MEDICARE

Higher Use of 

Advanced Imaging 

Services by Providers 

Who Self-Refer 

Costing Medicare 

Millions 

Report to Congressional Requesters

September 2012

GAO-12-966

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United States Government Accountability Office

GAO
United States Government Accountability Office

Highlights of GAO-12-966, a report to 

congressional requesters

September 2012

MEDICARE

Higher Use of Advanced Imaging Services by 

Providers Who Self-Refer Costing Medicare Millions 

Why GAO Did This Study

Medicare Part B expenditures—which 

include payment for advanced imaging 

services—are expected to continue 

growing at an unsustainable rate. 

Questions have been raised about selfreferral’s role in this growth. Selfreferral occurs when a provider refers 

patients to entities in which the 

provider or the provider’s family 

members have a financial interest. 

GAO was asked to examine the 

prevalence of advanced imaging selfreferral and its effect on Medicare 

spending. This report examines 

(1) trends in the number of and 

expenditures for self-referred and nonself-referred advanced imaging 

services, (2) how provision of these 

services differs among providers on 

the basis of whether they self-refer, 

and (3) implications of self-referral for 

Medicare spending. GAO analyzed 

Medicare Part B claims data from 2004 

through 2010 and interviewed officials 

from the Centers for Medicare & 

Medicaid Services (CMS) and other 

stakeholders. Because Medicare 

claims lack an indicator identifying selfreferred services, GAO developed a 

claims-based methodology to identify 

self-referred services and expenditures 

and to characterize providers as selfreferring or not.

What GAO Recommends

GAO recommends that CMS improve

its ability to identify self-referral of 

advanced imaging services and 

address increases in these services. 

The Department of Health and Human 

Services, which oversees CMS, stated 

it would consider one recommendation, 

but did not concur with the others. 

GAO maintains CMS should monitor 

these self-referred services and ensure 

they are appropriate.

What GAO Found

From 2004 through 2010, the number of self-referred and non-self-referred 

advanced imaging services—magnetic resonance imaging (MRI) and computed 

tomography (CT) services—both increased, with the larger increase among selfreferred services. For example, the number of self-referred MRI services 

increased over this period by more than 80 percent, compared with an increase 

of 12 percent for non-self-referred MRI services. Likewise, the growth rate of 

expenditures for self-referred MRI and CT services was also higher than for nonself-referred MRI and CT services.

GAO’s analysis showed that providers’ referrals of MRI and CT services 

substantially increased the year after they began to self-refer—that is, they 

purchased or leased imaging equipment, or joined a group practice that already 

self-referred. Providers that began self-referring in 2009—referred to as 

switchers—increased MRI and CT referrals on average by about 67 percent in 

2010 compared to 2008. In the case of MRIs, the average number of referrals 

switchers made increased from 25.1 in 2008 to 42.0 in 2010. In contrast, the 

average number of referrals made by providers who remained self-referrers or 

non-self-referrers declined during this period. This comparison suggests that the 

increase in the average number of referrals for switchers was not due to a 

general increase in the use of imaging services among all providers. GAO’s 

examination of all providers that referred an MRI or CT service in 2010 showed 

that self-referring providers referred about two times as many of these services 

as providers who did not self-refer. Differences persisted after accounting for 

practice size, specialty, geography, or patient characteristics. These two 

analyses suggest that financial incentives for self-referring providers were likely a 

major factor driving the increase in referrals.

Change in Average Number of MRI Services Referred, 2008 and 2010

Average 2008 referred 

MRI services

Average 2010 referred 

MRI services Percentage change 

Switchers 25.1 42.0 67.3

Non-self-referrers 20.6 19.2 -6.8

Self-referrers 47.0 45.4 -3.4

Source: GAO analysis of Medicare data. 

Note: Pattern observed for MRI services was similar for CT services. GAO defines switchers as those 

providers that did not self-refer in 2007 or 2008, but did self-refer in 2009 and 2010.

GAO estimates that in 2010, providers who self-referred likely made 400,000 

more referrals for advanced imaging services than they would have if they were 

not self-referring. These additional referrals cost Medicare about $109 million. To 

the extent that these additional referrals were unnecessary, they pose 

unacceptable risks for beneficiaries, particularly in the case of CT services, which 

involve the use of ionizing radiation that has been linked to an increased risk of 

developing cancer.

View GAO-12-966. For more information, 

contact James C. Cosgrove at (202) 512-7114 

or cosgrovej@gao.gov.
Page i GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Letter 1 

Background 7

Self-Referred MRI and CT Services and Expenditures Grew 

Overall, While Non-Self-Referred Services and Expenditures 

Grew Slower or Decreased 10

Self-Referring Providers Referred Substantially More Advanced 

Imaging Services on Average Than Did Other Providers 16

Higher Use of Advanced Imaging Services by Self-Referring 

Providers Results in Substantial Costs to Medicare 22

Conclusions 24

Recommendations for Executive Action 25

Agency Comments and Our Evaluation 25

Appendix I Scope and Methods 30

Appendix II Select Implemented or Proposed Policies Designed to Address 

Self-Referral or the Utilization of Advanced Imaging Services 37

Appendix III Self-Referral of MRI and CT Services, by Provider Specialty, 

in 2004 and 2010 40

Appendix IV Comments from the Department of Health and Human Services 42

Appendix V GAO Contact and Staff Acknowledgments 46

Tables

Table 1: Average Number of MRI and CT Services Referred by NonSelf-Referring and Self-Referring Providers, 2010 18

Table 2: Average Number of MRI and CT Services Referred by NonSelf-Referring and Self-Referring Providers in Urban and 

Rural Locations, 2010 20

Contents
Page ii GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Table 3: Patient Characteristics of Non-Self-Referring and SelfReferring MRI and CT Providers, 2010 21

Table 4: Change in Average Number of MRI and CT Services 

Referred, 2008 and 2010 22

Table 5: Self-referral Rates of MRI and CT Services for Select 

Provider Specialties 41

Figures

Figure 1: Distribution of Advanced Imaging Services by Modality 

and Setting, 2010 9

Figure 2: Number of Self-Referred and Non-Self-Referred MRI 

Services, 2004-2010 11

Figure 3: Number of Self-Referred and Non-Self-Referred CT 

Services, 2004-2010 12

Figure 4: Self-Referred and Non-Self-Referred MRI Expenditures, 

2004-2010 14

Figure 5: Self-Referred and Non-Self-Referred CT Expenditures, 

2004-2010 15

Figure 6: Potential Savings under Alternative Scenario for SelfReferring Providers, 2010 23
Page iii GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Abbreviations

BETOS Berenson-Eggers Type of Service

CMS Centers for Medicare & Medicaid Services

CT computed tomography

DRA Deficit Reduction Act of 2005

FFS fee-for-service 

HCPCS Healthcare Common Procedure Coding System

HHS Department of Health and Human Services

IDTF independent diagnostic testing facility

MedPAC Medicare Payment Advisory Commission

MRI magnetic resonance imaging

NPI national provider identifier

PC professional component

PPACA Patient Protection and Affordable Care Act

TC technical component

TIN taxpayer identification number

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Page 1 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

United States Government Accountability Office

Washington, DC 20548

September 28, 2012

Congressional Requesters

Expenditures for Medicare Part B services—which include physician and 

other outpatient services—are expected to continue exceeding the overall 

growth rate of the U.S. economy, heightening concerns about the longrange fiscal sustainability of Medicare.1 While Medicare spending growth 

has slowed in recent years, expenditures for Medicare Part B grew by an 

average of 5.9 percent annually from 2007 through 2011 and are 

projected to grow by an average of 7.6 percent annually from 2012 

through 2016.2 In comparison, the national economy grew by an average 

annual rate of 2.5 percent from 2007 through 20113 and is projected to 

increase on average by 4.6 percent annually from 2012 through 2016.4

Medicare Part B spending includes payments for advanced imaging 

services—magnetic resonance imaging (MRI) and computed tomography 

(CT) services—which providers use in the diagnosis and treatment of 

many diseases and disorders, such as different types of cancer, 

cardiovascular diseases, and musculoskeletal disorders.5

 

1

Medicare is the federally financed health insurance program for persons aged 65 and 

over, certain individuals with disabilities, and individuals with end-stage renal disease. 

Medicare Part A covers hospital and other inpatient stays. Medicare Part B is optional 

insurance, and covers physician, outpatient hospital, home health care, and certain other 

services. Medicare Parts A and B are known as original Medicare or Medicare fee-forservice (FFS).

2

See The Boards of Trustees, 2012 Annual Report of the Boards of Trustees of the 

Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds

(Washington, D.C.: April 2012). The projected Medicare Part B growth rate assumes that 

scheduled statutory cuts in physician payment rates will be overridden by Congress as 

they have been every year since 2003.

3

See Bureau of Economic Analysis, “Gross Domestic Product (GDP) Percent change from 

preceding period,” National Economic Accounts (Washington, D.C.: May 31, 2012), 

accessed June 27, 2012, http://www.bea.gov/national/xls/gdpchg.xls.

4

See Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2012 

through 2022 (Washington, D.C.: January 2012).

5

Other advanced imaging services include nuclear medicine services. For the purposes of 

this report, “advanced imaging services” refers to only MRI and CT services.

 
 

Page 2 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Policymakers and researchers have raised questions about the growth in 

Part B spending, noting that some of this growth may be partially 

attributed to self-referral and that not all of the advanced imaging services 

provided may be appropriate or necessary.6 Self-referral occurs when 

providers refer their patients to entities—such as themselves or a group 

practice—with which they or an immediate family member has a financial 

relationship, such as when a provider refers patients to his or her office 

for advanced imaging services after the provider purchases or leases 

advanced imaging equipment.7

Growth in imaging services expenditures—including expenditures for 

advanced imaging services—have prompted action from Congress and 

resulted in recommendations from us and others. Specifically, Congress, 

as part of the Deficit Reduction Act of 2005 (DRA),

Proponents of self-referral point out that 

such arrangements allow providers to make rapid diagnoses, improve 

coordination of care, and provide convenient access for patients. 

However, critics of self-referral note that the incentive for financial gain in 

such arrangements may result in inappropriate, unnecessary, or 

potentially harmful services. For example, CT services expose 

beneficiaries to ionizing radiation, which is associated with an increased 

risk of cancer.

