WESTWOOD IMAGING CENTERS

Payment for referrals.

Medical imaging is one of healthcare's fastest-growing sectors, so most everyone wants to get in on the action, including physicians. To illustrate, imaging costs are Medicare's fastest-growing service item. In recent years, they rose at three times the rate of other medical services, and the amount spent on imaging services has reached 15 percent of total healthcare costs. One reason for this rapid increase is the ability of imaging to detect conditions that previously required diagnostic surgery for detection. But another reason could be financial incentives that make some doctors order more scans than are medically necessary. At a recent meeting of cardiologists, neurologists, and oncologists, Westwood Imaging Centers told doctors how they could get in on the boom. The deal works like this: Doctors would send patients to Westwood for imaging services, and Westwood would charge the referring physician a flat rate per scan. Then, the physician would bill the thirdparty payer for the scan at the going rate. For example, Westwood would charge physicians $375 for an MRI scan, while the average reimbursement for the scan is estimated at about $700. After deducting about $90 per scan for interpretation and administrative costs (mostly billing and collections), the profit per scan comes in at about $235 per referral. A group practice that refers ten patients a day would pocket about $600,000 annually under this plan. For more expensive PET (positron emission tomography) scans, the same volume would produce an annual profit for the referring group of more than $2 million. For the most part, the thirdparty payers would be unaware of the deal, assuming that the scans were conducted in the doctor's office. W e s t wood Imaging Centers payment for referrals mini-cases. But wait a minute, aren't such arrangements against the law? After all, federal anti kickback (Stark) laws prohibit providers such as Westwood from paying doctors for referrals when Medicare or Medicaid patients are involved. These laws also extend to other types of patients under 36 state statutes. The Westwood plan also raises the issue of self-referral, which occurs when physicians refer patients to businesses in which they or relatives have a financial interest. When these prohibitions are considered, isn't the Westwood proposal illegal? It turns out that there are exceptions to the anti kickback and self referral laws. One exception is that it is permissible to self-refer when the services are provided in the physician's office. For example, it is legal to order an electrocardiogram for a patient and then perform the procedure in the doctor's office. Clearly, the Westwood proposal does not meet the exception because the scans are done at Westwood's imaging center. Westwood's solution to the legality issue is to characterize the scan not as a referral but rather as a "per use, nonrecurring lease agreement." In other words, when the scan is performed, the equipment and the space around it are "owned" by the referring physician, and hence the scan qualifies as a procedure performed in the doctor's office. Some imaging companies are using a slightly different approach. Instead of paying a charge for each scan, the physician (or group) books a set number of hours per week on a scanner, which they must pay for even if they don't send enough patients to use up all the time booked. This arrangement adds risk to the physician but supposedly is more resistant to anti kickback laws. Does anyone get hurt by such deals? Virtually all research done in this area indicates that utilization increases when doctors have a financial stake in providing imaging services. For example, one New York neurology practice with a lease deal ordered almost 50 percent more scans than did similar practices without such deals. It is hard to believe that the increased cost to insurers is medically justified, so the third-party payers (and ultimately the purchasers of health insurance) end up paying more than is necessary.

Question:

In a financial consultant view :

Part 1 : Present the side of the issue that it is an ethical issue : Please explain it and present a solution.

Part 2 : Present the side of the issue that it is not an ethical issue : Please explain why there is no ethical issue and how the industry should present the situation to show patients or interested parties that no ethical dilemma exists