MRI and CT Centers Offer Doctors Way to Profit on Scans | WSJ | 5.2.05
Physicians Pay a Flat Fee For Procedures, Then Bill Insurers — at Higher Rate
Navigating Legal LandscapeMedical imaging such as MRI and CT scanning is one of health care’s fastest-growing sectors. Last October, an owner of imaging centers told doctors how they could get in on the boom.
At a meeting of cardiologists, neurologists and cancer specialists in Torrance, Calif., Imaging Solutions Inc. proposed that the doctors sign a contract to send patients to one of its centers. According to documents handed out there and physicians who attended, the deal worked this way: The center would charge doctors a flat rate per scan. Then the doctors could bill insurers at the going reimbursement rate in their area. …
For an MRI, the company would charge doctors $375. It pegged the average reimbursement in the region at $706.31.
After deducting the cost of having the scan interpreted, the paperwork said, the doctors would net $234.77 from each MRI. It showed that a group practice could clear $122,078 a year if it referred two patients a day for scans, or $610,390 annually if it referred 10 a day. For a less-common kind of screening known as PET scans, profits would be higher: $525,200 a year to the doctors if they made two daily referrals, or $2.6 million annually for 10 a day. …
It’s a federal crime for health-care providers to compensate doctors for referrals, or for doctors to receive such compensation, when Medicare or Medicaid patients are involved. Such a ban, called an anti-kickback law, extends to all other types of patients, too, under 36 state statutes, including one in California. Some lawyers say the doctors’ almost assured profits under some imaging-center contracts might be considered illegal inducement for referral. …
“Utilization goes through the roof” when doctors have a financial stake in providing imaging tests, said Donald Ryan, head of CareCore National Inc. in Wappingers Falls, N.Y., which analyzes imaging claims for insurers to help them control costs.
Great article! It is hard to see how this is not a highly unethical situation. Certainly akin to prescribing practices where physician inducement is present.
{ 10 comments… read them below or add one }
Other than the amount of money involved, how is this different from a practice contracting with a lab service for routine labs, like CBC's and metabolic panels? Most office practices bill for the lab test at a higher rate than they are charged by the lab itself.
A CBC might cost the practice $40 but they will bill $80.
I think it would be important to distinguish between the situations where the cost to the ordering physician was $40 (inclusive of the lab ordering charge and cost incurred by the physician ordering the test), the charge (amount billed) was $80 and the actual payment was $40 with the situation where the actual payment is $80. The former has a $0 inducement for ordering and the latter has a $40 inducement/order. Is it proper (and ethical) to have “medical necessity” (where medical necessity is the necessary underpinning for ordering a test) under the pale of a known and regular financial renumeration to the physician? Should physician reimbursements come from the testings ordered in the course of diagnosis and treatment that they are already being reimbursed for under physician billing for services? Seems to me a situation very ripe for fraud and abuse.
The inducements seem even stronger when you consider the practice where the physician is charged a flat rate of service (in the article, scan time), e.g., X patients per day, where the physician pays whether or not X patients per day are referred. This seems almost like an HMO, the physician is capped for service expenses at a rate of X patients per day. As potent is the inducement for an HMO to control cost when working under a cap, there is a not dissimilar potency inducing the physician to exceed the “cap” under which he/she loses if not exceeded.
I think there is a very real potential ethical problem any time there is a linkage between physician reimbursement and what a physician has exclusive control over in ordering. “Medical necessity” comes under the pale of inducement.
My comment was meant to describe the pay $40 and bill/get $80 scenario. Most of the offices with which I am familiar make a profit, in addition to the fee for the visit, when they draw the blood and send it to a lab. That's why they do it. Otherwise, they would just give the patient a slip and send him to a lab.
I acknowledge that medicine is different, but your mechanic does the same thing. If he doesn't have a machine to turn your rotor, he send them down the road, pays that guy, marks up the charge and get his money from you. Building contractors do the same thing. Your contractor charges you more for the roofer than he pays the roofer, even though you are paying him a contractor fee.
Other than the amount of money involved, how is this different from a practice contracting with a lab service for routine labs, like CBC’s and metabolic panels? Most office practices bill for the lab test at a higher rate than they are charged by the lab itself.