8

 

6

For example, see Laurence C. Baker, “Acquisition of MRI Equipment by Doctors Drives 

Up Imaging Use and Spending,” Health Affairs, vol. 29, no. 12 (2010); Medicare Payment 

Advisory Commission, Report to the Congress, Improving Incentives in the Medicare 

Program (Washington, D.C.: June 2009); and Senator Grassley Press Release, Grassley 

Works to Protect Medicare Dollars, Empower Patients with Information (July 25, 2008), 

accessed May 31, 2012. 

http://www.finance.senate.gov/newsroom/ranking/release/?id=bb006ccf-dedc-40fd-9b14-

6074cb2687f3.

required that 

7

Compliance with the physician self-referral law, commonly known as the Stark law, is 

outside the scope of this report. The Stark law prohibits physicians from making referrals 

for certain designated health services paid for by Medicare, to entities with which the 

physicians or immediate family members have a financial relationship, unless the 

arrangement complies with a specified exception, such as in-office ancillary services. 

42 U.S.C. § 1395nn(b)(2).The requirements of the in-office ancillary services exception 

are found at 42 C. F. R. § 411.355(b) (2011).The Patient Protection and Affordable Care 

Act (PPACA) amended the Stark law to establish an additional requirement with respect to 

the in-office ancillary services exception for certain types of advanced imaging services. 

That is, self-referring physicians must inform patients in writing at the time of referral for 

these services that the patient may obtain the service from a person other than the 

referring physician or someone in the physician’s group practice and provide the patient 

with a list of suppliers who furnish the service in the area in which the patient resides. 

Pub. L. No. 111-148, § 6003, 124 Stat. 119, 697 (codified at 42 U.S.C. § 1395nn(b)(2)).

8

Pub. L. No. 109-171, § 5102(b), 120 Stat. 4, 39-40 (2006).
 

Page 3 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Medicare payment for certain imaging services under the Medicare 

physician fee schedule—the payment system used to determine fees for 

physician-billed services in Medicare FFS—not exceed the amount 

Medicare pays under the hospital outpatient prospective payment system, 

used to pay for hospital outpatient services. In our 2008 report, we 

recommended that, to address the rapid growth in Medicare Part B 

imaging expenditures, the Centers for Medicare & Medicaid Services 

(CMS)—the agency within the Department of Health and Human Services 

that administers the Medicare program—examine the feasibility of 

expanding the use of front-end approaches for managing the utilization of 

advanced imaging services.9 Front-end approaches to managing services 

are conducted prior to, rather than after, services are performed and 

payment is made. Examples of such approaches include requiring prior 

authorization (specific approval from a payer to perform a service) and 

privileging (limiting the authority to order certain services to only providers 

with specified qualifications). In contrast, back-end approaches are used 

after CMS issues payment, and could include targeted audits of providers 

that refer a high volume of services. Further, the Medicare Payment 

Advisory Commission (MedPAC) has recommended that certain 

providers with higher advanced imaging utilization participate in a prior 

authorization program and that CMS reduce payment rates for imaging 

services when the same provider orders and performs a service.10

You asked us to examine the prevalence of self-referral for advanced 

imaging services and Medicare spending for these services.

According to MedPAC, such a reduction would account for certain 

efficiencies that occur when the same provider orders and performs a 

service. Specifically, in these situations, the provider has likely already 

performed certain work involved in interpreting an imaging service, such 

as reviewing the patient’s history, prior to making the referral. As of June 

2012, CMS has not implemented MedPAC’s or our recommendation.

11

 

9

See GAO, Medicare Part B Imaging Services: Rapid Spending Growth and Shift to 

Physician Offices Indicate Need for CMS to Consider Additional Management Practices, 

In this 

GAO-08-452 (Washington, D.C.: June 13, 2008).

10See Medicare Payment Advisory Commission, Report to the Congress: Medicare and 

the Healthcare Delivery System (Washington, D.C.: June 2011).

11In addition to this report on advanced imaging, we also have ongoing work related to the 

self-referral of anatomic pathology services, intensity-modulated radiation therapy 

services, and physical therapy services.
 

Page 4 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

report, we examine (1) trends in the number of and expenditures for selfreferred and non-self-referred advanced imaging services from 2004 

through 2010, (2) the extent to which the provision of advanced imaging 

services differs for providers who self-refer when compared with other 

providers, and (3) the implications of self-referral for Medicare spending 

on advanced imaging services.

To identify trends in the number of and expenditures for self-referred and 

non-self-referred advanced imaging services from 2004 through 2010, we 

analyzed claims from the Medicare Part B Carrier File for MRI and CT 

services.12 Because there is no indicator or “flag” on the claim that 

identifies whether services are self-referred or non-self-referred and CMS 

has no other method for identifying whether a service was self-referred, 

we developed a claims-based methodology for identifying self-referred 

services.13 Specifically, we classified services from the period we 

reviewed as self-referred if the provider that referred the beneficiary for a 

MRI or CT service and the provider that performed the MRI or CT service 

were identical or had a financial relationship with the same entity.14 We 

removed MRI or CT services referred by radiologists or other providers 

that primarily practice in an independent diagnostic testing facility (IDTF) 

because they have limited ability to self-refer services.15

 

12For the purposes of our report, we limited MRI or CT services (1) to those that were 

designated health services—services which, in the absence of an exception, a physician 

may not make a referral to furnish to an entity with which he has a financial relationship 

without implicating the Stark law—and (2) to those where the service includes the 

performance of the imaging service—which can be billed with or separately from the 

interpretation of a MRI or CT imaging service.

We limited the 

universe for this portion of our analysis to those advanced imaging 

13An indicator or “flag” could be, for example, a modifier that a provider lists on a claim to 

indicate that a service is self-referred. Providers currently use modifiers to provide 

additional information about a service to CMS. For example, if a provider is only billing for 

the technical component of an imaging service, the provider would use a modifier to alert 

CMS that the claim does not cover the professional component of the service.

14Providers could have a financial relationship with the same entity if, for example, they 

are part of the same group practice.

15IDTFs are diagnostic testing facilities that are independent of a physician’s office or 

hospital and that comply with a number of requirements including those related to the use 

of qualified supervising physicians, qualified nonphysician personnel, performance of only 

specifically ordered tests, and compliance with all applicable state laws. See 42 C.F.R. 

§ 410.33 (2011). Radiologists and providers in IDTFs predominantly perform advanced 

imaging services and have limited ability to refer beneficiaries for advanced imaging 

services. These providers are unlikely to self-refer MRI or CT services.
 

Page 5 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

services performed in a provider’s office or in an IDTF, which represents 

approximately one-fifth of all advanced imaging services provided to 

Medicare FFS beneficiaries.

16

To determine the extent to which the provision of advanced imaging 

services differed for providers who self-refer when compared with other 

providers, we performed two separate analyses. First, we compared the 

provision—that is, the number of referrals made—of MRI and CT services 

by self-referring providers and non-self-referring providers in 2010, after 

accounting for factors such as practice size (i.e., the number of Medicare 

beneficiaries), provider specialty, geography (i.e., urban or rural), and 

patient characteristics.

Providers in our analysis include primarily 

physicians, but could include other providers, such as nurse practitioners 

and physician assistants. We focused on services performed in these 

settings because our previous work showed rapid growth among such 

services and because the financial incentive for providers to self-refer is 

most direct when the service is performed in a physician office. We used 

the claims to identify trends in the number and proportion of self-referred 

and non-self-referred MRI and CT services performed from 2004 through 

2010, the expenditures for these services from 2004 through 2010, and 

the proportion of self-referred and non-self-referred MRI and CT services 

by provider specialty for 2004 and 2010. To determine expenditures, we 

used the allowed charges variable from the Medicare Part B Carrier File, 

which includes the amounts paid by Medicare and the beneficiary.

17 For this analysis, our universe of providers 

included all those providers that referred at least one MRI or CT service, 

except for providers that had a specialty of radiology, emergency 

medicine, or provided services in an IDTF.18

 

16Providers can also provide advanced imaging services in settings other than physician 

offices or IDTFs, such as hospitals.

Second, we determined the 

extent to which the number of MRI and CT referrals made by providers 

changed after they began to self-refer. Specifically, we identified a group 

17We defined urban areas as metropolitan statistical areas, a geographic entity defined by 

the Office of Management and Budget as a core urban area of 50,000 or more population; 

all other settings are considered rural. 

18Providers with a radiology or IDTF specialty were removed because they have limited 

ability to refer beneficiaries for advanced imaging services, and thus are not likely to selfrefer MRI or CT services. We excluded emergency medicine providers from our analysis 

because they did not practice in provider offices. After we made our exclusions, there 

were 419,884 providers that referred at least one MRI service and 477,547 providers that 

referred at least one CT service in 2010.
 

Page 6 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

of providers that began to self-refer advanced imaging services in 2009.

We then calculated the change in the number of MRI or CT referrals 

made from 2008 (i.e., the year before they began self-referring) to 2010 

(i.e., the year after they began self-referring). We compared the change in 

the number of referrals made by these providers to the change in the 

number of referrals made over the same time period by providers who did 

not change whether or not they self-referred advanced imaging services. 

We classified providers as self-referring if they self-referred at least one 

MRI or CT service and non-self-referring if they referred—but did not selfrefer—at least one MRI or CT service.19

To determine the implications of self-referral for Medicare spending on 

advanced imaging services, we estimated what Medicare expenditures 

under the physician fee schedule for self-referred advanced imaging 

services would have been in 2010 if the rate of referrals made by selfreferring providers equaled the rate of referrals made by providers who 

did not self-refer. We compared this to the actual expenditures under the 

physician fee schedule, using the allowed charges variable, for selfreferred advanced imaging services of the same specialty and provider 

size and calculated the difference. To ensure comparisons were 

meaningful, we limited this analysis to providers in those specialties that 

had at least 1,000 self-referring providers.

For both analyses we counted all 

services that a provider referred, regardless of whether it was performed 

in a provider office, IDTF, or other setting, such as a hospital.

20

We took several steps to ensure that the data used to produce this report 

were sufficiently reliable. Specifically, we assessed the reliability of the 

CMS data we used by interviewing officials responsible for overseeing 

these data sources, reviewing relevant documentation, and examining the 

data for obvious errors. We determined that the data were sufficiently 

reliable for the purposes of our study. (See app. I for more details on our 

scope and methodology.)

 

19In 2010, 35,950 providers self-referred an MRI service and 39,913 providers selfreferred a CT service. In comparison, there were 383,934 non-self-referring MRI providers 

and 437,634 non-self-referring CT providers.

20We defined physician specialty using the specialty codes included in the Medicare 

claims. These specialty codes include physician specialties, such as cardiology and 

hematology/oncology, and nonphysician provider types, such as nurse practitioners and 

physician assistants.
 

Page 7 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

We conducted this performance audit from May 2010 through September 

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.

