Medicare: Action Needed to Address Higher Use of Anatomic Pathology Services by Providers Who Self-Refer
Published: 2013-06-24T00:00:00

Fast Facts:

Highlights:
section_title: Why GAO Did This Study
paragraphs: Questions have been raised about self-referral's role in Medicare Part B expenditures' rapid growth. Self-referral occurs when providers refer patients to entities in which they or their family members have a financial interest. Services that can be self-referred under certain circumstances include anatomic pathology--the preparation and examination of tissue samples to diagnose disease. GAO was asked to examine the prevalence of anatomic pathology 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 anatomic pathology services, (2) how provision of these services may differ on the basis of whether providers 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. GAO developed a claims-based approach to identify self-referred services because Medicare claims lack such an indicator.
section_title: What GAO Found
paragraphs: Self-referred anatomic pathology services increased at a faster rate than non-self-referred services from 2004 to 2010. During this period, the number of self-referred anatomic pathology services more than doubled, growing from 1.06 million services to about 2.26 million services, while non-self-referred services grew about 38 percent, from about 5.64 million services to about 7.77 million services. Similarly, the growth rate of expenditures for self-referred anatomic pathology services was higher than for non-self-referred services. Three provider specialties--dermatology, gastroenterology, and urology--accounted for 90 percent of referrals for self-referred anatomic pathology services in 2010.
Referrals for anatomic pathology services by dermatologists, gastroenterologists, and urologists substantially increased the year after they began to self-refer. Providers that began self-referring in 2009--referred to as switchers--had increases in anatomic pathology services that ranged on average from 14.0 percent to 58.5 percent in 2010 compared to 2008, the year before they began self-referring, across these provider specialties. In comparison, increases in anatomic pathology referrals for providers who continued to self-refer or never self-referred services during this period were much lower. Thus, the increase in anatomic pathology referrals for switchers was not due to a general increase in use of these services among all providers. GAO's examination of all providers that referred an anatomic pathology service in 2010 showed that self-referring providers of the specialties we examined referred more services on average than non-self referring providers. Differences in referral for these services generally persisted after accounting for geography and patient characteristics such as health status and diagnosis. These analyses suggest that financial incentives for self-referring providers were likely a major factor driving the increase in referrals.
GAO estimates that in 2010, self-referring providers likely referred over 918,000 more anatomic pathology services than if they had performed biopsy procedures at the same rate as and referred the same number of services per biopsy procedure as non-self-referring providers. These additional referrals for anatomic pathology services cost Medicare about $69 million. To the extent that these additional referrals were unnecessary, avoiding them could result in savings to Medicare and beneficiaries, as they share in the cost of services.
section_title: What GAO Recommends
paragraphs: CMS should identify self-referred anatomic pathology services and address their higher use. The Department of Health and Human Services, which oversees CMS, agreed with GAO's recommendation that CMS address higher use of self-referral through a payment approach, but disagreed with GAO's other two recommendations to identify self-referred services and address their higher use. GAO believes the recommended actions could result in Medicare savings.

section_title: Letter
paragraphs: Expenditures for Medicare Part B services—which include physician and  other outpatient services—have grown rapidly, increasing annually at   5.9 percent, on average, from 2007 through 2011. In comparison, the  national economy grew by less than half that rate during the same time  period. Some policymakers have raised questions about the growth in  Part B spending, including the extent to which this growth may be  attributable to financial incentives that exist for physicians to self-refer  certain services. Self-referral occurs when providers refer their patients  for services delivered by entities—such as themselves or a group  practice—with which the providers or an immediate family member has a  financial relationship. While federal law generally prohibits self-referral  under Medicare, there are exceptions for certain services and  arrangements.
