Self-Interest: Medicare balks at tracking costly physician self-referrals

To say that Medicare is huge is an understatement.

The federal health insurance program covers 54 million people and accounts for about one out of every five health care dollars spent in the U.S. Medicare made more than $583 billion in payments in 2013.

You might think with that much money at stake the agency would have a detailed accounting of where all those dollars went.

But, for one of the fastest rising areas of spending by Medicare, the agency has no way of knowing whether the money was spent wisely.

The Government Accountability Office, in a series of reports about the practice of physicians who refer patients for services in which the doctors or their families have a financial stake, called out Medicare for not being able to track these physician self-referrals. The GAO wrote:

Specifically, Medicare claims do not include an indicator or "flag" that identifies whether services are self-referred or non-self-referred. … Including a self-referral flag on Medicare Part B claims submitted by providers who bill for anatomic pathology services is likely the easiest and most cost-effective approach.

Sounds logical.

But the Department of Health and Human Services disagreed. When the GAO made this recommendation to HHS, the agency said, in essence, “Thanks but no thanks.” It did not provide a reason for declining to implement a flagging system.

Nor did HHS like the GAO recommendation that Medicare “determine and implement an approach to ensure the appropriateness of biopsy procedures performed by self-referring providers.” HHS said that there just too many Medicare claims for biopsy services for Medicare to police them all.

The GAO wrote that,“the agency stated that it does not believe that this recommendation will address overutilization that occurs as a result of self-referral.”

The GAO’s comeback? Don’t examine every self-referred pathology service in detail. Just do some targeted audits of doctors who have the highest number of biopsy procedures, which can then be“compared to providers of the same specialty treating similar numbers of Medicare beneficiaries.”

So far, Medicare is not taking that advice.

In one area, though, it seemed at first glance that the GAO could claim victory. The office asked that Medicare “develop and implement a payment approach for anatomic pathology services that would limit the financial incentives associated with referring a higher number of anatomic pathology services per biopsy procedure.”

HHS told the GAO that it liked that recommendation a lot and, in fact, already had implemented it. HHS said that it was drivingcostsdowncostsby lowering the amount it paid for biopsy services. According to HHS, the payments for biopsies decreased by 30 percent in just one year.

But the GAO noted that the problems run deeper than just the amount Medicare pays per biopsy. It wrote:

Although no consensus exists on the number and type of tissue samples that become a specimen –an anatomic pathology service – the current payment system pays more if providers create more specimens from the same number of samples. We continue to believe that CMS should develop a payment approach that addresses the incentive to provide more services.

Similarly, in the GAO’s report about advanced imaging services, the agency wrote that it was “concerned that neither HHS nor CMS appears to recognize the need to monitor the self-referral of advanced imaging services on an ongoing basis and determine those services that may be inappropriate, unnecessary, or potentially harmful to beneficiaries.”

On the GAO’s big finding that self-referring doctors tend to refer about two times as many patients to advanced imaging services than other doctors, Medicare and HHS had no comment. Nor did Medicare and HHS say anything about the massive price tag that the GAO placed on those self-referred services: “more than $100 million in 2010 alone.”

So if Medicare isn’t going to fix the problem itself, who will? I’ll write about the differences between states in regulating self-referrals in my next post.

Photo by Raymond Bryson via Flickr.