Self-Referrals Cost Medicare an Extra $109 Million, GAO Says

Marcia Frellick

November 02, 2012

A new Government Accountability Office (GAO) report finds that physician self-referrals for advanced imaging are rapidly increasing and cost Medicare more than $100 million in 2010.

With this controversial practice, a physician orders a test on a patient that is performed by him- or herself or by another physician or facility with whom the ordering physician has financial ties.

Critics say self-referral is a conflict of interest and that physicians are ordering more tests than they would if they did not have that financial stake, which exposes more patients to unnecessary radiation.

Proponents say self-referral has benefits, including continuity of care by the same physician and convenience for physicians and patients. They say that tying physicians' hands on this option could affect care.

John Tongue, MD, president of the American Academy of Orthopaedic Surgeons (AAOS), said in an emailed statement, "The AAOS believes that the provision of in-office imaging services is critically important for musculoskeletal patients and can lead to greater patient adherence to treatment plans and improved outcomes.... Significant technological advances have been made in our field so that patients can receive timely and accessible screenings from the comfort of their doctor's office. We believe that any restriction on this convenience would threaten the quality of care being delivered to our patients."

In the report, titled "Higher Use of Advanced Imaging Services by Providers Who Self-Refer Costing Medicare Millions," the GAO estimates that Medicare spent $109 million more in 2010 alone than it would have without these self-referral incentives.

This study focused on magnetic resonance imaging (MRI) and computed tomography (CT) scans from 2004-2010. It found that the number of self-referred MRI services shot up by more than 80% compared with a 12% increase for non-self-referred MRI services.

For CT scans, the growth in self-referred services in that period more than doubled (up 107%), whereas non-self-referred CT services increased by 30%.

The prevalence of self-referrals was behind the initial request for the report by Democratic Reps. Henry Waxman and Pete Stark of California and Sander Levin of Michigan, and Sens. Max Baucus (D-MT) and Chuck Grassley (R-IA).

Sen. Baucus' office said in a statement emailed to Medscape Medical News, "This report revealed the dramatic rise in the number of self-referrals. In many of these cases, doctors are ordering tests that are unnecessary because they have a financial stake. Doctors do this to run up costs and send the bill to Medicare. These doctors are lining their own pockets at the expense of patients and taxpayers. This is unacceptable."

Reform had support from the other side of the aisle as well. Sen. Grassley said in a press release about the report's findings: "The challenge is to develop a payment system that safeguards beneficiary access to services while preventing self-referrals by physicians who abuse the system."

In light of the report, the GAO made 3 recommendations to the Centers for Medicare & Medicaid Services (CMS):

  • Insert a flagging system in Medicare Part B claim forms indicating when a referral for imaging services is a self-referral.

  • Develop a system for decreasing the reimbursement for self-referral to recognize it should cost less if the referring physician also performs the imaging service.

  • Address the substantial increase in these referrals and verify that when these referrals are made, they are appropriate.

According to the report, the US Department of Health and Human Services (HHS), which oversees CMS, stated it would consider the third recommendation but rejected the other two.

In rejecting the flagging system, the report says, CMS believes that a new checkbox on the form that notes self-referral would be complex to administer and that providers may not accurately characterize referrals.

As far as decreasing reimbursement, the report states that HHS says that is already accounted for in CMS' multiple-procedure payment reduction system. It also says reducing the pay might even increase the use of self-referral because the underlying incentive for physicians would be to use the practice more frequently to make up the income lost to reduced pay.

David Levin, MD, emeritus professor of the Department of Radiology at Thomas Jefferson University in Philadelphia, Pennsylvania, says of the 3 recommendations that the biggest success would come from reducing physicians' reimbursements. He says that cut should be 50%, which he says is high enough to keep physicians from trying to compensate with more self-referrals.

"Is that going to happen? I kind of doubt it, because it's a political hot potato and the CMS and Congress don't want to alienate a large number of physicians," he said.

Dr. Levin also said that self-referring physicians should have to get preapprovals for imaging for Medicare patients just as they do for the commercially insured. The self-referrals should have to meet the standards of radiology benefits management companies before preapproval to help cut down on the number of unnecessary referrals, he said. Some Medicare Advantage plans require this, but traditional Medicare does not.

The GAO report bounces the self-referral issue back to HHS, Congress, and state governments.

"In my opinion, nothing is going to happen," Dr. Levin said. "This report by the GAO is not the first time people have raised this red flag. People have talked about this for 40 years. There are studies that go back to 1972 that show self-referral inevitably leads to higher utilization of imaging, and no one has taken any action on it yet."