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The Keckley Report

The New Day for Physician Business Relationship Transparency

By October 27, 2014March 1st, 2023No Comments

The following is an excerpt from Navigant Healthcare’s Pulse Weekly. Click here for a complete copy of this week’s article. 

Prominently positioned on page one in last Thursday’s Wall Street Journal was this headline: “Doctor Self-Referral Thrives on Loophole.The story centered on a Florida medical group and its use of the in-office exemption to self-referral regulations:

 “A federal law since the 1990s has prohibited ‘self-referral’ in which doctors can profit from Medicare-reimbursed procedures they order. But 21st Century Oncology, and many physician groups around the country, have found ways to do it anyway, exploiting an exception to the law in ways its writers didn’t anticipate.”

 The focus: a group of 95 Fort Myers urologists who receive compensation for the lab tests they refer to their in-house lab, specifically a bladder cancer test known as FISH (fluorescent in situ hydridization). After starting its in-office lab service in 2009, the volume of FISH tests ordered by the group increased from 202 in May, 2009 to 942 in October, 2009. The FISH test was reimbursed at $700-$1000/test at the time, and is now reimbursed at $430/test by Medicare. Per the Wall Street Journal’s reporting, the Office of the Inspector General’s analysis of the Medicare Physician billing data found the lab’s Medicare reimbursement  per ordering physician was $107,700—24 times the average for all non-independent labs.

 Without opining to the legality or not of this arrangement in Florida or the medical necessity for the tests ordered, it’s clear business relationships involving physicians are a source of intensifying interest to regulators and journalists who follow the industry. The reasons are clear:

  • Physicians play a unique role in the U.S. health system. They are patient advocates, and for the majority of patients, the primary decision-maker when it comes to the treatments they use.
  • Physician preferences and decisions, therefore, are directly linked to the financial performance of the industry and to health costs.
  • Physician business relationships have not been readily transparent to key stakeholders—health plans, employers, regulators and taxpayers.

 The case can reasonably be made that the medical profession is unique in its influence on patient choices and costs. Last month, the Office of the Actuary’s forecast that health costs will exceed 6% annually for the next decade: meaning increased pressure from payers and regulators to control costs and intensified scrutiny about how physician business relationships might drive avoidable or unnecessary costs. Understandably, this is not welcome news for physicians, most believing their financial circumstances off limits and revelations from recent releases of data from the Physician Payment Sunshine Act, Medicare Physician Database misleading and counterproductive.

 In all likelihood, if in their shoes, we might feel the same. The profession relishes in its unmatched and well-earned respect and trust. To protect that, it must embrace transparency in its business relationships and distance itself from real or perceived conflicts of interest that could be seen as inconsistent with the profession’s ethical code.

And, this same burden must be shared by the hospitals, device and drug manufacturers, health plans and others who partner with physicians in risk sharing arrangements and other business relationships.

 The public’s appetite to know how the business of medicine works seems unquenchable. The integrity of the profession is at risk unless it embraces full transparency in disclosing its business relationships forthrightly, however uncomfortable or revelatory.


Sources: John Carreyrou, Janet Adamy, “How Medicare ‘Self-Referral’ Thrives on Loophole,” Wall Street Journal, October 22, 2014; Note: Since 2010, the Wall Street Journal has published a series, “Secrets of the System,” exposing fraud, waste and abuse in the healthcare industry.

The opinions expressed in this article are those of the author and do not necessarily represent the views of Navigant Consulting, Inc. The information contained in this article is a summary and reflects current impressions based on industry data and news available at the time of publication. Any predictions and expectations noted herein are inherently uncertain and actual results may differ materially from those contained in this article. Navigant undertakes no obligation to update any of the information contained in the article.

© 2014 Navigant Consulting, Inc.