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Study exposes physician self-referrals

Fee-for-service health care system endangers patients, can raise deductables

When physicians order certain medical tests or procedures to be done for a patient, they have the option to self-refer patients back to their own office. These self-referrals are widely viewed as financially motivated and self-serving, yet loopholes in the law allow their continuation. A recent paper by Eli Adashi, professor of medicine, and Robert Kocher, senior fellow at the University of Southern California, explains how and why these loopholes should be closed.

Self-referrals often lead to excessive and unnecessary testing, which can be dangerous for patients and costly for taxpayers, according to the article published in this month’s issue of the Journal of the American Medical Association.

“If you look at physicians who give imaging scans … many more of the self-referral cases are negative,” said Edward Feller, clinical professor of medicine at the Alpert Medical School. The evidence suggests that many self-referral tests are unnecessary, he added.

Physicians are financially incentivized to self-refer patients largely because the United States currently has a fee-for-service health care system, in which physicians are paid for each test or procedure that is done, Feller said.

A related report issued by the Government Accountability Office “specifically states that these activities, in their judgment, are financially motivated,” Adashi said.

Taxpayers who pay for Medicare,  Medicaid and their own insurance premiums often suffer the consequences, Adashi said. Though the insurance covers the cost of the procedures, excessive testing causes a hike in deductibles, he said.

Overtesting occurs in part because patients do not need to think about the cost of procedures that are covered by insurance, Feller said.

“A fee-for-service system is divorced from patient interest,” he said, adding that he has done thousands of colonoscopies and “never, ever, ever in my career did a patient with health insurance ask me how much it cost, and I wouldn’t have known.”

Educating the general public about the prevalence of overtesting may help solve the problem, Feller said. Copays, deductibles and lifetime limits on health care spending may also aid in alleviating the problem by increasing personal financial responsibility, Adashi added.

Past laws have attempted to prevent physician self-referrals, but over time subsequent amendments and regulations have created loopholes.

In order to reduce self-referral rates, Adashi said he recommends switching from the current fee-for-service system to a fee-for-value system, in which physicians are paid according the quality of care they provide.

For example, primary care providers are responsible for screening patients for symptoms relating to diabetes, Adashi said. If a patient is found to have diabetes, the physician should also order tests screening for other symptoms of diabetes, such as problems with eyesight and urination. In a fee-for-value system, a physician that orders these tests would be rewarded with a bonus, while physicians who fail to do so would be paid less.

“The idea is to use incentives and disincentives, so you link payment to performance,” Adashi said.

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