Medicare: Higher Use of Advanced Imaging Services by Providers Who Self-Refer Costing Medicare Millions
Published: 2012-09-28T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: 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 self-referral's role in this growth. Self-referral 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 self-referral and its effect on Medicare spending. This report examines (1) trends in the number of and expenditures for self-referred and non-self-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 self-referred services, GAO developed a claims-based methodology to identify self-referred services and expenditures and to characterize providers as self-referring or not.
section_title: What GAO Found
paragraphs: 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 self-referred 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 non-self-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.
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.
section_title: What GAO Recommends
paragraphs: 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.

section_title: Letter
paragraphs: 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 long- range fiscal sustainability of Medicare. 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. In comparison, the national economy grew by an average  annual rate of 2.5 percent from 2007 through 2011 and is projected to  increase on average by 4.6 percent annually from 2012 through 2016.  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.
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. 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.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.
Proponents of self-referral point out that  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), required that 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. 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.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.
You asked us to examine the prevalence of self-referral for advanced  imaging services and Medicare spending for these services. In this report, we examine (1) trends in the number of and expenditures for self- referred 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. 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. 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. 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. We limited the  universe for this portion of our analysis to those advanced imaging  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. 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.
We 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. 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 self- refer—at least one MRI or CT service. 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.
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 self- referring 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 self- referred 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.
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.)
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.
subsections: section_title: Background
paragraphs: 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.
subsections: section_title: MRI and CT Services
paragraphs: 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. 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 more- invasive medical procedures and improve patient outcomes.
section_title: Medicare Billing and Payment Policies for Advanced Imaging Services
paragraphs: 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.
section_title: 2010 Advanced Imaging Utilization by Setting and Medicare Physician Fee Schedule Expenditures
paragraphs: 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.
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 self- referral, 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  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. 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.
section_title: Self-Referred MRI and CT Services and Expenditures Grew Overall, While Non- Self-Referred Services and Expenditures Grew Slower or Decreased
paragraphs: 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 self- referred 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.
subsections: section_title: 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
paragraphs: 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   Specifically, the  increase occurred among the self-referred services.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 non- self-referred services declined at some point during the years of our  study. However, the number of self-referred services grew faster in the  earlier years and declined less in the later years than the number of non- self-referred services.
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.
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.
section_title: Self-Referred MRI and CT Expenditures Grew More Than Non-Self-Referred Expenditures Overall with Non-Self-Referred MRI Expenditures Declining
paragraphs: 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  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. Since the declines  in 2007, expenditures for non-self-referred MRI services have declined  further while self-referred expenditures have increased.
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 self- referred 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.
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 self- referred increased from 2004 through 2010 for all provider specialties that  we studied.specialties, see appendix III.
section_title: Self-Referring Providers Referred Substantially More Advanced Imaging Services on Average Than Did Other Providers
paragraphs: 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.
subsections: section_title: Self-Referring Providers Referred Substantially More MRI and CT Services Than Other Providers, Regardless of Practice or Patient Characteristics
paragraphs: In 2010, self-referring providers referred substantially more advanced  imaging services than providers who did not self-refer such services that  year.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   Specifically, providers that self-referred at least one beneficiary for  resulted from how the services are provided, and we recently  recommended that CMS expand these efforts.
Differences in advanced imaging referrals between self-referring and non- self-referring providers persisted after accounting for differences in  practice size, specialty, geography, or patient characteristics.
section_title: Practice Size
paragraphs: Self-referring providers referred more MRI and CT services than did non- self-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.
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. Similarly, self-referring providers in 9 of the  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.
section_title: Geography
paragraphs: Self-referring providers referred more MRI and CT services than non-self- referring 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, non- self-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).
Self-referring providers referred more MRI and CT services than non-self- referring 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.
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 self- referral 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.)
The increase in MRI and CT referrals for providers that began self- referring 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 self- referring 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   Providers that remained in the same practice from 2008 through  status.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.
section_title: Higher Use of Advanced Imaging Services by Self- Referring Providers Results in Substantial Costs to Medicare
paragraphs: 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.
The additional Medicare imaging expenditures attributed to self-referring  providers is likely higher than $109 million in 2010.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   This is because a  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.
section_title: Conclusions
paragraphs: 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 self- referred 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 self- referral 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  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.
section_title: Recommendations for Executive Action
paragraphs: 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.
section_title: Agency Comments and Our Evaluation
paragraphs: 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 self- referring providers referred substantially more 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 self- referral 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.
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 self- referring 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  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.
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section_title: Appendix I: Scope and Methods
paragraphs: This section describes the scope and methodology used to analyze our  three objectives: (1) trends in the number of and expenditures for self- referred 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. 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.
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  without implicating the Stark law.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.
Annually, CMS publishes a list of  Because there is no indicator or “flag” on the claim that identifies whether  services were self-referred or non-self-referred, we developed a claims- based 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. performing providers, we created a crosswalk of the performing provider’s  unique physician identification number or national provider identifier (NPI)
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 self- referring 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. to the TIN that appeared on the claim and used that to assign TINs to the  referring and performing providers.
We considered global services and separately-billed TCs to be self- referred 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  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.  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.
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  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. 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.
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. 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-self- referring 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.
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.
section_title: Appendix II: Select Implemented or Proposed Policies Designed to Address Self-Referral or the Utilization of Advanced Imaging Services
paragraphs: Appendix II: Select Implemented or Proposed  Policies Designed to Address Self-Referral or  the Utilization of Advanced Imaging Services Description and examples of policies  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.  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. 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. 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.
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. 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.  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. 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.
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. 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.
Description and examples of policies  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.  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.  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. 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.  Another policy, discussed in MedPAC’s June 2010 report, that would limit physician self- referral 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.
American College of Radiology, State-by-State Comparison of Physician Self-Referral Laws,  accessed July 26, 2010.
section_title: Appendix III: Self-Referral of MRI and CT Services, by Provider Specialty, in 2004 and 2010
paragraphs: 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. 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).
section_title: Appendix IV: Comments from the Department of Health and Human Services
section_title: Appendix V: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: 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.