There are two schools of thought on physician self-referral. On one side are supporters who see the practice as a harmless means of streamlining care for patients. On the other are detractors who consider it a cynical form of capitalism run amok in healthcare.

In the referee’s position is the federal government, which has passed legislation and mounted regulations to curtail questionable self-referrals. However, loopholes abound and, despite the interventions, the practice—in which physicians refer their patients to service facilities in which they have a close financial interest—has not only continued but appears to be gaining steam.

Two physicians long involved in health policy argue for a stronger referee in commentary published online by JAMA Jan. 12.

Eli Y. Adashi, MD, former dean of medicine and biological sciences at Brown University, and Robert P. Kocher, MD, a former Obama Administration economic policy advisor and now a partner at the venture capital firm Venrock, start by laying out the basics of the two perspectives side by side.

To self-referral proponents, they write, the practice is a “patient-centered care-improving proposition intent on facilitating authorization and scheduling, timely diagnosis and treatment, same-day one-stop convenience, and continuity of care in familiar settings.”

To their philosophical adversaries, self-referral creates divided loyalties that stand to compromise the ethical character of the medical profession and its all-important public trust. “[P]hysician self-referral has been repeatedly shown to increase the use of the services offered and the related attendant overall costs,” Adashi and Kocher write. “It is this latter reality that has thrust physician self-referral into the national health care debate in which ‘bending the cost curve’ remains an overriding imperative.”

The timing of the commentary is not arbitrary. It follows the release of four audit reports from the Government Accountability Office (GAO), the last on June 2, 2014, commissioned by a bipartisan congressional contingent comprising members of both the House and Senate.  

In its examination of advanced imaging, the GAO found that, between 2004 and 2010, self-referrals grew substantially faster than non-self-referrals in both MRI and CT. MRI self-referrals grew seven times faster than non-referrals, while CT self-referral growth outpaced non-self-referral growth by a 3.5 to 1 margin.

The office found comparable patterns in anatomic pathology. In intensity-modulation radiation therapy (IMRT), the most egregious offender under the government’s microscope, urology groups treating prostate cancer drove utilization of self-referred IMRT services by as much as 356% (from about 80,000 to 366,000)—and did so at a time when utilization of non–self-referred IMRT decreased by 5% (from about 490,000 to 466,000).

The authors of the JAMA Viewpoint note that, in 2010 alone, the surge in self-referrals in these four procedures increased Medicare Part B expenditures by approximately $300 million. They note—and agree with—the GAO’s conclusion that the growth of self-referrals probably has more to do with money than with any other single motivator.

They point to traditional healthcare payment models as unwitting enablers.

“By most accounts, the persistent increase in physician self-referrals (as documented by the GAO) is due to inadequate statutory and regulatory oversight in the face of ongoing incentives afforded by the fee-for-service reimbursement model,” write Adashi and Kocher. “It follows that optimal redress of the physician self-referral challenge will require the institution of novel payment mechanisms whereby the fee-for-volume environment has been replaced by fee-for-value alternatives like accountable care organizations in which physicians are rewarded for cost-effective care.”

After tracing the measures the government has taken through the years to curb self-referral, beginning with the Anti-Kickback Statute of 1972 and on through the Stark laws and the modifications thereto over the past three-plus decades, they state their opinion that more governmental action is required today.

“The promise of payment model revision notwithstanding,” they write, “the enormity of the transformation required suggests that this approach is unlikely to yield near-term relief for the self-referral challenge. It would thus appear that meaningful and timely redress of physician self-referrals will require regulatory or legislative relief.”

The GAO reports, they conclude, “must be seen as nothing less than a call for action. Congress should address the relative shortcomings of the well-meaning if ineffective Stark provisions and enact simpler and enforceable ordinances in its stead. Failure to do so would constitute a costly opportunity missed.”

To read the full commentary, headlined “Physician Self-referral: Regulation by Exceptions,” click here.