Medicare:

Referrals to Physician-Owned Imaging Facilities Warrant HCFA's Scrutiny

HEHS-95-2: Published: Oct 20, 1994. Publicly Released: Nov 22, 1994.

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Pursuant to a congressional request, GAO compared physicians' referral rates for diagnostic imaging services, focusing on: (1) referrals by physicians with a financial interest in joint-venture imaging service facilities; and (2) whether the Department of Health and Human Services' (HHS) procedures and policies are effective in monitoring and identifying abusive self-referral practices.

GAO found that: (1) Florida physicians with financial interests in joint-venture imaging centers had higher referral rates for a wide variety of imaging services than other Florida physicians; (2) the differences in referral rates were the greatest for costly high-technology imaging services; (3) physicians with financial interests in imaging centers offering magnetic resonance imaging (MRI) services ordered twice as many MRI scans as physicians with no financial interests in these centers; (4) Florida's Medicare costs could have been reduced by about $10 million in 1990 if physicians with financial interests in imaging centers ordered imaging services at the same rate as other Florida physicians; (5) Florida physicians that offered in-practice imaging services ordered 3 times as many MRI scans, 2 times as many computed tomography scans, 5 times as many ultrasound scans, and 4.8 times as many echocardiograms as physicians that referred their patients to outside facilities; (6) HHS has not finalized the regulations that are needed to implement and enforce federal self-referral restrictions; and (7) the Health Care Financing Administration (HCFA) and Medicare contractors have not developed procedures to systematically monitor physician referral practices or identify the overutilization of medical services provided through in-practice self-referrals.

Status Legend:

More Info
  • Review Pending-GAO has not yet assessed implementation status.
  • Open-Actions to satisfy the intent of the recommendation have not been taken or are being planned, or actions that partially satisfy the intent of the recommendation have been taken.
  • Closed-implemented-Actions that satisfy the intent of the recommendation have been taken.
  • Closed-not implemented-While the intent of the recommendation has not been satisfied, time or circumstances have rendered the recommendation invalid.
    • Review Pending
    • Open
    • Closed - implemented
    • Closed - not implemented

    Recommendations for Executive Action

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop the procedures and policy guidance needed for the Medicare contractors to closely monitor Medicare imaging referral patterns and utilization rates.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: On January 9, 1998, HCFA published a "Proposed Rule on Physicians' Referrals to Health Care Entities With Which They Have Financial Relationships" (Regulation 1998. Identification Number 0938-AG80). Following review of comments on the proposed rule, HCFA published a Final Rule (RIN 0938-1809 FC) on January 4, 2001, incorporating substantial changes. A comment period on the final rule concluded on June 5, 2001, and the rule became effective in 2002. CMS has developed guidance for its contractors and the provider community to help providers comply with the rules. CMS plans a second phase of rulemaking on this issue, with additional guidance materials to follow.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop the procedures and policy guidance needed for the Medicare contractors to ensure compliance with the provisions of the self-referral ban.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: The Final Rule, "Physician Referrals to Health Care Entities With Which They Have Financial Relationships" (RIN 0938-1809-FC) was issued on January 4, 2001, with a comment period, to be effective in 2002. This is considered to be the Phase I final rule--further rulemaking is anticipated. To date, the agency has provided policy guidance on the rules available on the web, and has issued two advisory opinions concerning whether specific arrangements violate the self-referral ban. According to the final rule, the agency intends to provide further educational materials after Phase II of the final rule is published.

    Recommendation: The Secretary of Health and Human Services should direct the Administrator, HCFA, to develop the procedures and policy guidance needed for the Medicare contractors to identify any overutilization of imaging services ordered and provided from within physician practice settings.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Implemented

    Comments: The Final Rule, "Physician Referrals to Health Care Entities With Which They Have Financial Relationships" (RIN 0938-1809-FC) was issued on January 4, 2001, with a comment period, and was effective in 2002. Since then, CMS has published educational materials and advisory opinions to help guide contractors and physicians.

    Recommendation: The Secretary of Health and Human Services should systematically review imaging utilization information developed by HCFA and use the authority provided under the Omnibus Budget Reconciliation Act of 1993 to develop any additional regulations needed to reduce overutilization through abusive self-referral practices.

    Agency Affected: Department of Health and Human Services

    Status: Closed - Not Implemented

    Comments: The Final Rule, "Physician Referrals to Health Care Entities With Which They Have Financial Relationships" (RIN 0938-1809-FC) was issued on January 4, 2001, with a comment period, and was effective in 2002. CMS is planning a second phase of final rulemaking. Since this recommendation was made, CMS has developed better capacity to analyze claims in certain jurisdictions to identify problem billing practices. This recommendation anticipates that CMS will obtain data on referral patterns at some point in the future, and the Secretary will analyze the data to determine if further regulation is needed. Because of the nature of the rulemaking on the complex issues of self referral, CMS may not be able to fully implement the recommendation for several more years.

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