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The good, the bad and the ugly: Self-referrals have many implications
Chief Medical Editor Douglas W. Jackson, MD, asks Jack M. Bert, MD, about the potential for success and inherent danger in self-referring.
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Jack M. Bert, MD, has extensive knowledge, experience and interest in the business of orthopedics. In this interview, I asked him to comment on the concept of self-referral in the changing marketplace of ancillary services.
Douglas W. Jackson, MD
Chief Medical Editor
Douglas W. Jackson, MD: Who are the players influencing reimbursement for physician-owned ancillary services?
Jack M. Bert, MD: First, the American Hospital Association wants to reduce physician ownership of ancillary services, arguing that it reduces referrals to their local hospital. This is despite the fact that hospitals have had their best year in more than 7 years (profits were approximately 5.4% in 2006).
Second, the radiologists want MRI ownership predicated on completing a residency in radiology so that they obtain 100% of the facility fee.
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Third, physical therapists have won landmark decisions in three states and argue that orthopedists should not be able to own their own physical therapy departments so that "self-referrals" do not occur.
Perhaps the most onerous development is that insurers are now arguing that physicians "owe them money back" that was spent on MRIs performed to diagnose a patient's injury, based upon the argument that they "self-referred" the patient to his or her own scanner!
Jackson: What has been your experience with MRI usage and reimbursement in Minnesota?
Bert: In our state, the majority of insurers will not allow a patient to be operated on without a positive MRI. Our extremity scanners are between 30% to 35% less expensive with respect to charges and reimbursements than a hospital-based or radiologist-based scanner. We have collected Explanations of Benefits confirming this statement from multiple patients with different insurers. Why would an insurer care where the scan was performed, based upon who owned it, unless there truly was an abusive quantity of referrals occurring in the marketplace by physician groups that have their own scanners?
Also, why wouldn't they allow only a fixed reimbursement based upon the lowest-priced scanners in any given location? And, if they are so concerned about abusive self-referrals, why don't they track the number of scans performed, based upon patient volume within the group practice, or develop a "second-opinion program," which has been done in our state. The early results of this concept have resulted in increased insurance costs for the second opinion because the vast majority of scans have been positive anyway.
There is an interesting lead article in the Journal of Bone & Joint Surgery in 2005 in which a relatively large orthopedic group retrospectively reviewed their outpatient surgical volume before and after instituting a physician-owned ambulatory surgery center (ASC). In the end, there was no change in surgical volume regardless of physician ownership.
Jackson: What are the advantages of physician-owned MRI units?
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Bert: The advantages of physician ownership of MRIs is that it allows the orthopedist to choose the absolute best MRI radiologists in the country to read the MRI from their unit at minimal cost (charges vary nationally from $75 to $175). The lower Tesla MRI units provide excellent images, as confirmed by our radiologists.
The maintenance costs of these extremity units are a fraction of the cost of the older whole-body 1.5 Tesla units. However, newer whole-body scanners are about 30% to 40% of the yearly maintenance costs of the older systems.
Also, the convenience of having a scanner contained within the orthopedic office or nearby with the ability to provide same-day (or within a few days) imaging appointments results in excellent patient convenience.
Finally, the cost to the health care system is less due to the decrease in charges to the insurer, which, ironically in this case, they do not seem to appreciate.
Jackson: What is your approach to the self-referral denials for MRI studies that are being proposed and implemented in some areas?
Bert: My approach to this crisis would be to meet with the medical director of the insurance company(s) and explain the advantages of physician ownership of MRI services. You should develop a fair, equitable and efficient screening process with the insurer to allow for an MRI to be ordered for a patient with a specific symptom complex. Once this is agreed upon, determine a reasonable reimbursement for the MRI scan, which will undoubtedly be below what a hospital- or radiologist-owned private scanner would charge. If this can be achieved, the insurer will save money and the physician will achieve his personal goal of being able to obtain a high-quality scan efficiently, while still obtaining a reasonable reimbursement.
Both the insurer and the orthopedist must be fair during their negotiations, or neither side will win in this situation. If the physician group demands too high a reimbursement and the negotiations fail, neither side will obtain a reasonable result, which is generally true in any negotiation with a payer. Both sides must feel like they have done reasonably well in the negotiating process in order to resolve this type of conflict.
There is an old adage that I have found particularly compelling when negotiating with payers. For them, "It's not the money … it's the money." As physicians, it is particularly disheartening when we are concerned about quality of care, as evidenced by our desire to make certain that our patients obtain the highest-quality MRI scan possible at a fair price. The payers, however, are more concerned about costs. That is their business model. It is imperative that orthopedists are aware of this and make certain that they (the insurers) understand that we can be of benefit to them by providing outstanding quality and service at a lower cost than other providers (ie, hospitals and radiologists) by utilizing our own scanners and without abusing the system.
For more information:
- Jack M. Bert, MD, 17 W Exchange St., 307 Gallery Medical Building, Saint Paul, MN 55102; 651-223-9204; bertx001@tc.umn.edu.
- Woods GW, O'Connor DP, Pierce P. Orthopaedic surgeons do not increase surgical volume after investing in a specialty hospital. J Bone Joint Surg. 2005; 87-A:1185-1190.