MRI and CT services are two types of medical imaging that aid in the 

diagnosis and treatment of myriad diseases and disorders. Medicare 

reimburses providers for performing the services and, subsequently, 

interpreting the results. Payment for the performance of the service can 

be made through different payment systems, depending on where the 

service is performed. In 2010, 6.8 million MRI and CT services were 

performed in a physician office or IDTF, representing about 23 percent of 

all MRI and CT services received by Medicare FFS beneficiaries. CMS 

has implemented several policies to limit self-referral, and MedPAC and 

other researchers have proposed further reforms.

Medical imaging is a noninvasive process used to obtain pictures of the 

internal anatomy or function of the anatomy using one of many different 

types of imaging equipment and media for creating the image. MRI and 

CT services are two of the six medical imaging modalities.21

 

21The other four imaging modalities are nuclear medicine, ultrasound, X-ray and other 

standard imaging, and procedures that use imaging.

MRI services 

use magnets, radio waves, and computers to create images of internal 

body tissues. CT services use ionizing radiation and computers to 

produce cross-sectional images of internal organs and body structures.

For certain advanced imaging services, contrast agents, such as barium 

or iodine solutions, are administered to patients orally or intravenously. By 

using contrast, sometimes referred to as “dye,” as part of the imaging 

examination, providers can view soft tissue and organ function more 

clearly. MRI and CT services help diagnose and treat many diseases and 

disorders such as different types of cancer, cardiovascular diseases, and 

musculoskeletal disorders. They can also reduce the need for moreinvasive medical procedures and improve patient outcomes.

Background 

MRI and CT Services
 

Page 8 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Medicare payments for advanced imaging services are separated into two 

components—the technical component (TC) and the professional 

component (PC). The TC is intended to cover the cost of performing a 

test, including the costs for equipment, supplies, and nonphysician staff.

The PC is intended to cover the provider’s time in interpreting the image 

and writing a report on the findings. The PC and TC can be billed 

together, on what is called a global claim. The components can also be 

billed separately. For instance, a global claim could be billed if the same 

provider performs and interprets the examination, whereas the TC and 

PC could be billed separately if the performing and interpreting providers 

are different. Typically, the Medicare payment for the TC is substantially 

higher than the payment for the PC. For instance, for a CT of the pelvis 

with dye billed under the 2010 Medicare physician fee schedule, the TC 

accounted for 79 percent of the total payment, and the PC accounted for 

21 percent.

Medicare reimburses providers through different payment systems 

depending on where the advanced imaging service is performed. When 

an advanced imaging service is performed in a provider’s office or an 

IDTF, both the PC and TC are reimbursed under the Medicare physician 

fee schedule. Alternatively, when the service is performed in an 

institutional setting, such as a hospital outpatient or inpatient department, 

the provider is reimbursed under the Medicare physician fee schedule for 

the PC, while the TC is reimbursed under a different Medicare payment 

system, according to the setting in which the service was provided. For 

instance, the TC of an advanced imaging service performed in a hospital 

outpatient department is reimbursed under the Medicare hospital 

outpatient payment system, while a service performed in a hospital 

inpatient setting is reimbursed through a facility payment paid under 

Medicare Part A.

In 2010, Medicare FFS beneficiaries received 30.0 million advanced 

imaging services, approximately 6.8 million (23 percent) of which were 

performed in an IDTF or physician’s office. Of the 6.8 million advanced 

imaging services performed in an IDTF or physician’s office, 2.9 million 

were MRI services and 3.9 million were CT services. The remaining 

23.2 million advanced imaging services were performed in other settings, 

such as hospital inpatient or outpatient departments, and their associated 

TCs were billed through different payment systems (see fig. 1). The total 

expenditures for all advanced imaging services billed under the Medicare 

physician fee schedule, including TCs and PCs, reached $4.2 billion in 

2010.

Medicare Billing and 

Payment Policies for 

Advanced Imaging 

Services

2010 Advanced Imaging 

Utilization by Setting and 

Medicare Physician Fee 

Schedule Expenditures
 

Page 9 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Figure 1: Distribution of Advanced Imaging Services by Modality and Setting, 2010

Numerous policies have been implemented or proposed by CMS, 

MedPAC, or other researchers that are designed to limit self-referral or 

reduce inappropriate utilization of advanced imaging services. These 

policies can affect self-referral or advanced imaging utilization through 

various means such as prohibiting different types of physician selfreferral, informing beneficiaries of physician self-referral, mandating 

accreditation of staff performing MRI and CT services, improving payment 

accuracy, reducing payments for self-referred services, and ensuring 

services are clinically appropriate. One type of physician self-referral 

arrangement that CMS has prohibited is “per-click” self-referral 

arrangements where, for instance, a physician leases an imaging 

machine to a hospital, refers patients for imaging services, and then is 

paid on a per-service basis by the hospital. CMS has also solicited 

comments on prohibiting self-referral of diagnostic tests provided as an 

ancillary service in a physician’s office that are not usually provided 

during an office visit, because a key rationale for permitting self-referral of 

such services is that receiving a diagnostic service during the same office 

visit when a physician orders a test is convenient for beneficiaries.

MedPAC, in its June 2010 report to Congress, noted that MRI and CT 

Select Implemented or 

Proposed Policies 

Designed to Address 

Utilization or Expenditures 

Associated with SelfReferral of Advanced 

Imaging Services
 

Page 10 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

services were performed on the same day as an office visit less than a 

quarter of the time, with only 8.4 percent of MRI services of the brain 

being performed on the same day as an office visit.22 Appendix II lists a 

select number of such policies in addition to these two policies that have 

been implemented or put forth by CMS, MedPAC, and other researchers.

From 2004 through 2010, the number of self-referred MRI and CT 

services performed in a provider’s office and non-self-referred MRI and 

CT services performed in a provider’s office or IDTF increased, with the 

larger increase for self-referred services. Similarly, expenditures for selfreferred advanced imaging services also increased over this period, and 

this increase was larger than the changes in expenditures for advanced 

imaging services that were not self-referred. Over the period we 

reviewed, the share of advanced imaging services that were self-referred 

also increased overall and across all provider specialties we examined.

While the number of self-referred MRI services performed in a provider’s 

office and non-self-referred MRI services performed in a provider’s office 

or IDTF both increased from 2004 through 2010, a significantly larger 

increase occurred among the self-referred services.23

 

22Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in 

Medicare (Washington, D.C.: June 2010).

Specifically, the 

number of self-referred MRI services increased from about 380,000 

services in 2004 to about 700,000 services in 2010—an increase of more 

than 80 percent (see fig 2). In contrast, the number of non-self-referred 

MRI services grew about 12 percent over the same time period, from 

about 1.97 million services in 2004 to about 2.21 million services in 2010.

Despite an overall increase during this time, both self-referred and nonself-referred services declined at some point during the years of our 

study. However, the number of self-referred services grew faster in the 

23As noted in the Scope and Methodology section, the universe of services for this finding 

refers to advanced imaging services performed in a provider’s office or in an IDTF. We 

focused on these settings because our previous work showed rapid growth among such 

services and because the financial incentive for providers to self-refer is most direct when 

the service is performed in a physician office.

Self-Referred MRI and 

CT Services and 

Expenditures Grew 

Overall, While NonSelf-Referred Services 

and Expenditures 

Grew Slower or 

Decreased 

Number of Self-Referred 

and Non-Self-Referred MRI 

and CT Services Increased 

Overall from 2004 to 2010, 

with the Larger Increase 

among Self-Referred 

Services
 

Page 11 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

earlier years and declined less in the later years than the number of nonself-referred services.

Figure 2: Number of Self-Referred and Non-Self-Referred MRI Services, 2004-2010

Note: Results include services performed in a physician office or IDTF. Services performed in other 

settings, such as hospital outpatient departments, are not included.

Similar to MRI services, the number of self-referred and non-self-referred 

CT services both increased from 2004 through 2010, with a considerably 

larger increase occurring in self-referred services. Specifically, the 

number of self-referred CT services more than doubled from 2004 

through 2010, growing from about 700,000 services to about 1.45 million 

services (see fig. 3). In contrast, the number of non-self-referred CT 

services increased about 30 percent during these years, from about 

1.90 million services to about 2.48 million services. Although the number 

of both self-referred and non-self-referred CT services increased over the 

period of our study, the number of non-self-referred CT services 

decreased from 2009 through 2010.
 

Page 12 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Figure 3: Number of Self-Referred and Non-Self-Referred CT Services, 2004-2010

Note: Results include services performed in a physician office or IDTF. Services performed in other 

settings, such as hospital outpatient departments, are not included.

The number of self-referred advanced imaging services increased from 

2004 through 2010, even after accounting for change in the number of 

Medicare FFS beneficiaries. Specifically, the number of self-referred MRI 

services per 1,000 Medicare FFS beneficiaries grew from 10.8 in 2004 to 

20.0 in 2010—an increase of about 85 percent. Similarly, the number of 

self-referred CT services per 1,000 Medicare FFS beneficiaries more than 

doubled, growing from about 19.6 in 2004 to 41.2 in 2010.

Expenditures for self-referred MRI services grew overall from 2004 

through 2010, while expenditures for non-self-referred MRI services 

declined. Specifically, self-referred MRI expenditures grew about 

55 percent during the time of our review, from approximately $239 million 

in 2004 to about $370 million in 2010 (see fig. 4). In contrast, 

expenditures for non-self-referred MRI services decreased about 

8.5 percent during the same period. Expenditures for both self-referred 

Self-Referred MRI and CT 

Expenditures Grew More 

Than Non-Self-Referred 

Expenditures Overall with 

Non-Self-Referred MRI 

Expenditures Declining
 

Page 13 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

and non-self-referred MRI services increased rapidly from 2004 through 

2006, then decreased sharply in 2007. These declines in 2007 

corresponded with the first year of implementation of a DRA provision that 

reduced fees for certain advanced imaging services.24 Since the declines 

in 2007, expenditures for non-self-referred MRI services have declined 

further while self-referred expenditures have increased.

 

24Under a provision in the DRA, Medicare fees for certain imaging services covered by the 

Medicare physician fee schedule cannot exceed what Medicare pays under the hospital 

outpatient prospective payment system, effectively mandating reduction in fees for certain 

services. Pub. L. No. 109-171, § 5102(b), 120 Stat. 4, 39-40 (2006). See GAO, Medicare: 

Trends in Fees, Utilization, and Expenditures for Imaging Services before and after 

Implementation of the Deficit Reduction Act of 2005, GAO-08-1102R (Washington, D.C.: 

September 26, 2008). 
 

Page 14 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Figure 4: Self-Referred and Non-Self-Referred MRI Expenditures, 2004-2010

Note: Expenditures include those services we could determine were performed in a physician office 

or IDTF setting. This included global claims where the performance and interpretation of the 

advanced imaging service were billed together—and claims where the performance of the advanced 

imaging service was billed separately from the interpretation of the image. We excluded expenditures 

for claims where the interpretation of the exam was billed separately because this service may have 

been performed in another setting, such as a hospital outpatient department.