Anatomic pathology includes multiple subspecialties, such as surgical pathology—the  macroscopic and microscopic examination of surgical specimens; cytopathology—the  examination of cells from fluids or smears; and hematology—the examination of cells from  bone marrow aspirations or biopsies. For the purposes of this report “anatomic pathology”  services refer to those services with a Healthcare Common Procedure Coding System  (HCPCS) code of 88305. allow providers to make rapid diagnoses and improve coordination of  care. In 2010, expenditures for anatomic pathology services under the  Medicare physician fee schedule—the payment system used to  determine fees for physician-billed services in Medicare fee-for-service  (FFS)—totaled $1.94 billon.
While we and other federal agencies have reported on physician self- referral, only a series of studies by the Department of Health and Human  Services (HHS) Office of the Inspector General (OIG) has focused  explicitly on how self-referral may affect the provision of anatomic  pathology services. Specifically, in 2007, HHS OIG issued three studies  that examined self-referral of anatomic pathology services among three  urology practices. The HHS OIG found that, for all three practices,  utilization of anatomic pathology services increased after the practice  began to self-refer.
You asked us to examine the prevalence of self-referral of anatomic  pathology services and Medicare spending for these services. report, we examine (1) trends in the number of and expenditures for self- referred and non-self-referred anatomic pathology services from 2004  through 2010, (2) how the provision of anatomic pathology services may  differ for providers who self-refer when compared with other providers,  and (3) the implications of self-referral for Medicare spending on anatomic  pathology services.
In addition to this report on anatomic pathology services, we have ongoing work related  to the self-referral of intensity-modulated radiation therapy services and physical therapy  services.
To identify trends in the number of and expenditures for self-referred and  non-self-referred anatomic pathology services, we analyzed claims from  the Medicare Part B Carrier File for 2004 through 2010. Because there is  no indicator or “flag” on Medicare claims that identifies whether or not  services were self-referred, we developed a claims-based methodology to  identify services as either self-referred or non-self-referred. Specifically,  we classified services as self-referred if the provider that referred the  beneficiary for an anatomic pathology service and the provider that  performed the anatomic pathology service were identical or had a  financial relationship with the same entity. We focused our review of  anatomic pathology services and service components to services with a  Healthcare Common Procedure Coding System (HCPCS) code 88305,  which is the code for anatomic pathology services related to the  examination of tissue samples taken through biopsy procedures. About  66 percent of the $1.94 billion in expenditures for anatomic pathology  services in 2010 were associated with HCPCS code 88305. (We also  reviewed services with HCPCS codes 88312, 88313, and 88342—special  stains—which are used in conjunction with anatomic pathology services  to assist providers in making a diagnosis. See app. I for our analysis  related to special stains.) We limited the universe for this portion of our  analysis to those anatomic pathology services performed in a provider’s  office or in an independent clinical laboratory. We focused on these  settings because the financial incentive for providers to self-refer is most  direct when the service is performed in a physician office. Further, we  limited our analysis to self-referral of the preparation of these services,  because we could determine that the services were performed in a  physician’s office or independent laboratory.identify trends in the number and proportion of self-referred and non-self- referred anatomic pathology 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 anatomic pathology  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 used the claims to  To determine how the provision of anatomic pathology services may differ  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 anatomic pathology services by self- referring providers and non-self-referring providers in 2010,  disaggregated by provider size (i.e., the number of Medicare beneficiaries  seen by the provider), provider specialty, geography (i.e., urban or rural)   Second, we determined the extent to which  and patient characteristics. the number of anatomic pathology referrals made by providers changed  after the providers began to self-refer. Specifically, we identified a group  of providers who began to self-refer anatomic pathology services in 2009  and calculated the change in the number of anatomic pathology referrals  the providers made from 2008 (i.e., the year before they began self- referring) through 2010 (i.e., the year after they began self-referring).We then compared this change to the change made by (1) providers who  self-referred anatomic pathology services over this time period and   (2) providers who did not self-refer services over the time period.
