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 found that: (1) of the responses received, 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 selected were owned exclusively by physicians, and investors used cash or promissory notes for their initial investments; and (6) 1988 distributions to partners for three of the five facilities ranged from 38 to 48 percent of the owners' initial investment.