Relative to 2004, expenditures for both self-referred and non-self-referred 

CT services have grown through 2010, but the increase was larger for 

self-referred CT services (see fig. 5). Specifically, expenditures for selfreferred CT services increased from $204 million in 2004 to about 

$340 million in 2010, an increase of about 67 percent. In contrast, 

expenditures for non-self-referred CT services increased from about 

$609 million in 2004 to about $642 million in 2010, an increase of about 

5 percent.
 

Page 15 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Figure 5: Self-Referred and Non-Self-Referred CT Expenditures, 2004-2010

Note: Expenditures include those services we could determine were performed in a physician office 

or IDTF setting. This included global claims where the performance and interpretation of the 

advanced imaging service were billed together—and claims where the performance of the advanced 

imaging service was billed separately from the interpretation of the image. We excluded expenditures 

for claims where the interpretation of the exam was billed separately because this service may have 

been performed in another setting, such as a hospital outpatient department.

Because the self-referred advanced imaging services grew at a greater 

rate than non-self-referred services from 2004 through 2010, the 

proportion of MRI and CT services that were self-referred increased 

during that time period. Specifically, the proportion of MRI services that 

were self-referred increased from 16.3 percent in 2004 to 24.2 percent in 

2010. Similarly, the proportion of CT services that were self-referred grew 

from 26.8 percent in 2004 to 37.0 percent in 2010. Consistent with the 

overall trend, the proportion of MRI and CT services that were selfreferred increased from 2004 through 2010 for all provider specialties that 

Share of Self-Referred MRI 

and CT Services Increased 

Overall and across All 

Major Referring Provider 

Specialties
 

Page 16 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

we studied.25 For further information on self-referral rates across provider 

specialties, see appendix III.

We found that, in 2010, providers that self-referred beneficiaries for MRI 

and CT services referred substantially more of those services than did 

providers who did not self-refer these services, even after we accounted 

for differences in practice size, specialty, geography, and patient 

characteristics. We also found that the year after providers purchased 

MRI or CT equipment, leased MRI or CT equipment, or joined a group 

practice that self-referred, they increased the number of services they 

referred when compared with providers that did not begin to self-refer 

advanced imaging services.

In 2010, self-referring providers referred substantially more advanced 

imaging services than providers who did not self-refer such services that 

year.26

 

25We included specialties that referred at least 1.5 percent of self-referred MRI or CT 

services in 2004 and 2010. Sixteen provider specialties met these criteria for MRI 

services, CT services, or both types of services. These specialties were Cardiology, 

Family Practice, Gastroenterology, General Surgery, Hematology/Oncology, Internal 

Medicine, Medical Oncology, Neurology, Neurosurgery, Physical Medicine, Pulmonary 

Disease, Orthopedic Surgery, Otolaryngology, Radiation Oncology, Rheumatology, and 

Urology.

Specifically, providers that self-referred at least one beneficiary for 

an MRI service in 2010 averaged 36.4 MRI referrals, compared with an 

average of 14.4 MRI referrals for non-self-referrers. Similarly, providers 

that self-referred at least one beneficiary for a CT service in 2010 

averaged 73.2 CT referrals, or 2.3 times as many as the 32.3 CT referrals 

averaged by non-self-referring providers. About 10 percent of all MRI and 

CT services referred by self-referring providers in 2010 were ordered, 

performed, and interpreted by the same provider. Certain efficiencies may 

be gained when the same provider orders, performs, and interprets an 

advanced imaging service, such as reviewing a patient’s clinical history 

only once. CMS has taken steps to ensure that fees for services paid 

under the physician fee schedule take into account efficiencies that 

26As discussed earlier, the scope of services included in this analysis is broader than our 

analysis of self-referred services. Specifically, this analysis includes settings other than a 

physician office or IDTF, such as a hospital. We did this to fully capture the advanced 

imaging referral patterns of self-referring and non-self-referring providers to ensure that 

the comparison between the groups was comparable.

Self-Referring 

Providers Referred 

Substantially More 

Advanced Imaging 

Services on Average 

Than Did Other 

Providers 

Self-Referring Providers 

Referred Substantially 

More MRI and CT Services 

Than Other Providers, 

Regardless of Practice or 

Patient Characteristics
 

Page 17 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

resulted from how the services are provided, and we recently 

recommended that CMS expand these efforts.27

Differences in advanced imaging referrals between self-referring and nonself-referring providers persisted after accounting for differences in 

practice size, specialty, geography, or patient characteristics.

Self-referring providers referred more MRI and CT services than did nonself-referring providers, regardless of differences in practice size. In 

general, self-referring providers tend to work in practices with a larger 

number of Medicare beneficiaries. However, in 2010, self-referring 

providers referred more MRI and CT services than non-self-referring 

providers regardless of practice size, and the difference in number of 

services referred generally increased as provider size increased (see 

table 1). For example, self-referring providers that had 50 or fewer 

patients referred 1.8 times as many MRI services as did non-self-referring 

providers. In comparison, self-referring providers with 500 or more 

patients referred 2.4 times as many MRI services as non-self-referring 

providers did.

 

27CMS has a long-standing policy called a multiple procedure payment reduction that is 

meant to avoid duplicate payments for expenses that are incurred only once when two or 

more surgical services are furnished together by the same physician during the same 

operating session. CMS expanded the multiple procedure payment reduction to include 

certain imaging services in 2006. Medicare Program: Revisions to Payment Policies 

Under the Physician Fee Schedule for Calendar Year 2006, 70 Fed. Reg. 70116 (Nov. 21, 

2005). In our 2009 report, we recommended that CMS expand its efforts to ensure that 

fees for services paid under the physician fee schedule reflect efficiencies that occur when 

services are performed by the same physician to the same beneficiary on the same day. 

See GAO, Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved 

When Services Are Provided Together, GAO-09-647 (Washington, D.C.: July 31, 2009). In 

2012, CMS expanded its multiple procedure payment reduction policy by applying a 

reduction to the PC of imaging services that are provided during the same session, to the 

same patient, on the same day; the agency had previously applied the multiple procedure 

payment reduction to only the TC of imaging services that met the same criteria.

Practice Size
 

Page 18 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Table 1: Average Number of MRI and CT Services Referred by Non-Self-Referring and Self-Referring Providers, 2010

MRI services CT services

Number of unique 

Medicare FFS 

beneficiariesa Non-self-referring Self-referring

Relative rate of 

self-referring 

providersb Non-self-referring Self-referring

Relative rate of 

self-referring 

providersb

1 to 50 3.2 5.7 1.8 5.2 7.1 1.4

51 to 100 7.2 12.3 1.7 13.7 19.0 1.4

101 to 250 13.0 24.0 1.8 26.7 40.8 1.5

251 to 500 20.4 42.8 2.1 48.7 78.8 1.6

>500 29.7 71.1 2.4 89.9 151.0 1.7

Source: GAO analysis of Medicare data.

Notes: Providers were considered to be self-referring if they self-referred beneficiaries for at least one 

service. Providers with a specialty of radiology or independent diagnostic testing facility (IDTF) were 

removed from this analysis because they should not be able to self-refer services. Additionally, 

because emergency medicine providers generally did not practice in provider offices, they were 

removed from our analysis. Of the 419,884 providers that referred at least one beneficiary for an MRI 

service in 2010, 35,950 were self-referring and 383,934 were non-self-referring. Of the 477,547 

providers that referred at least one beneficiary for a CT service in 2010, 39,913 were self-referring 

and 437,634 were non-self-referring.

a

The number of unique Medicare FFS beneficiaries refers to the number of unique beneficiaries that 

received at least one service from a provider. 

b

The relative rate of self-referring providers refers to the factor by which the average number of 

services referred by self-referring providers is greater than the average number of services referred 

by non-self-referring providers. For example, if the relative rate of self-referring providers is equal to 

3, it would mean that, on average, self-referrers refer 3 times as many advanced imaging services as

do non-self-referrers.

Self-referring providers generally referred more MRI and CT services than 

did non-self-referring providers, regardless of differences in specialties.

Self-referring providers were more likely than non-self-referring providers 

to belong to specialties that had a greater-than-average number of 

referrals per physician for advanced imaging services in 2010. However, 

for the 7 specialties that had at least 1,000 providers that self-referred 

beneficiaries for MRI services, self-referring providers generally averaged 

more referrals for MRI services than did non-self-referring providers, 

regardless of practice size.28

 

28We grouped providers of each specialty with at least 1,000 self-referring providers into 

five provider-size categories: (1) fewer than 50 unique Medicare FFS patients; (2) 51-100 

unique Medicare FFS patients; (3) 101-250 unique Medicare FFS patients; (4) 251-500 

unique Medicare FFS patients; and (5) more than 500 unique Medicare FFS patients. The 

seven specialties that had at least 1,000 self-referring providers were Family Practice, 

Hematology/Oncology, Internal Medicine, Neurology, Nurse Practitioners, Orthopedic 

Surgeons, and Physician Assistants.

Similarly, self-referring providers in 9 of the 

Specialty
 

Page 19 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

13 specialties that had at least 1,000 self-referring CT providers generally 

referred more beneficiaries for CT services than non-self-referring 

providers, regardless of practice size.29

Self-referring providers referred more MRI and CT services than non-selfreferring providers, regardless of differences in geography. Providers that 

self-referred MRI services averaged 36.3 MRI referrals and 37.3 MRI 

referrals in urban and rural locations, respectively. In comparison, nonself-referring providers averaged 14.3 MRI referrals in urban locations 

and 15.2 MRI referrals in rural locations. Providers that self-referred 

beneficiaries for CT services averaged 72.7 referrals in urban locations 

and 77.2 referrals in rural locations, while non-self-referring providers 

averaged 31.1 CT referrals in urban locations and 40.7 referrals in rural 

locations. We found that differences in the number of MRI and CT 

referrals made by self-referring and non-self-referring providers persisted 

when accounting for provider size along with geography (see table 2).

 

29The nine specialties where self-referring providers referred more beneficiaries for CT 

services than non-self-referring providers across the majority of provider size categories 

were: Cardiology, Gastroenterology, General Surgery, Hematology/Oncology, Nurse 

Practitioners, Orthopedic Surgery, Otolaryngology, Urology, and Pulmonary Disease 

specialists. The four specialties where non-self-referring providers referred more 

beneficiaries for CT services, on average, than self-referring providers across the majority 

of provider size categories were Family Practice, Internal Medicine, Neurology, and 

Physician Assistants.

