatment for prostrate cancer involves a sophisticated form of radiation therapy called IMRT (intensity modulated radiation therapy). It is widely recognized as superior to the type of external radiation it replaced because it targets the tumor more specifically, limiting damage to healthy tissue. It has become a heated debate among health-care professionals on its cost-effectiveness in the Medicare population. Eight years ago, virtually no patients received the treatment; however in 2008, Medicare spent an estimated $1 billion or more on IMRT largely for the treatment of prostate cancer.

This example points out the pressing need for comparative effectiveness research to provide us data as Medicare is constrained from considering cost alone as the basis in coverage decisions for new technologies. The reimbursements for new technology are driven by the companies to encourage practitioners to use a new technology that is being introduced and promoted. The Medicare payment system, whether it is to a urologist, a radiation oncologist, or other professionals, the reimbursement for using new technology needs to be in line with treatments of proven effectiveness. Companies’ strategies for most new technology include presenting a return on investment for physicians. The argument is made that owning IMRT machines offers lucrative Medicare reimbursement. It has been presented that one urologist managing two new IMRT cases per month can expect a potential increase in income of $336,000 annually. This is an oversimplification and assumes ongoing flow of patients receiving this technology and continued reimbursement at close to current levels.

Paying for new technology

One example in orthopedic surgery which remains a controversial procedure for all but a few indications in the Medicare population is spinal fusion at one or multiple levels. The rods and screws implanted for spinal fusion can cost the payers tens of thousands of dollars for the hardware. Corporate whistleblowers and congressional critics contend that the companies influence and offer promotions to surgeons that represent conflicts of interest and result in the overuse of surgical hardware in this population. The comparisons are being made for spinal implant “kickbacks” similar to those that were made in joint replacements. The Medicare system and even private insurance is asking for supportive data to substantiate these additional costs for this new technology in the elderly and disabled.

With the limits on our resources to continue to fund Medicare, someone or groups will have to make tough cost-minded judgments on what procedures are justified in patient care. Spinal implants are just one of many examples that have been targeted as areas where there is a need to remove any financial incentive that may result in more surgeries than necessary.

We, as a profession, and our patients will be served to assist in cutting unnecessary costs for Medicare entitlements. We need to be leaders and help address these issues in 2011. It does not help us to argue in the press over our individual opinions if a spinal fusion is appropriate in the aging population for more then a small number of conditions. We need to be part of the urgent need for comparative effectiveness research in this area. Studies chosen for decision making will be done with or without us.

We need to be part of cost-effectiveness and quality-of-life studies or live with the ones that are done.

Douglas W. Jackson, MD, is chief medical editor of Orthopedics Today. He can be reached at Orthopedics Today, 6900 Grove Road, Thorofare, NJ 08086; e-mail: OT@slackinc.com.