Medical imaging is one of healthcare’s fastest-growing sectors, so most everyone wants to get in on the action, includin

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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. 239 © HAP, 2014.
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www.copyright.com 240 Cases in Healthcare Finance But wait a
minute, aren’t such arrangements against the law? After all,
federal antikickback (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 antikickback and selfreferral 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 antikickback 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.
What do you think about Westwood’s proposal to provide
physicians with “leased” diagnostic equipment?
Does this case present an ethical issue? If so, to which party
(or parties)?
If you could act as the ultimate authority in this situation,
what would you do?