Geography
 

Page 20 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Table 2: Average Number of MRI and CT Services Referred by Non-Self-Referring and Self-Referring Providers in Urban and 

Rural Locations, 2010

MRI services CT services

Geographic 

designation

Number of 

unique 

Medicare FFS

beneficiariesa Non-selfreferring Self-referring

Relative rate of 

self-referring 

providersb Non-selfreferring Self-referring

Relative rate of 

self-referring 

providersb

Urban 1 to 50 3.3 5.8 1.8 5.4 7.3 1.4

51 to 100 7.5 12.4 1.7 14.2 19.4 1.4

101 to 250 13.5 24.4 1.8 27.2 41.9 1.5

251 to 500 20.8 43.9 2.1 48.2 80.8 1.7

>500 29.5 72.1 2.4 86.5 151.5 1.8

Rural 1 to 50 2.8 4.7 1.7 4.3 5.2 1.2

51 to 100 5.7 10.2 1.8 10.4 12.7 1.2

101 to 250 10.5 20.1 1.9 23.8 30.3 1.3

251 to 500 19.0 34.6 1.8 51.3 64.7 1.3

>500 30.5 65.4 2.1 102.8 147.8 1.4

Source: GAO analysis of Medicare data.

Notes: Providers were considered to be self-referring if they self-referred beneficiaries for at least one 

service. Providers with a specialty of radiology or independent diagnostic testing facility (IDTF) were 

removed from this analysis because they should not be able to self-refer services. Additionally, 

because emergency medicine providers generally did not practice in provider offices, they were 

removed from our analysis. Of the 419,884 providers that referred at least one beneficiary for an MRI 

service in 2010, 35,950 were self-referring and 383,934 were non-self-referring. Of the 477,547 

providers that referred at least one beneficiary for a CT service in 2010, 39,913 were self-referring 

and 437,634 were non-self-referring.

a

The number of unique Medicare FFS beneficiaries refers to the number of unique beneficiaries that 

received at least one service from a provider.

b

The relative rate of self-referring providers refers to the factor by which the average number of 

services referred by self-referring providers is greater than the average number of services referred 

by non-self-referring providers. For example, if the relative rate of self-referring providers is equal to 

3, it would mean that, on average, self-referrers refer 3 times as many advanced imaging services as 

do non-self-referrers.

Self-referring providers referred more MRI and CT services than non-selfreferring providers, in spite of similarities in patient characteristics. 

Specifically, the patient populations of self-referring and non-self-referring 

MRI and CT providers were similar in terms of most patient 

characteristics, with self-referring providers having slightly healthier 

patients than non-self-referring providers, as indicated by their lower 

average risk score (see table 3). If self-referring providers had patients 

that were older or sicker, it could have explained why self-referring 

providers referred their patients for more services than non-self-referring 

providers.

Patient Characteristics
 

Page 21 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Table 3: Patient Characteristics of Non-Self-Referring and Self-Referring MRI and CT Providers, 2010

MRI services CT services

Patient characteristics, average Non-self-referring Self-referring Non-self-referring Self-referring

Average age (years) 70 71 70 71

Percent female 59 60 59 57

Average risk scorea 1.53 1.40 1.57 1.44

Source: GAO analysis of Medicare data.

a

A beneficiary’s risk score is a proxy for health status and is equivalent to the ratio of expected health 

care expenditures for that beneficiary under Medicare FFS relative to the average health care 

expenditures for all Medicare FFS beneficiaries. For example, a beneficiary with a risk score of 1.05 

would have expected expenditures that were 5 percent higher than an average Medicare FFS 

beneficiary. The risk scores presented are normalized using the FFS normalization factor of 1.041 

that CMS used to normalize risk scores in 2010. Normalization keeps the average Medicare FFS risk 

score constant at 1.0 over time.

Our analysis indicated that providers’ referrals for MRI and CT services 

substantially increased the year after they began to self-refer. In our 

analysis, we compared the number of MRI and CT referrals for 

switchers—those providers that did not self-refer in 2007 or 2008 but did 

self-refer in 2009 and 2010—to providers that did not change their selfreferral status during the same time period. Providers could self-refer by 

purchasing imaging equipment, leasing equipment, or joining a group 

practice that already self-referred. Overall, the switcher group of providers 

who began self-referring in 2009 increased the average number of MRI 

and CT referrals they made by about 67 percent in 2010 compared to the 

average in 2008. In the case of MRIs, the average number of referrals 

switchers made for MRI services increased from 25.1 in 2008 to 42.0 in 

2010. In contrast, the average number of MRI and CT referrals declined 

for providers that did not self-refer and providers who self-referred from 

2008 through 2010. This comparison suggests that the increase in the 

average number of referrals for switchers from 2008 to 2010 was not due 

to a general increase in the use of imaging services among all providers.

(See table 4.)

Providers’ Referrals for 

MRI and CT Services 

Substantially Increased the 

Year after They Began to 

Self-Refer
 

Page 22 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Table 4: Change in Average Number of MRI and CT Services Referred, 2008 and 2010

MRI Services CT Services

Provider 

referral type

Number

of 

providers

Average 

2008 

referred MRI 

services

Average 

2010 

referred MRI 

services

Percentage 

change, 

2008 to 2010

Number 

of 

providers

Average 

2008 

referred CT 

services

Average 

2010 

referred CT 

services

Percentage 

change, 

2008 to 2010

Switchers 2,803 25.1 42.0 67.3 3,329 56.3 93.9 66.7

Non-self-referrers 199,102 20.6 19.2 -6.8 241,097 59.1 58.1 -1.7

Self-referrers 17,753 47.0 45.4 -3.4 19,756 89.6 87.3 -2.6

Source: GAO analysis of Medicare data.

Note: We define switchers as those providers that did not self-refer in 2007 or 2008, but did self-refer 

in 2009 and 2010.

The increase in MRI and CT referrals for providers that began selfreferring in 2009 cannot be explained exclusively by factors such as 

providers joining practices with higher patient volumes, different patient 

populations, or different practice cultures. Specifically, providers that 

remained in the same practice from 2007 through 2010, but began selfreferring in 2009, also had a bigger increase in the number of MRI and 

CT referrals than did providers that did not change their self-referral 

status.30 Providers that remained in the same practice from 2008 through 

2010, but began self-referring in 2009 had a 21.0 percent increase in MRI 

referrals and a 14.4 percent increase in CT referrals.

On the basis of our estimates, Medicare spent about $109 million more in 

2010 than the program would have if self-referring providers referred 

advanced imaging services at the same rate as non-self-referring 

providers of the same specialty and provider size (see fig. 6). This 

additional spending can be attributed to the fact that self-referring 

providers referred over 400,000 more MRI and CT services in 2010 than 

if they had referred at the same rate as non-self-referring providers of the 

same size and specialty. Specifically, we estimate there were 143,303 

additional referrals for MRI services and 283,725 additional referrals for 

CT services.

 

30We considered a provider to have remained in the same practice if the entity to which 

they most commonly referred MRI or CT services remained the same from 2007 through 

2010.

Higher Use of 

Advanced Imaging 

Services by SelfReferring Providers 

Results in Substantial 

Costs to Medicare
 

Page 23 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Figure 6: Potential Savings under Alternative Scenario for Self-Referring Providers, 

2010

Note: We included imaging expenditures for those specialties that had at least 1,000 self-referring 

providers. Overall, specialties that met these criteria referred approximately 66 percent of selfreferred MRI services and approximately 81 percent of self-referred CT services. Under the 

alternative scenario, we calculated expenditures for services as if self-referring providers referred MRI 

and CT services at the same rate as non-self-referring providers of the same specialty and practice 

size in 2010.

The additional Medicare imaging expenditures attributed to self-referring 

providers is likely higher than $109 million in 2010.31

 

31We limited our analysis to expenditures directly related to imaging services. There may 

be additional costs associated with the increased use of advanced imaging services by 

self-referring providers, if these imaging services reveal abnormalities that have no clinical 

relevance or result in unnecessary surgeries. In contrast, increased use of advanced 

imaging may partially offset some of these direct imaging costs if increased use led to the 

early detection of disease and resulted in less-invasive and less-costly treatments.

This is because a 

significant portion of self-referring providers are not included in this 

estimate. Specifically, we limited our analysis to those specialties that had 

at least 1,000 self-referring providers. Approximately 34 percent of the 
 

Page 24 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

providers who self-referred beneficiaries for MRI services and 19 percent 

of the providers who self-referred beneficiaries for CT services belonged 

to a specialty other than those that met the 1,000 self-referring providers 

criteria.

Advanced imaging services can help in the early detection and aid in the 

treatment of certain diseases, resulting in less-invasive treatments and 

improved patient outcomes. The ability of providers to self-refer 

beneficiaries for these services can, for example, improve coordination of 

care and help ensure convenient access to these services among 

beneficiaries. However, our review indicates that some factor or factors 

other than the health status of patients, provider practice size or specialty, 

or geographic location (i.e., rural or urban) helped drive the higher 

advanced imaging referral rates among self-referring providers compared 

to non-self-referring providers. We found that providers who began to 

self-refer advanced imaging services—after purchasing or leasing 

imaging equipment or joining practices that self-referred—substantially 

increased their referrals for MRI and CT services relative to other 

providers. This suggests that financial incentives for self-referring 

providers may be a major factor driving the increase in referrals. These 

financial incentives likely help explain why, in 2010, providers who selfreferred made 400,000 more referrals for advanced imaging services than 

they would have if they were not self-referring. These additional referrals 

cost CMS more than $100 million in 2010 alone. To the extent that these 

additional referrals are unnecessary, they pose an unacceptable risk for 

beneficiaries, particularly in the case of CT services, which involve the 

use of ionizing radiation.

Given the challenges to the long-range fiscal sustainability of Medicare, it 

is imperative that CMS develop policies to address the effect of selfreferral on the utilization of and expenditures for advanced imaging 

services. CMS first needs to improve its ability to identify services that are 

self-referred. Claims do not include an indicator or “flag” that identifies 

whether services are self-referred or non-self-referred, and CMS does not 

currently have a method for easily identifying such services. A systematic 

method for identifying self-referred advanced imaging services would give 

CMS the ongoing ability to determine the extent to which these services 

are self-referred and help the agency identify those services that may be 

inappropriate, unnecessary, or potentially harmful to beneficiaries.