To determine the implications of self-referral for Medicare spending on  anatomic pathology services, we summed the number of and  expenditures for all anatomic pathology services performed in 2010  across the three provider specialties—dermatology, gastroenterology,  and urology—we reviewed. We then calculated the number of and  expenditures for anatomic pathology services if self-referring providers  performed biopsy procedures at the same rate as and referred the same  number of services per biopsy procedure as non-self-referring providers  of the same provider size and specialty. We repeated this analysis  incorporating an approximation of the payment reduction for anatomic  pathology services that became effective in 2013.
We took several steps to ensure that the data used to produce this report  were sufficiently reliable. Specifically, we assessed the reliability of the  data we used from the Centers for Medicare & Medicaid Services  (CMS)—the agency that administers Medicare—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. For further information on the scope and methodology for this  report, see appendix II.
We conducted this performance audit from January 2012 through June  2013 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: Anatomic pathology services aid in the diagnosis and treatment of  diseases such as cancers and gastroenteritis—a condition that causes  irritation and inflammation of the stomach and intestines. Medicare pays  providers for performing the services and subsequently interpreting the  results. Payment for the performance of the services can be made  through different payment systems, depending on where the anatomic  pathology service is performed. In 2010, Medicare paid about   $1.28 billion under the physician fee schedule for anatomic pathology  services across all settings, of which about $945 million was for services  performed in physician offices and independent laboratories.
subsections: section_title: Anatomic Pathology Services
paragraphs: Anatomic pathology services involve the examination of tissues and other  specimens to diagnose diseases, such as cancers and gastroenteritis,  and guide patient care. The services may be performed after a biopsy  procedure used to obtain tissue samples. For example, after removing  tissue samples during a biopsy procedure on a patient’s prostate, a  urologist may refer the patient’s tissue sample for examination to  determine whether, on the basis of an analysis of the tissue sample or  samples, the patient has prostate cancer. After collecting these tissue  samples, a non-self-referring provider may send them to an independent  diagnostic laboratory, a hospital laboratory, or pathology physician group  for further preparation and analysis. In contrast, self-referring providers  may prepare specimens or evaluate specimens or both at their practices,  rather than involving an external diagnostic laboratory or pathology  physician group. For example, the ordering provider’s group practice may  have a technician who prepares specimens into slides or include a  pathologist who interprets these specimens, or both.
Providers have discretion in determining the number and type of tissue  samples that become a specimen. For example, a provider referring  anatomic pathology services may include more than one tissue sample in  a specimen if the samples are from the same areas of abnormal tissue  (see fig. 1). Alternatively, a provider may choose to create multiple  specimens, each containing a single tissue sample. Providers differ on  whether or to what extent tissue samples can be combined in creating a  specimen or if each tissue sample must become a specimen. For  example, urologists differ on whether it is clinically appropriate to combine  tissue samples obtained through a prostate biopsy procedure or whether  each tissue sample must became a specimen. The resultant number of  specimens has implications for payment as each specimen submitted for  analysis can be billed to Medicare separately as an anatomic pathology  service. CMS policy states that specimens submitted for individual  examination should be medically reasonable and necessary for diagnosis.  Finally, a pathologist—a specialty provider trained to interpret  specimens—examines the specimen with and without a microscope and  prepares written results of this examination for the referring provider.
Depending on the level of complexity, biopsy procedures can involve risks  for patients. For example, biopsies of the skin to detect cancer are  generally considered safe, but complications such as bleeding, bruising,  or infection can occur. Additional complications, such as difficulty  urinating and infections resulting in hospitalization, can occur from other  biopsy procedures.
section_title: Medicare Payment and Billing Policies for Anatomic Pathology Services
paragraphs: Medicare’s payments for anatomic pathology services are separated into  two components—the technical component (TC) and the professional  component (PC). The TC payment is intended to cover the cost of  preparing a specimen for analysis, including the costs for equipment,  supplies, and nonphysician staff. The PC payment is intended to cover  the provider’s time examining the specimen and writing a report on the  findings. The PC and TC can be billed together, on what is called a global  claim, or alternatively the components can be billed separately. For  instance, a global claim could be billed if the same provider prepares and  examines the specimen, whereas the TC and PC could be billed  separately if the performing and interpreting providers are different.