A CBC might cost the practice $40 but they will bill $80.
I don't disagree with your analogies; however, there are distinguishing aspects for the physician ordering as opposed to the mechanic or contractor.
<ol>
<li>When you utilize the mechanic/contractor there is a contract and there are no surprises that included in their cost will be a profit. More service implies more profit. The point being there is disclosure of the inducement.</li>
<li>With the physician there is no financial disclosure of any profit from ordering. The patient is highly unlikely to even consider the possibility of inducement or that the physician may receive $X reimbursement from service provider A and $Y reimbursement from service provider B.</li>
<li>The customer always has a choice with a mechanic/contractor.</li>
<li>A patient may have no choice of a physician. Many reasons: emergency situation, HMO with limited provider list, no one taking new patients, rare specialty, etc.</li>
<li>I would suspect that if disclosed that the physician charged $X in the office and retained a percentage of $X and the patient could go to another service provider and be charged $Y, where Y is significantly less than X, that they would go to the other provider. I would think the payers would be very concerned as well.</li>
</ol>
Bottom line here is that there needs to be disclosure of the financial inducements that are neither apparent to the patient nor to the third party payers (governmental and non-governmental). I think the type of business activities discussed in the article are going to land these participants in a world of hurt. When we consider how drug benefits are going to be covered, how the boomers are going to be covered, and how we can cover 45 million disenfranchised from healthcare (either under- or un-insured) — then the silver lining the pockets of those that have exclusive control over particular utilizations of healthcare dollars become low enough hanging fruits to be plucked.
Similar themes here and here.
I think it would be important to distinguish between the situations where the cost to the ordering physician was $40 (inclusive of the lab ordering charge and cost incurred by the physician ordering the test), the charge (amount billed) was $80 and the actual payment was $40 with the situation where the actual payment is $80. The former has a $0 inducement for ordering and the latter has a $40 inducement/order. Is it proper (and ethical) to have “medical necessity” (where medical necessity is the necessary underpinning for ordering a test) under the pale of a known and regular financial renumeration to the physician? Should physician reimbursements come from the testings ordered in the course of diagnosis and treatment that they are already being reimbursed for under physician billing for services? Seems to me a situation very ripe for fraud and abuse.
The inducements seem even stronger when you consider the practice where the physician is charged a flat rate of service (in the article, scan time), e.g., X patients per day, where the physician pays whether or not X patients per day are referred. This seems almost like an HMO, the physician is capped for service expenses at a rate of X patients per day. As potent is the inducement for an HMO to control cost when working under a cap, there is a not dissimilar potency inducing the physician to exceed the “cap” under which he/she loses if not exceeded.
I think there is a very real potential ethical problem any time there is a linkage between physician reimbursement and what a physician has exclusive control over in ordering. “Medical necessity” comes under the pale of inducement.
You're right again!
My comment was meant to describe the pay $40 and bill/get $80 scenario. Most of the offices with which I am familiar make a profit, in addition to the fee for the visit, when they draw the blood and send it to a lab. That’s why they do it. Otherwise, they would just give the patient a slip and send him to a lab.
I acknowledge that medicine is different, but your mechanic does the same thing. If he doesn’t have a machine to turn your rotor, he send them down the road, pays that guy, marks up the charge and get his money from you. Building contractors do the same thing. Your contractor charges you more for the roofer than he pays the roofer, even though you are paying him a contractor fee.
I don’t disagree with your analogies; however, there are distinguishing aspects for the physician ordering as opposed to the mechanic or contractor.
Bottom line here is that there needs to be disclosure of the financial inducements that are neither apparent to the patient nor to the third party payers (governmental and non-governmental). I think the type of business activities discussed in the article are going to land these participants in a world of hurt. When we consider how drug benefits are going to be covered, how the boomers are going to be covered, and how we can cover 45 million disenfranchised from healthcare (either under- or un-insured) — then the silver lining the pockets of those that have exclusive control over particular utilizations of healthcare dollars become low enough hanging fruits to be plucked.
Similar themes here and here.
You’re right again!