Including a self-referral flag on Medicare Part B claims submitted by 

providers who bill for advanced imaging services is likely the easiest and 

most cost-effective approach. Second, we found that about 10 percent of 

Conclusions 
 

Page 25 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

advanced imaging services referred by self-referring physicians in 2010 

were also performed and interpreted by the same physician. Certain 

efficiencies may be gained when the same provider orders, performs, and 

interprets an advanced imaging service, such as reviewing a patient’s 

clinical history only once. MedPAC recommended in 2011 that CMS 

should reduce its payments for advanced imaging services in which the 

same provider refers and performs the service, to account for efficiencies 

that are realized in these circumstances. This is consistent with previous 

efforts by CMS to reduce fees for services paid under the physician fee 

schedule when efficiencies are realized and with our previous 

recommendation that CMS expand these efforts. Third, if CMS were able 

to easily identify self-referred services, the agency may be better 

positioned to implement an approach that ensures the appropriateness of 

advanced imaging services that Medicare beneficiaries receive—beyond 

examining the feasibility of such methods, as we recommended in our 

2008 report. Approaches for managing advanced imaging utilization could 

be “front-end” or used before CMS issues payment, such as prior 

authorization. CMS could also explore back-end approaches used after 

CMS issues payment, such as targeted audits of self-referring providers 

that refer a high volume of services.

In order to improve CMS’s ability to identify self-referred advanced 

imaging services and help CMS address the increases in these services, 

we recommend that the Administrator of CMS take the following three 

actions:

1. Insert a self-referral flag on its Medicare Part B claims form and 

require providers to indicate whether the advanced imaging services 

for which a provider bills Medicare are self-referred or not.

2. Determine and implement a payment reduction for self-referred 

advanced imaging services to recognize efficiencies when the same 

provider refers and performs a service.

3. Determine and implement an approach to ensure the appropriateness 

of advanced imaging services referred by self-referring providers.

HHS reviewed a draft of this report and provided written comments, which 

are reprinted in appendix IV. In its comments, HHS stated that it would 

consider one of our recommendations but did not concur with our other 

two recommendations. HHS did not comment on our findings that selfreferring providers referred substantially more advanced imaging services 

Recommendations for 

Executive Action

Agency Comments 

and Our Evaluation
 

Page 26 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

than non-self-referring providers or our conclusion that financial 

incentives for self-referring providers may be a major factor driving the 

increase in referrals for advanced imaging services. 

HHS noted that it would consider our recommendation that CMS 

determine and implement an approach to ensure the appropriateness of 

advanced imaging services referred by self-referring providers. According 

to HHS, CMS would consider this recommendation when refining its 

medical review strategy for advanced imaging services. HHS also 

indicated that CMS does not have statutory authority to implement some 

of the approaches discussed in the report. We are pleased that CMS 

plans to consider this recommendation and note that we did not identify a 

specific approach, having identified several examples in our report of both 

front-end and back-end approaches to managing utilization of advanced 

imaging services. As we reported, CMS could explore back-end 

approaches used after CMS issues payment, such as targeted audits of 

self-referring providers. CMS could also explore other approaches the 

agency determines are within its statutory authority. Further, if deemed 

necessary, CMS could seek legislative authority to implement promising 

approaches to managing advanced imaging utilization.

HHS did not concur with our recommendation that CMS insert a selfreferral flag on its Medicare Part B claims and require providers to 

indicate whether the advanced imaging services for which a provider bills 

Medicare are self-referred or not. According to HHS, CMS believes that a 

new checkbox on the claim form identifying self-referral would be complex 

to administer and providers may not characterize referrals accurately. 

CMS believes that other payment reforms, such as paying networks of 

providers, hospitals, or other entities that share responsibility for providing 

care to patients, would better address overutilization. We continue to 

believe that including an indicator or flag on the claims would likely be the 

easiest and most cost-effective approach to improve CMS’s ability to 

identify self-referred advanced imaging services. We do not suggest, nor 

did we intend, that CMS use the self-referral flag or indicator we 

recommended to determine compliance with the physician self-referral 

law. Without a self-referral flag or indicator, CMS will not be able to 

monitor trends in utilization and expenditures associated with physician 

self-referral without considerable time and effort. Further, a self-referral 

flag does not have to be a “checkbox” on the claim and could be a 

modifier, similar to other modifiers that CMS uses to characterize claims.

In addition, HHS did not provide reasons to support CMS’s contention 

that such a flag would be complex to administer. 
 

Page 27 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

HHS also did not concur with our recommendation that CMS determine 

and implement a payment reduction for self-referred advanced imaging 

services to recognize efficiencies when the same provider refers and 

performs a service. According to HHS, CMS’s multiple procedure 

payment reduction already captures efficiencies inherent in providing 

multiple advanced imaging services by the same physician or group 

practice during the same session. CMS also noted that a further payment 

reduction may reduce, but not eliminate, the underlying financial incentive 

to self-refer advanced imaging services and may cause providers to refer 

more services, in an effort to maintain their income. CMS also noted that 

providers in a group practice could easily avoid this reduction by having 

one physician order the service while another furnishes the service. 

According to HHS, CMS also questions its statutory authority to impose 

the payment reduction for the subset of physicians who self-refer, citing a 

prohibition on paying a differential by physician specialty for the same 

service. Our report shows that self-referring providers generally referred 

more MRI and CT services, regardless of differences in specialties, and 

CMS did not indicate how this recommendation would implicate the 

prohibition on paying a differential by specialty. Additionally, while HHS 

cites the multiple procedure payment reduction as a means to address 

certain efficiencies in the delivery of advanced imaging services, these 

are not the efficiencies targeted by our recommendation. Instead, as 

noted in our report, our recommended payment reduction would capture 

those efficiencies gained when the same provider orders and performs an 

advanced imaging service. Such efficiencies could be captured in a 

single—rather than multiple—advanced imaging service. This 

recommendation is also consistent with a 2011 MedPAC 

recommendation. As noted in our report, this payment reduction would 

affect about 10 percent of advanced imaging services referred by selfreferring providers. As for CMS’s concern about overutilization of 

advanced imaging services resulting from a payment reduction, CMS 

could help address this issue by implementing our recommendation to 

use a flag indicating self-referral to monitor utilization of these services.

On the basis of HHS’s written response to our report, we are 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. HHS did not comment on our key 

finding that self-referring physicians referred about two times as many 

advanced imaging services, on average, as providers who did not self 

refer. Nor did HHS comment on our estimate that these additional 

referrals for advanced imaging services cost CMS more than $100 million 
 

Page 28 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

in 2010 alone. Given these findings, we continue to believe that CMS 

should take steps to monitor the utilization of advanced imaging services 

and ensure that the services for which Medicare pays are appropriate. 

HHS also provided technical comments that we incorporated as 

appropriate. 

As agreed with your offices, unless you publicly announce the contents of 

this report earlier, we plan no further distribution until 30 days from the 

report date. At that time, we will send copies to the Secretary of HHS, 

interested congressional committees, and others. In addition, the report 

will be available at no charge on the GAO website at http://www.gao.gov. 

If you or your staff has any questions about this report, please contact me 

at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. GAO staff who made major contributions to this report 

are listed in appendix V.

James C. Cosgrove

Director, Health Care
Page 29 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

List of Requesters

The Honorable Max Baucus

Chairman

Committee on Finance

United States Senate

The Honorable Chuck Grassley

Ranking Member

Committee on the Judiciary

United States Senate

The Honorable Henry A. Waxman

Ranking Member

Committee on Energy and Commerce

House of Representatives

The Honorable Sander Levin

Ranking Member

Committee on Ways and Means

House of Representatives

The Honorable Pete Stark

Ranking Member

Subcommittee on Health

Committee on Ways and Means

House of Representatives
Appendix I: Scope and Methods

Page 30 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

This section describes the scope and methodology used to analyze our 

three objectives: (1) trends in the number of and expenditures for selfreferred and non-self-referred advanced imaging services from 2004 

through 2010, (2) the extent to which the provision of advanced imaging 

services differs for providers who self-refer when compared with other 

providers, and (3) the implications of self-referral for Medicare spending 

on advanced imaging services.

For all three objectives, we used the Medicare Part B Carrier File, which 

contains final action Medicare Part B claims for noninstitutional providers, 

such as physicians. Claims can be for one or more services or for 

individual service components.1 Each service or service component is 

identified on a claim by its Healthcare Common Procedure Coding 

System (HCPCS) code, which the Centers for Medicare & Medicaid 

Services (CMS) assigns to products, supplies, and services for billing 

purposes. HCPCS codes are also categorized by CMS using the 

Berenson-Eggers Type of Service (BETOS) categorization system, which 

assigns HCPCS to broad service categories.2

We limited our universe of services and service components for our study 

to those for magnetic resonance imaging (MRI) and computed 

tomography (CT) services. We classified MRI and CT services and 

service components as those with HCPCS codes included in a BETOS

category where the first two digits were equal to “I2”, defined as advanced 

imaging services. We further limited our universe to only those MRI and 

CT services that were considered designated health services—services 

for which, in the absence of an exception, a physician may not make a 

referral to furnish to an entity with which he has a financial relationship

 

1

Services can have technical components (TC) and professional components (PC). The 

TC of a service is intended to cover the performance of a test, including the cost of 

equipment, supplies, and nonphysician staff. In addition, services have a PC, which for 

advanced imaging services is intended to cover the physician’s time in interpreting an 

image and writing a report on the findings. The TC and PC of a service can be billed 

together on the same claim—called a global claim—or separately. 

2

The BETOS categorization system was developed by CMS primarily for analyzing the 

growth in Medicare expenditures by broad categories. Each billing code is assigned to 

only one BETOS category. 

Appendix I: Scope and Methods
Appendix I: Scope and Methods

Page 31 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

without implicating the Stark law.3

Because there is no indicator or “flag” on the claim that identifies whether 

services were self-referred or non-self-referred, we developed a claimsbased methodology for identifying self-referred services. Specifically, we 

classified services as self-referred if the provider that referred the 

beneficiary for a MRI or CT service and the provider that performed the

MRI or CT service was identical or had a financial relationship with the 

same entity. We used taxpayer identification number (TIN), an 

identification number used by the Internal Revenue Service, to determine 

providers’ financial relationships. The TIN could be that of the provider, 

the provider’s employer, or another entity to which the provider reassigns 

payment.

Annually, CMS publishes a list of 

designated health services as part of the physician fee schedule. We also 

restricted our universe to those HCPCS codes that involved the 

performance of an advanced imaging service, which can be billed with or 

separately from the interpretation of a MRI or CT imaging service. We 

identified 125 HCPCS codes that met these criteria.

4

 

3

Compliance with the physician self-referral law, commonly known as the Stark law, is 

outside the scope of this report. The Stark law prohibits physicians from making referrals 

for certain designated health services paid for by Medicare, to entities with which the 

physicians or immediate family members have a financial relationship, unless the 

arrangement complies with a specified exception, such as in-office ancillary services. 