Medicare reimburses providers through different payment systems  depending on where the anatomic pathology service is performed. When  an anatomic pathology service is performed in a provider’s office or  independent clinical laboratory, 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 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. For instance, the TC of an anatomic  pathology service performed in a hospital inpatient setting is reimbursed  through a facility payment made under Medicare Part A.
section_title: Certain Policies Implemented by CMS Regarding Anatomic Pathology Services
paragraphs: In response to concerns about potential overutilization of anatomic  pathology services due to physician self-referral, CMS established rules  limiting the reimbursements allowed under certain self-referral  arrangements. Specifically, in 2008 CMS imposed an “anti-markup rule”  that prohibits providers from billing Medicare for anatomic pathology  services for amounts that exceed what the providers themselves pay to  subcontract the services from other providers or pathology laboratories.  However, in the 2009 physician fee schedule final rule, CMS identified an  exception to the anti-markup rule: a service may be marked up when  performed by a physician who shares a practice with the billing provider.Since then, arrangements in which a provider group practice includes a  pathologist in the practice’s office space have become a common self- referral arrangement.
In the 2009 physician fee schedule, CMS also introduced a payment  change for anatomic pathology services related to a specific biopsy  procedure due to concern of overpayment. Specifically, CMS began  paying for multiple anatomic pathology services from prostate saturation  biopsy procedures through a single payment, rather than paying for each  specimen individually. This specific biopsy procedure involves taking  numerous tissue samples—typically 30 to 60—to increase the likelihood  of detecting prostate cancer in a subgroup of high-risk individuals in  whom previous conventional prostate biopsies had been negative. As a  result, CMS introduced four new HCPCS codes to pay for these  specimens, which were previously paid through HCPCS 88305. The  four HCPCS codes noted are payment for 1 to 20 specimens (G0416), 21  to 40 specimens (G0417), 41 to 60 specimens (G0418), and more than  60 specimens (G0419). The payment change resulted in a substantial  decrease in payment for anatomic pathology services resulting from  prostate saturation biopsy procedures.
CMS reduced its payment for anatomic pathology services in 2013 as  part of its efforts to examine the payment for certain high-volume  services. Specifically, CMS reduced its payment of anatomic pathology  services in 2013 because it determined that fewer resources—equipment,  supplies, and nonphysician staff—were required to prepare anatomic  pathology services, which in turn reduced payment for the TC. Effective  January 1, 2013, CMS reduced Medicare’s reimbursement for anatomic  pathology services under the physician fee schedule by lowering  reimbursement for the TC by approximately half. With this change, a  payment for a global claim for an anatomic pathology service was  reduced by approximately 30 percent.
section_title: 2010 Anatomic Pathology Services Utilization and Expenditures
paragraphs: In 2010, there were about 16.2 million anatomic pathology services  performed in all settings, including physician offices and hospitals. In  2010, expenditures for anatomic pathology services paid under the  physician fee schedule totaled about $1.28 billion across all settings.  About $945 million of the $1.28 billion—74 percent—in expenditures for  anatomic pathology services in 2010 were for services performed in  physician offices and independent laboratories.
section_title: Self-referred Anatomic Pathology Services and Expenditures Grew Faster Than Non-self- referred Services and Expenditures
paragraphs: The number of self-referred anatomic pathology services increased at a  faster rate than non-self-referred anatomic pathology services from 2004  through 2010. Similarly, expenditures for self-referred anatomic pathology  services increased at a faster rate than expenditures for non-self-referred  services. The share of anatomic pathology services that were self- referred increased overall during the period we reviewed.
