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This article was originally published in The Gray Sheet

Executive Summary

Magnetic resonance imaging scan referral rates for physicians with ownership in free-standing MRI facilities were 54% higher than for nonowners in a study conducted by the General Accounting Office. The results were released April 20 at a House Ways and Means health subcommittee hearing on physician self- referral. Preliminary results from an ongoing analysis of 1990 Florida Medicare claims found that "physicians with a financial interest in free-standing (nonhospital) imaging facilities refer their patients more frequently, for more expensive imaging services, than do other physicians," according to testimony provided by Janet Shikles, director of health financing and policy issues in GAO's human resources division. GAO also reported that physician owner referral rates were 28% higher for computed tomography and 25% higher for ultrasound and echocardiography. Subcommittee Chairman Pete Stark (D-Calif.) cited the GAO study as evidence of the need for a broad ban on physician self- referral. Stark introduced legislation (H.R. 345) to implement a comprehensive ban on Jan. 6. "This study strongly supports what I have contended all along -- physician ownership and referral arrangements cost all of us money," Stark proclaimed in a prepared statement on the hearing. "Only by enacting a comprehensive, across-the-board ban on referrals can we protect and improve consumers' confidence in their physicians." Stark was the sponsor of a provision in the Omnibus Budget Reconciliation Act of 1990 that bans physician self-referral to clinical laboratories for Medicare services. H.R. 345 would extend the ban to other types of diagnostic facilities and would cover non-Medicare services. Much of the discussion at the hearing centered on possible exemptions from a broad self-referral ban, particularly for underserved rural or inner-city areas where a ban could create problems with access to health services. Reps. Sander Levin (D- Mich.) and Michael Andrews (D-Tex.) maintained that legislation should not prescribe exemptions, but it should allow physicians to apply for exemptions under certain circumstances. Andrews stated: "There may be the need for exceptions, but...I think the burden should fall on those seeking the exceptions." At the same hearing, the subcommittee addressed Clinton Administration proposals to trim $685 mil. from Medicare reimbursement for durable medical equipment and $2.8 bil. from clinical laboratory services reimbursement over the next five years. The proposals are included in the administration's fiscal year 1994 budget request ("The Gray Sheet" April 12, p. 6). James Liken, representing the National Association of Medical Equipment Suppliers, expressed concern that the DME provisions of the budget proposal would "erect still further barriers to using home care at the very time when public policy should be encouraging home medical equipment and other in-home services" as an alternative to institutional care. Liken reiterated equipment supplier opposition to provisions such as a proposal to allow for readjustment of DME reimbursement based on "market factors" ("The Gray Sheet" April 5, p. 9). Commenting on the proposed $2.8 bil. in clinical lab payment reductions, Hope Foster, general counsel for the American Clinical Laboratory Association, argued that the budget proposal calls for labs to "contribute disproportionately to deficit reduction." She contended that "labs would shoulder over 18% of the [Medicare] Part B savings...even though [labs] constitute only 5% of Part B expenditures." Foster added, however, that ACLA would accept the proposals for reimbursement cuts if Congress enacted a laboratory direct billing law. Foster said such a law would "enable laboratories to absorb the lower Medicare reimbursement proposed by the Administration because it would eliminate the inequities" of indirect billing to physicians. A direct billing provision is included in HR 200, a managed competition bill introduced by Stark and House Majority Leader Richard Gephardt on Jan. 5 ("The Gray Sheet" Jan. 11, p. 13).

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