42 U.S.C. § 1395nn(b)(2). 

In order to identify the associated TINs for the referring and 

performing providers, we created a crosswalk of the performing provider’s 

unique physician identification number or national provider identifier (NPI) 

4

Some providers may be associated with TINs with which they do not have a direct or 

indirect financial relationship and thus would not have the same incentives as other selfreferring providers. We anticipate that relatively few providers in our self-referring group 

meet this description but to the extent that they do, it may have limited the differences we 

found in utilization and expenditure rates between self-referring and non-self-referring 

providers.
Appendix I: Scope and Methods

Page 32 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

to the TIN that appeared on the claim and used that to assign TINs to the 

referring and performing providers.5

We considered global services and separately-billed TCs to be selfreferred if one or more of the TINs of the referring and performing 

provider matched. However, we did not consider separately-billed PCs to 

be self-referred, even if they met the same criterion. Compared to the 

payment for the TC of an advanced imaging service, the payment for the 

PC is relatively small, and thus there is little incentive for providers to only 

self-refer the PC of a service. As part of developing this claims-based 

methodology to identify self-referred services, we interviewed officials 

from CMS, provider groups, and other researchers.

To describe the trends in the number of and expenditures for self-referred 

and non-self-referred advanced imaging services from 2004 through 

2010, we used the Medicare Part B Carrier File to calculate utilization and 

expenditures for self-referred and non-self-referred MRI and CT services, 

both in aggregate and per beneficiary. We limited this portion of our 

analysis to global claims or claims for a separately-billed TC, which 

indicates that the performance of the imaging service was billed under the 

physician fee schedule. As a result, the universe for this portion of our 

analysis are those advanced imaging services performed in a provider’s 

office or in an independent diagnostic testing facility (IDTF), which both 

bill for the performance of an advanced imaging service under the 

physician fee schedule. We focused on these settings because our 

previous work showed rapid growth among such services and because 

the financial incentive for providers to self-refer is most direct when the 

service is performed in a physician office. Approximately one-fifth of all 

 

5

The final rule implementing the Health Insurance Portability and Accountability Act 

established the standard for a unique health identifier for health care providers for use in 

the health care system and announced the adoption of the NPI as that standard. HIPAA 

Administrative Simplification: Standard Unique Health Identifier for Health Care Providers, 

69 Fed. Reg. 2424 (Jan. 23, 2004) (adding a new subpart D to 45 C.F.R. part 162). 

Performing physicians were required to include their NPI on any claim submitted to 

Medicare as of May 23, 2008. Prior to implementation of the NPI, Medicare required 

providers to submit another type of unique provider identifier called the unique physician 

identification number.

Our methodology for identifying self-referred services was similar to the methodology used 

by MedPAC for its study of the effect of physician self-referral on use of imaging services 

within an episode. See Medicare Payment Advisory Commission: Report to the Congress: 

Improving Incentives in the Medicare Program (Washington, DC, June 2009). 
Appendix I: Scope and Methods

Page 33 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

advanced imaging services provided to Medicare FFS beneficiaries were 

performed in a physician office or IDTF. To calculate the number of 

Medicare beneficiaries from 2004 through 2010 needed for per 

beneficiary calculations, we used the Denominator File, a database that 

contains enrollment information for all Medicare beneficiaries enrolled in a 

given year. Because radiologists and IDTFs are limited in their ability to 

generate referrals for advanced imaging services, we removed services 

referred by an IDTF or radiologist.

To determine the extent to which the provision of advanced imaging 

services differs for providers who self-refer when compared with other 

providers, we first classified providers on the basis of the type of referrals 

they made. Specifically, we classified providers as self-referring if they 

self-referred at least one beneficiary for an advanced imaging service.6

First, we compared the provision—that is, the number of referrals made—

of MRI and CT services by self-referring providers and non-self-referring 

providers in 2010, after accounting for factors such as practice size 

(i.e., the number of Medicare beneficiaries), provider specialty, geography 

(i.e., urban or rural), and patient characteristics. We used the number of 

unique Medicare fee-for-service (FFS) beneficiaries for which providers 

provided services in 2010 as a proxy for practice size, which we identified 

We classified providers as non-self-referring if they referred a beneficiary 

for an advanced imaging service, but did not self-refer any of the 

services. Because radiologists and providers in IDTFs predominantly 

perform advanced imaging services and have limited ability to refer 

beneficiaries for advanced imaging services, we removed those providers 

from our analysis. Additionally, because emergency medicine providers 

generally did not practice in provider offices, they were removed from our 

analysis. We assigned to each provider the MRI and CT service and 

service-components that he or she referred, including those for the 

performance of an imaging service and those for the interpretation of the 

imaging service result. If the TC and PC were billed separately for the 

same beneficiary, we counted these two components as one referred 

service. As a result, we counted all services that a provider referred, 

regardless of whether it was performed in a provider office, IDTF, or other 

setting. We then performed two separate analyses.

 

6

Providers in our analysis that could self-refer include primarily physicians, but also could 

include other providers, such as nurse practitioners and physician assistants.
Appendix I: Scope and Methods

Page 34 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

using 100 percent of providers’ claims from the Medicare Part B Carrier 

File. We defined urban settings as metropolitan statistical areas, a 

geographic entity defined by the Office of Management and Budget as a 

core urban area of 50,000 or more population. We used rural-urban 

commuting area codes—a Census tract-based classification scheme that 

utilizes the standard Bureau of Census Urbanized Area and Urban 

Cluster definitions in combination with work-commuting information to 

characterize all of the nation’s Census tracts regarding their rural and 

urban status—to identify providers as practicing in metropolitan statistical 

areas.7

Second, we determined the extent to which the number of MRI and CT 

referrals made by providers changed after they began to self-refer.

Specifically, we identified a group of providers that began to self-refer 

advanced imaging services in 2009.

We considered all other settings to be rural. We identified 

providers’ specialties on the basis of the specialties listed on the claims. 

These specialty codes include physician specialties, such as cardiology 

and hematology/oncology, and nonphysician provider types, such as 

nurse practitioners and physician assistants. We also examined the 

extent to which the characteristics of the patient populations served by 

self-referring and non-self-referring providers differed. We used CMS’s 

risk score file to identify average risk score, which serves as a proxy for 

beneficiary health status. Information on additional patient characteristics, 

such as age and sex, came from the Medicare Part B Carrier File claims. 

To calculate the percentage of advanced imaging services referred by 

self-referring providers that were referred, performed, and interpreted by 

the same provider, we summed global advanced imaging claims where 

the referring and performing provider were the same and claims where 

the TC and PC were referred and performed separately for the same 

beneficiary by the same provider. We then divided the total by the number 

MRI and CT services referred by self-referring providers.

8

 

7

We considered a location with a rural-urban commuting area code of 1.0, 1.1, 2.0, 2.1, or 

3.0 to be a metropolitan statistical area.

We refer to this group of providers 

as “switchers” because it represents providers that did not self-refer in 

2007 or 2008, but did self-refer in 2009 and 2010. We then calculated the 

change in the number of MRI or CT referrals made from 2008 (i.e., the 

8

We used 4 years of experience (2007 through 2010) to categorize providers even though 

we compared referrals in 2008 to 2010 because we wanted to ensure that providers that 

began self-referring in 2009 did not self-refer for at least the 2 prior years.
Appendix I: Scope and Methods

Page 35 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

year before the switchers began self-referring) to 2010 (i.e., the year after 

they began self-referring). We compared the change in the number of 

referrals made by these providers to the change in the number of referrals 

made over the same time period by providers who did not change 

whether or not they self-referred advanced imaging services. Specifically, 

we compared the change in the number of referrals made by switchers to 

those made by (1) self-referring providers—providers that self-referred in 

years 2007 through 2010, and (2) non-self-referring providers—providers

that did not self-refer in years 2007 through 2010. For each provider, we 

also identified the most common TIN to which they referred MRI or CT 

services. If the TIN was the same for all 4 years, we assumed that they 

remained part of the same practice for all 4 years. We calculated the 

number of referrals in 2008 and 2010 separately for providers that met 

this criterion.

To determine the implications of self-referral for Medicare spending on 

advanced imaging services, we summed the number of and expenditures 

for all MRI and CT services performed in 2010 by providers of those 

specialties with at least 1,000 self-referring providers. We then created an 

alternative scenario in which self-referring providers referred the same 

number of services as non-self-referring providers of the same provider 

size and specialty and calculated how this affected expenditures. To do 

this, we calculated the number of advanced imaging services non-selfreferring providers referred per unique Medicare FFS beneficiary for each 

specialty and practice size. We then multiplied the referral rate times the 

number of patients seen by self-referring providers of the same practice 

size and specialty, representing the number of services self-referring 

providers would have referred if they referred at the non-self-referring 

rate. To calculate the cost of additional services to Medicare, we 

multiplied the difference between the self-referred services and the 

number of services they would have referred if they referred at the same 

rate as non-self-referring providers by the average expenditures for a MRI 

or CT service.

We took several steps to ensure that the data used to produce this report 

were sufficiently reliable. Specifically, we assessed the reliability of the 

CMS data we used by interviewing officials responsible for overseeing 

these data sources, reviewing relevant documentation, and examining the 

data for obvious errors. We determined that the data were sufficiently 

reliable for the purposes of our study.
Appendix I: Scope and Methods

Page 36 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

We conducted this performance audit from May 2010 through September

2012 in accordance with generally accepted government auditing 

standards. Those standards require that we plan and perform the audit to 

obtain sufficient, appropriate evidence to provide a reasonable basis for 

our findings and conclusions based on our audit objectives. We believe 

that the evidence obtained provides a reasonable basis for our findings 

and conclusions based on our audit objectives.
Appendix II: Select Implemented or Proposed 

Policies Designed to Address Self-Referral or 

the Utilization of Advanced Imaging Services

Page 37 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Policy approach Description and examples of policies

Informing Beneficiaries of Physician 

Self-Referral

Effective January 1, 2011, the Patient Protection and Affordable Care Act of 2010 

(PPACA) requires physicians who self-refer MRI, CT, or positron emission tomography 

services under certain circumstances to inform their patients that they may obtain these 

services from another provider and provide their patients with a list of alternative 

providers in their area.a

The effect of this requirement on physician self-referral is unclear. The American College 

of Radiology reports that multiple states had similar requirements in place before the 

implementation of PPACA.b

Mandating Accreditation of Staff 

Performing MRI and CT Services

In 2008, the Centers for Medicare and Medicaid (CMS) proposed, but did not adopt, a 

requirement that provider office-based imaging practices enroll as independent diagnostic 

testing facilities (IDTF).c However, the Medicare Improvements for Patients and Providers 

Act of 2008 requires physicians and other providers to be accredited by a CMS-approved 

national accreditation organization by January 1, 2012, in order to continue to furnish the 

technical component of services such as MRI and CT services.d While the intent of this 

requirement was to improve quality of care, this policy could reduce the number of 

providers who self-refer if they fail to gain accreditation. However, this policy’s actual 

effect on self-referral is unclear.

