Inappropriate Utilization

The dramatic proliferation in the volume of diagnostic medical imaging services performed by physicians, including non-radiologists, has inflicted a colossal burden on the U.S. health care system, especially Medicare. The leading component of this explosion is the growing trend of entrepreneurial physicians manipulating the in-office ancillary services exception to the Stark self-referral law. The ACR is deeply concerned that this exception has become a damaging loophole.

Issue Background

While this exception is designed to protect physicians who provide certain designated health services that are generally ancillary to the medical service provided by their practice, the ACR is deeply concerned that this exception has become the rule and serves as a damaging loophole. Current data demonstrates that costs associated with the volume of diagnostic medical imaging services are increasing faster than that of prescription drugs and three times faster than all other physician services.

Physician self-referrals have been a problem prevalent within the medical profession for over two decades. The referral of a patient by a physician to medical facilities in which the physician has a financial interest not only poses a conflict of interest, but also, in the case of diagnostic medical imaging, encourages inappropriate utilization of those services, which in turn drives up health care costs throughout the country. Moreover, these types of arrangements eliminate competition, and thus limit the choice for patients and adversely affect the practice of other health care providers.

In order to remedy the problem of self-referral, Congress included a provision known as “Stark I” in the Omnibus Budget Reconciliation Act of 1989. This provision prohibits self-referrals of clinical laboratory services under the Medicare program. Congress expanded the scope of Stark I and passed subsequent legislation known as “Stark II,” which was included in the Omnibus Budget Reconciliation Act of 1993. Stark II includes additional health services and also applies the limitation to both Medicare and Medicaid. Following the enactment of Stark II, the Government Accountability Office (“GAO”), formerly the General Accounting Office, released a study specifically illustrating the inappropriate utilization of diagnostic medical imaging resulting from self-referral. Its data clearly indicated that physician owners of diagnostic imaging devices referred their patients more frequently, for more expensive services, than non-owners, including 54% more magnetic resonance imaging (“MRI”) scans, and 27% more computed tomography (“CT”) scans.

Today, many physician specialties are disgruntled with declining reimbursements for their services and are actively searching for supplemental revenue streams. Because of the exception for in-office ancillary services, these physicians are either opening their own diagnostic imaging centers featuring highly utilized imaging modalities, such as MRI and CT, or purchasing such equipment for their office. These types of arrangements allow physicians to bill insurance providers and Medicare for both the technical and professional components of these expensive scans and studies. However, the purchase and utilization of diagnostic medical imaging modalities by non-radiologists undermines the legislative intent of the Stark law and has the potential to deprive patients from obtaining affordable, quality health.

During the eleven years since the GAO study and implementation of Stark II, technological advancements not only have improved the type and quality of the diagnostic imaging modality, but also have made the cost of this equipment more affordable, enabling even more non-radiologists to purchase these devices for their own use. However, non-radiologists often purchase older equipment, which have a propensity to produce poor quality images. Furthermore, because of the financial incentives steering these physicians who own imaging modalities, more images than necessary are ordered, which exposes patients to an inordinate and unhealthy amount of radiation.

Yet, some contend that physicians offer in-office services, such as MRI and CT, as a convenience for patients and that the rapidly increasing volume of diagnostic imaging being administered is a result of defensive medicine, which physicians are practicing in response to the medical liability crisis sweeping the nation. Although the ACR acknowledges defensive medicine is a factor, it maintains that the primary force driving non-radiologists to purchase and inappropriately utilize these imaging devices is the opportunity to capitalize on the loophole and increase profits.

Most Recent Federal Legislation

On April 6, 2017, Representatives Jackie Speier (D-CA) and Dina Titus (D-NV) introduced H.R. 2066, the Promoting Integrity in Medicare Act (PIMA), which would remove advanced diagnostic imaging services (MRI, CT, and PET), radiation therapy, anatomic pathology, and physical therapy from the in-office ancillary services exception within the Stark self-referral law. H.R. 2066 was referred to the House Committees on Energy and Commerce and Ways and Means. No Senate companion bill has been introduced to date.

Committees of Jurisdiction

• Finance
• Health, Education, Labor and Pensions

• Energy & Commerce
• Ways & Means

For more information, please read CMS Physician Self-Referral Final Rule - A New Era for Stark?