subsections: section_title: Number of Self-referred Anatomic Pathology Services Increased at a Faster Rate Than Non-self- referred Services
paragraphs: While both the number of self-referred and non-self-referred anatomic  pathology services grew overall from 2004 through 2010, self-referred  services increased at a faster rate than non-self-referred services.  Specifically, the number of self-referred anatomic pathology services  more than doubled over the period we reviewed, growing from about   1.06 million services in 2004 to about 2.26 million services in 2010 (see  fig. 2). In contrast, the number of non-self-referred anatomic pathology  services increased about 38 percent, growing from about 5.64 million  services to about 7.77 million services. Because of the faster growth in  self-referred anatomic pathology services, the proportion of anatomic  pathology services that were self-referred grew from about 15.9 percent  in 2004 to about 22.5 percent in 2010. Notably, the number of self- referred anatomic pathology services increased from 2004 through 2010,  even after accounting for the decrease in the number of Medicare FFS  beneficiaries. Specifically, the number of self-referred anatomic  pathology services per 1,000 Medicare FFS beneficiaries grew from  about 30 to about 64, an increase of about 113 percent.
Although both self-referred and non-self-referred anatomic pathology  services increased over the period of our study, the number of self- referred anatomic pathology services decreased slightly from about   1.67 million in 2007 to about 1.65 million in 2008 before increasing about  14 percent to 1.88 million services in 2009. This decrease in 2008  corresponds to the implementation of CMS’s anti-markup rule that limits  reimbursement for anatomic pathology services in certain self-referral  arrangements. In contrast, the number of non-self-referred anatomic  pathology services increased every year during the period we studied,  with the largest annual increase (about 13 percent) in 2008.
section_title: Medicare’s Expenditures for Self-referred Anatomic Pathology Services Grew Faster Than Expenditures for Non-self-referred Services
paragraphs: While Medicare expenditures for self-referred and non-self-referred  anatomic pathology services grew from 2004 through 2010, expenditures  for the self-referred services increased at a faster rate. Specifically,  expenditures for self-referred anatomic pathology services grew about  164 percent from 2004 to 2010, increasing from about $75 million in 2004  to $199 million in 2010 (see fig. 3). In contrast, non-self-referred anatomic  pathology expenditures increased about 57 percent, from $473 million to  about $741 million.
Consistent with the overall trend, the proportion of anatomic pathology  services that were self-referred increased for the three provider  specialties—dermatology, gastroenterology, and urology—that accounted  for over 90 percent of self-referred anatomic pathology services in 2010  (see table 1). For example, the proportion of anatomic pathology services  self-referred by dermatologists increased from 24 percent in 2004 to  about 29 percent in 2010.
section_title: Self-referring Providers Generally Referred More Anatomic Pathology Services on Average Than Non-self- referring Providers
paragraphs: Self-referring providers in 2010 generally referred more anatomic  pathology services on average than those providers who did not self-refer  these services, even after accounting for differences in specialty, number  of Medicare FFS beneficiaries seen, patient characteristics, or geography.  Providers’ referrals for anatomic pathology services substantially  increased the year after they began to self-refer.
subsections: section_title: Self-referring Providers Generally Referred More Anatomic Pathology Services Than Other Providers Regardless of Practice or Patient Characteristics
paragraphs: Across the three provider specialties—dermatology, gastroenterology,  and urology—that refer the majority of anatomic pathology services, we  found that in 2010, self-referring providers referred more anatomic  pathology services, on average, than other providers, regardless of  number of Medicare FFS beneficiaries seen. Specifically, we found this  pattern for dermatologists, gastroenterologists, and urologists treating  small, medium, and large numbers of Medicare beneficiaries (see   table 2). Notably, for all provider specialties, providers who treated a large  number of Medicare FFS beneficiaries—more than 500—had the highest  relative rate within each specialty.