Improving Payment Accuracy The Medicare Payment Advisory Commission (MedPAC) has noted that improving the 

payment accuracy of services could reduce the incentive to self-refer those services by 

making them less financially beneficial.e Consistent with our previous recommendations, 

payment rates for MRI and CT services have been reduced several times over the last 

few years to reflect efficiencies that occur when the same provider performs multiple 

services on the same patient on the same day.f,g

Reducing Payments for Physician 

Self-Referred Services

In its June 2010 report, MedPAC noted that reducing payments for physician self-referred 

services could limit Medicare expenditures when self-referral occurs and reduce the 

incentive to self-refer by making it less financially beneficial.h One option put forth in the 

report is reducing payments for certain self-referred services by an amount equal to the 

percent expenditures increase due to self-referral. Another option discussed is reducing 

the payment for self-referred services when they include activities already performed by 

self-referring physicians, such as reviewing the medical history of a beneficiary.

Ensuring Services are Clinically 

Appropriate

In addition to a similar recommendation from MedPAC, we have recommended CMS 

consider expanding its front-end management capabilities, such as prior authorization—

an approach whereby providers must seek some sort of approval before ordering an 

advanced imaging service.i,j

Such policies could limit the increased utilization associated 

with self-referral by ensuring that self-referred services are clinically appropriate.

One researcher suggested expanding postpayment reviews by making imaging a subject 

for medical review by recovery audit contractors.k,l

Appendix II: Select Implemented or Proposed 

Policies Designed to Address Self-Referral or 

the Utilization of Advanced Imaging Services
Appendix II: Select Implemented or Proposed 

Policies Designed to Address Self-Referral or 

the Utilization of Advanced Imaging Services

Page 38 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Policy approach Description and examples of policies

Prohibiting Different Types of Physician 

Self-Referral

CMS has prohibited different types of physician self-referral that the agency deemed 

particularly susceptible to abuse. Effective October 1, 2009, CMS prohibits “per-click” 

self-referral arrangements where, for instance, a physician leases an imaging machine to 

a hospital, refers patients to that hospital in order to receive imaging services, and then is 

paid on a per service basis by the hospital.m

In 2008, CMS considered but did not prohibit “block time” self-referral arrangements 

where, for instance, a physician leases a block of time on a facility’s MRI or CT machine, 

refers his or her patients to receive services on the facility’s machine, and then bills for 

the services.n

CMS has also solicited comments on a prohibition against physician self-referral for 

diagnostic tests provided in physician offices when those tests are not needed at the time 

of a patient’s office visit in order to assist the physician in determining an appropriate 

diagnosis or plan of treatment.o MedPAC has found that MRI and CT services are 

performed on the same day as an office visit less than a quarter of the time, with only 8.4 

percent of MRIs of the brain being performed on the same day as an office visit.p

Another policy, discussed in MedPAC’s June 2010 report, that would limit physician selfreferral is restricting certain types of self-referral to only those practices that are clinically 

integrated.

Maryland prohibits providers from making self-referrals for certain MRI and CT services.q

Source: GAO analysis of select self-referral regulations and proposals.

a

Pub. L. No. 11-148, § 6003, 124 Stat. 199, 697.

b

American College of Radiology, State-by-State Comparison of Physician Self-Referral Laws, 

accessed July 26, 2010.

c

Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other 

Revisions to Part B for CY 2009, 73 Fed. Reg. 38502, 28533 (July 7, 2008).

d

Pub. L. No. 110-275, §135(a), 122 Stat. 2494, 2532.

e

See Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in Medicare

(Washington, D.C.: June 2010).

f

See GAO, Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved When 

Services Are Provided Together, GAO-09-647 (Washington, D.C.: July 31, 2009).

g

For instance, in 2006, CMS began reducing the payment for the technical component of the lowerpriced imaging service by 25 percent when multiple services are performed on contiguous body parts 

during the same session. See Medicare Program: Revisions to Payment Policies Under the Physician 

Fee Schedule for Calendar Year 2006, 70 Fed. Reg. 70116 (Nov. 21, 2005). PPACA increased the 

payment reduction from 25 percent to 50 percent beginning July 1, 2010. Pub. L. No. 111-148, 

§3135(b), 124 Stat. 119, 437. CMS also expanded this policy beginning January 1, 2012 by reducing 

payments for the lower-priced professional component of advanced imaging services by 25 percent 

when two or more services are furnished by the same physician to the same patient, in the same 

session, on the same day.

h

See Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in Medicare

(Washington, D.C.: June 2010).

i

See Medicare Payment Advisory Commission, Report to the Congress: Medicare and the Healthcare 

Delivery System (Washington, D.C.: June 2011).

j

See GAO, Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices 

Indicate Need for CMS to Consider Additional Management Practices, GAO-08-452 (Washington, 

D.C.: June 13, 2008).

k

Donald H. Romano, “Self-Referral of Imaging and Increased Utilization: Some Practical Perspectives 

on Tackling the Dilemma,” Journal of the American College of Radiology (2009): 773-779. 
Appendix II: Select Implemented or Proposed 

Policies Designed to Address Self-Referral or 

the Utilization of Advanced Imaging Services

Page 39 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

l

The stated goal of the recovery audit program is to identify improper payments for services provided 

to Medicare beneficiaries. Improper payments may be overpayments or underpayments. 

Overpayments can occur when health care providers submit claims that do not meet Medicare’s 

coding or medical necessity policies.

mMedicare Program; Changes to Disclosure of Physician Ownership in Hospitals and Physician SelfReferral Rules, 73 Fed. Reg. 48434, 48713 (Aug. 19, 2008).

n

Medicare Program; Changes to Disclosure of Physician Ownership in Hospitals and Physician SelfReferral Rules, 73 Fed. Reg. 48434, 48719 (Aug. 18, 2008).

o

Medicare Program; Proposed Revisions to Payment Policies Under the Physician Fee Schedule, and 

Other Part B Payment Policies for CY 2008, 72 Fed. Reg. 38122, 38181 (July 12, 2007).

p

See Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in Medicare

(Washington, D.C.: June 2010).

q

Md. Code Ann., Health Occ. § 1-301(k)(2).
Appendix III: Self-Referral of MRI and CT 

Services, by Provider Specialty, in 2004 and 

2010

Page 40 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

The proportion of MRI services and CT services that were self-referred 

increased from 2004 through 2010 for all provider specialties we 

examined for our study. We examined all provider specialties that 

performed a minimum proportion of either self-referred MRI or CT 

services in 2004 and 2010.1 While this increase across provider 

specialties is consistent with the overall trend of increased self-referral, 

the increases varied among provider specialties. For MRI services, 

increases in the self-referral rate for provider specialties ranged from 

about 4 percentage points (Internal Medicine) to about 19 percentage 

points for Hematology/Oncology. Similarly, for CT services, increases in 

the self-referral rates for provider specialties ranged from about 

2 percentage points (Internal Medicine) to over 38 percentage points 

(Radiation Oncology). (see table 5).

 

1

Specifically, for MRI and CT services, we examined provider specialties that referred at 

least 1.5 percent of the MRI or CT services that were self-referred in both 2004 and 2010. 

Specialties we examined referred about 86 percent of self-referred MRI services in 2004 

and about 81 percent of self-referred MRI services in 2010. These specialties referred 

about 82 percent of self-referred CT services in 2004 and about 88 percent of self-referred 

CT services in 2010. 

Appendix III: Self-Referral of MRI and CT 

Services, by Provider Specialty, in 2004 and 

2010
Appendix III: Self-Referral of MRI and CT 

Services, by Provider Specialty, in 2004 and 

2010

Page 41 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Table 5: Self-referral Rates of MRI and CT Services for Select Provider Specialties

Specialtya

Percentage of 

MRI services 

self-referred 

in 2004

Percentage of 

MRI services 

self-referred 

in 2010

Change in 

MRI Self-referral 

rate from 

2004 to 2010

(percentage 

points)

Percentage of 

CT services 

self-referred 

in 2004

Percentage of 

CT services 

self-referred 

in 2010

Change in 

CT self-referral 

rate from 

2004 to 2010

(percentage 

points)

Cardiology n/a n/a n/a 33.5 % 55.4% 21.9

Family Practice 10.8 15.7 4.8 25.0 27.6 2.6

Gastroenterology n/a n/a n/a 18.5 24.0 5.5

General Surgery n/a n/a n/a 21.5 24.8 3.3

Hematology/Oncology 15.3 34.3 19.0 39.8 48.7 9.0

Internal Medicine 12.1 16.1 4.0 27.2 29.0 1.8

Medical Oncology n/a n/a n/a 39.7 51.7 12.0

Neurology 19.7 28.9 9.1 n/a n/a n/a

Neurosurgery 20.5 26.1 5.6 n/a n/a n/a

Physical Medicine 22.7 29.4 6.7 n/a n/a n/a

Orthopedic Surgery 27.1 38.4 11.4 n/a n/a n/a

Otolaryngology n/a n/a n/a 21.3 32.4 11.1

Pulmonary Disease n/a n/a n/a 27.8 29.7 1.9

Radiation Oncology n/a n/a n/a 37.7 76.1 38.4

Rheumatology 29.4 38.6 9.2 n/a n/a n/a

Urology n/a n/a n/a 27.8 51.2 23.4

Source: GAO analysis of Medicare data.

Notes: “n/a” indicates that the provider specialty referred less than1.5 percent of all self-referred 

services, for MRI or CT services, in either 2004 or 2010. If a provider specialty did not refer at least 

1.5 percent of all self-referred services for both 2004 and 2010 for either MRI or CT services, it is not 

included in the table.

a

Provider specialties are included in Medicare claims data and are self-reported.
Appendix IV: Comments from the Department 

of Health and Human Services

Page 42 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

Appendix IV: Comments from the 

Department of Health and Human Services
Appendix IV: Comments from the Department 

of Health and Human Services

Page 43 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix IV: Comments from the Department 

of Health and Human Services

Page 44 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix IV: Comments from the Department 

of Health and Human Services

Page 45 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix V: GAO Contact and Staff 

Acknowledgments

Page 46 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services

James C. Cosgrove, (202) 512-7114 or cosgrovej@gao.gov

In addition to the contact named above, Jessica Farb, Assistant Director; 

Thomas Walke, Assistant Director; Manuel Buentello; Krister Friday; 

Gregory Giusto; Brian O’Donnell; and Daniel Ries made key contributions 

to this report.

Appendix V: GAO Contact and Staff 

Acknowledgments 

GAO Contact

Staff 

Acknowledgments 

(290864)
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