Medicare: Referring Physicians' Ownership of Laboratories and Imaging Centers

GAO discussed physician referrals to clinical diagnostic laboratories and diagnostic imaging centers in Maryland and Pennsylvania, focusing on: (1) physician ownership of laboratories and imaging centers; (2) utilization rates and referral patterns of physician owners and nonowners; and (3) investment opportunities in facilities and the return gained on investments. GAO noted that questionnaire responses indicated that: (1) at least 30 of the 164 laboratories or imaging centers in Maryland and 142 of the 482 in Pennsylvania had multiple physician owners not in the speciality related to the facility; (2) most of the physician-owned facilities were established during the last 4 years; (3) physician owners tended to order more laboratory tests than nonowners; (4) owners tended to order fewer, but more expensive, imaging services than nonowners; (5) three of the five facilities it reviewed regarding investment opportunities and returns were owned exclusively by physicians, who used cash or promissory notes for their initial investment; and (6) 1988 distributions to partners for three of the five facilities ranged from 38 percent to 48 percent of the owners' initial investment.