Self-referring providers generally referred more anatomic pathology  services on average than non-self-referring providers due to referring  more services—specimens to be examined—per biopsy procedures and,  in certain cases, performing a greater number of biopsy procedures.  Across the three specialties we reviewed, self-referring providers referred  more services per biopsy procedure, on average, than non-self-referring  providers, regardless of the number of Medicare FFS beneficiaries seen.  Specifically, self-referring providers referred from 7 percent to 52 percent  more services per biopsy procedure for the provider specialty and size  category combinations we examined. Further, we observed a greater  number of biopsy procedures performed by self-referring providers in  certain cases. Specifically, self-referring dermatologists treating medium  and large numbers of Medicare FFS beneficiaries performed about 8 and  38 percent more biopsy procedures on average, respectively, than non- self-referring dermatologists treating similar numbers of Medicare  beneficiaries. In the remaining provider specialty and size category combinations, the rate of biopsy procedures performed by self-referring  providers was similar to that for non-self-referring providers.
The higher number of referrals for anatomic pathology services among  self-referring providers relative to other providers of the same size and  specialty cannot, in general, be explained by differences in patient  diagnoses, patient health status, other patient characteristics, or  geography.
Differences in referrals for anatomic pathology services between self- referring and non-self-referring providers of the same specialty treating a  similar number of Medicare FFS beneficiaries could not be explained by  differences in their patients’ diagnoses. Generally, we found that the  types and proportions of patient diagnoses were similar for self-referring  and non-self-referring providers of the same specialty. However, we  found that self-referring providers referred more anatomic pathology  services per biopsy procedure for nearly all—53 of 54—primary  diagnoses for which beneficiaries were referred for anatomic pathology  services. This pattern is particularly evident for those diagnoses that  accounted for a large proportion of anatomic pathology services referred  within each specialty (see table 3).For example, self-referring urology  providers referred on average about 12.5 anatomic pathology services  per biopsy procedure for diagnosis of elevated prostate specific antigen  (790.93) while non-self-referring urology providers referred about   8.5 anatomic pathology services per biopsy procedure for this diagnosis.  For further information on the average number of anatomic pathology  services referred per biopsy procedure by beneficiary primary diagnosis,  see appendix III.
Differences in the number of referrals for anatomic pathology services  between self-referring and non-self-referring providers of the same  specialty treating similar numbers of Medicare FFS beneficiaries could  generally not be explained by differences in patient health status.  Specifically, for all three provider specialties we reviewed, the  beneficiaries seen by self-referring providers treating a small, medium, or  large number of Medicare FFS beneficiaries were of similar health status  as patients seen by non-self-referring providers of the same specialty and  size category (see table 4), as indicated by having similar average risk   If self-referring providers saw relatively sicker beneficiaries, it  scores.could have explained why these providers referred more anatomic  pathology services on average than other providers of the same provider  specialty and size categories.
Differences in the number of anatomic pathology service referrals  between self-referring and non-self-referring providers of the same  specialty treating similar numbers of Medicare FFS beneficiaries could  not be explained by differences in the age and sex of beneficiaries. In  particular, the age and sex of Medicare FFS beneficiaries were generally  consistent between those beneficiaries seen by self-referring providers  and those seen by non-self-referring providers for all provider specialties  and size categories we examined. For further information on the average  age and sex of beneficiaries seen by self-referring and non-self-referring  providers of the provider specialties we examined, see appendix IV.
Differences in the number of anatomic pathology service referrals  between self-referring and non-self-referring providers could not generally  be explained by whether a provider practiced in an urban or rural area.
Self-referring providers of the same specialty treating a similar number of  Medicare beneficiaries generally referred more anatomic pathology  services on average than non-self-referring providers, regardless of  whether the provider practiced in an urban or rural area. For example,  self-referring dermatologists and urologists treating a similar number of  Medicare FFS beneficiaries had higher referral rates on average for  anatomic pathology services, regardless of whether they practiced in an  urban or rural location. Likewise, self-referring gastroenterologists treating  a medium or large number of Medicare FFS beneficiaries referred a  higher number of anatomic pathology services on average than non-self- referring gastroenterologists treating a similar number of Medicare  beneficiaries, regardless of whether they practiced in an urban or rural  location. For further information on referral of anatomic pathology  services across provider specialties and size categories in urban and  rural areas, see appendix V.
