A Brief History of Physician Self-Referral

Sharon Roberts Physician Self-ReferralAccording to the most recently available data, federal reports reveal that the number of doctors referring patients to businesses in which they have a vested monetary interest is on the rise.

The practice of “physician self-referrals” has undergone a number of regulations since 1989. Combined, these self-referral laws prohibit government-backed payments from Medicare and Medicaid when a physician refers any of ten “designated health services” (DHS) to an entity where the physician or his immediate family member has a financial relationship unless an exemption applies. Again, these laws pertain specifically to physicians. 

Stark 1

In 1989 congress included a provision in the Omnibus Budget Reconciliation Act (OBRA 1989). This provision  prohibited self-referrals for clinical laboratory services under the Medicare program, beginning January 1 of 1992. This provision was more popularly known as “Stark I”.

Stark II

Again in 1993, Congress implemented The Omnibus Budget Reconciliation Act (OBRA 1993) and expanded this restriction to include a broader range of health services and applied it to both Medicare and Medicaid.  This provision, often referred to as “Stark II”, specified more clearly the exceptions to the initial law.

Exceptions to Stark I and Stark II

Both provisions were put into effect to prohibit the practice of physician self-referral. However, employees and contractors of physicians are exempt from this law when providing in-office ancillary services. Furthermore, physician employees or contractors are exempt from these provisions under the condition that their services are:

• supervised either by the referring physician or by a physician also belonging to the same group practice

• performed in a location where the referring or group physician provides non-DHS services; or in a centralized site used exclusively by the group for providing DHS

• billed by the physician overseeing the services, by a group practice to which the physician belongs, or by an entity that is owned entirely by such a physician or group practice

Additionally, certain financial relationships between an audiologist or speech-language pathologist and physician are protected as long as requirements outlined in the “safe harbor” regulations are adhered to.

The GAO and Physician Self-Referral

The U.S. Government Accountability Office (GAO) is an independent, nonpartisan agency that works for Congress, and is often referred to as the “congressional watchdog”. From 2010 to 2014, the GAO focused specifically on gathering data regarding this practice of physician self-referral. The resulting 4 reports examined services that included advanced imaging, radiation therapy, anatomic pathology and physical therapy. These GAO reports are the most recent audit of physicians who refer their patients to service facilities wherein these physicians (or an immediate family member) have a financial interest.

In February of 2015, the Journal of the American Medical Association published and article by Dr. Eli Y. Adashi, MD and MS and Robert P. Kocher, MD. This article shares the findings from the GAO’s reports, examines the topic of physician self-referral, considers the regulatory system in which it continues, and presents potential solutions to this challenge.

This recent attention on the topic suggests the importance for physicians and secondary businesses to familiarize themselves fully with these laws and provisions, and conduct themselves in full adherence to said laws.