section_title: Providers’ Referrals for Anatomic Pathology Services Increased the Year after They Began to Self-refer
paragraphs: Our analysis shows that, across the three provider specialties we  reviewed, providers’ referrals for anatomic pathology services  substantially increased the year after they began to self-refer. In our  analysis we examined the number of anatomic pathology referrals made  by “switchers”—those providers that did not self-refer in 2007 or 2008 but  began to self-refer in 2009 and continued to do so in 2010—and  compared these referrals to the number made by providers that did not  begin to self-refer during this period. Providers could self-refer by setting  up an in-office laboratory, contracting for laboratory services, or joining a  group practice that already self-referred. We found that the switchers saw  large increases in the number of anatomic referrals they made from 2008  to 2010 when compared with other providers (see table 5). Specifically,  across the three provider specialties we reviewed, the switcher group of  providers increased the number of anatomic pathology referrals they  made from 2008 to 2010 by at least 14.0 percent and by as much as   58.5 percent. In contrast, providers that self-referred anatomic pathology  services during the entire period experienced smaller changes in the  number of referrals, ranging from a 1.4 percent increase to an   11.6 percent increase, depending on the provider specialty. Among  providers that did not self-refer anatomic pathology services, the number  of referrals the providers made for these services ranged from a decrease  of 0.2 percent to an increase of 2.8 percent, depending on the provider  specialty.
Providers in the switcher groups for the three specialties we reviewed had  an increase in the number of anatomic pathology referrals they made  from 2008 to 2010 due to an increase, on average, in the number of  anatomic pathology services referred per biopsy procedure. Across the  three specialties we reviewed, the increase in the number of specimens  submitted for examination from each biopsy procedure from 2008 to 2010  ranged from 13.3 percent to 48.9 percent. For all three specialties we  reviewed, the increase in the number of anatomic pathology services  referred per biopsy procedure was greater for providers in the switchers  group than for providers who did not self-refer from 2008 through 2010 or  those providers who self-referred for all 3 years.
The increase in anatomic pathology 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 anatomic  pathology referrals than did providers that did not change their self- referral status. The increase in the number of anatomic pathology  services referred by providers in the switcher group that met this criterion  from 2008 to 2010 ranged from an increase of 6.8 percent to an increase  of 38.6 percent, depending on the provider specialty.
section_title: Higher Use of Anatomic Pathology Services by Self- Referring Providers Results in Substantial Additional Medicare Spending
paragraphs: We estimate that Medicare spent about $69 million more in 2010 than the  program would have spent if self-referring providers performed biopsy  procedures at the same rate as and referred the same number of services  per biopsy procedure as non-self-referring providers of the same provider  size and specialty (see fig. 4). This additional spending can be attributed  to the fact that self-referring providers in the 3 provider specialties we  examined referred about 918,000 more anatomic pathology services in  2010. In 2013, CMS reduced its payment of anatomic pathology services  because it determined that fewer resources—equipment, supplies, and  non-physician staff—were required to prepare anatomic pathology  services. If the lower 2013 Medicare reimbursement rates for anatomic  pathology services were in effect in 2010, Medicare would have spent  approximately $48 million more than it would have if self-referring  providers performed biopsy procedures at the same rate as and referred  the same number of services per biopsy procedure as non-self-referring  providers of the same provider size and specialty.
This calculation likely underestimates the total amount of additional  Medicare spending that can be attributed to self-referring providers  because we did not include all Medicare providers in our analysis.  Specifically, we limited our analysis to anatomic pathology services  referred by dermatologists, gastroenterologists, and urologists. These  specialties account for approximately 64 percent of anatomic pathology  services referred across all settings and about 90 percent of all self- referred anatomic pathology services in 2010.
section_title: Conclusions
paragraphs: Anatomic pathology services are vital services that help providers  diagnose disease and guide treatment options for patient care.  Proponents of self-referral contend that the ability of providers to self-refer  anatomic pathology services has the potential benefit of more rapid  diagnoses and better coordination of care. Our review indicates that  across the major provider specialties that refer beneficiaries for anatomic  pathology services, self-referring providers generally referred more  anatomic pathology services on average than other providers of the same  specialty treating similar numbers of Medicare patients. This increase is  due to a greater number of specimens submitted for examination from  each biopsy procedure, and in certain cases a greater number of biopsy  procedures performed. This increase raises concerns, in part because  biopsy procedures, although generally safe, can result in serious  complications for Medicare beneficiaries. Further, our analysis shows that  across these provider specialties, providers’ referrals for anatomic  pathology services substantially increased the year after they began to  self-refer.
The relatively higher rate of anatomic pathology services among self- referring providers cannot be explained by patient diagnosis, patient  health status, or geographic location. Taken together, this suggests that  financial incentives for self-referring providers were likely a major factor  driving the increase in anatomic pathology referrals. In 2010, providers  who self-referred made an estimated 918,000 more referrals for anatomic  pathology services than they likely would have if they were not self- referring. Notably, these additional referrals cost CMS about $69 million in  2010 alone. To the extent that these additional services are unnecessary,  avoiding them could result in savings to Medicare and to beneficiaries.
Despite the potential safety and financial implications of unnecessary  anatomic pathology services, CMS does not have policies to address the  effect of how self-referral affects the utilization of and expenditures for  anatomic pathology services. CMS does not currently have the ability to  identify anatomic pathology services that are self-referred so that the  agency can track the extent to which anatomic pathology services are  self-referred and identify services that may be unnecessary. Specifically,  Medicare claims do not include an indicator or “flag” that identifies  whether services are self-referred or non-self-referred. Thus, CMS does  not currently have a method for easily identifying such services and  cannot determine the effect of self-referral on utilization and expenditures  for anatomic pathology services. Including a self-referral flag on Medicare  Part B claims submitted by providers who bill for anatomic pathology  services is likely the easiest and most cost-effective approach.
If CMS could readily identify self-referred anatomic pathology services,  the agency may be better positioned to identify potentially inappropriate  utilization of biopsy procedures. CMS could, for example, consider  performing targeted audits of providers who perform a higher average  number of biopsy procedures, compared to providers of the same  specialty treating a similar number of Medicare beneficiaries. Given our  report findings, CMS may want to initially focus its efforts on self-referring  dermatologists who treated a larger number of Medicare beneficiaries.
While providers have discretion in determining the number of tissue  samples that become specimens, CMS’s current payment system  provides a financial incentive for providers to refer a higher number of  specimens—or anatomic pathology services—per biopsy procedure.  Providers can double their payment for anatomic pathology services, for  example, by submitting four specimens from four tissue samples instead  of combining the four tissue samples into two specimens. However,  providers differ on whether or to what extent tissue samples can be  combined in creating a specimen or if each tissue sample must become a  specimen. CMS has already implemented a payment approach for one  specific biopsy procedure—prostate saturation biopsy—that pays  providers through a single payment rather than paying for each specimen  individually within a given range of anatomic pathology services, such as  1 to 20 specimens. However, this policy does not apply to anatomic  pathology services from other biopsy procedures. CMS could expand this  payment approach to other biopsy procedures and associated anatomic  pathology services.
section_title: Recommendations for Executive Action
paragraphs: In order to improve CMS’s ability to identify self-referred anatomic  pathology services and help CMS avoid unnecessary increases in these  services, we recommend that the Administrator of CMS take the following  three actions:  1.  Insert a self-referral flag on Medicare Part B claim forms and require  providers to indicate whether the anatomic pathology services for  which the provider bills Medicare are self-referred or not.  2.  Determine and implement an approach to ensure the appropriateness  of biopsy procedures performed by self-referring providers.  3.  Develop and implement a payment approach for anatomic pathology  services that would limit the financial incentives associated with  referring a higher number of specimens—or anatomic pathology  services—per biopsy procedure.
section_title: Agency and Third- Party Comments and Our Evaluation
paragraphs: We provided a draft of this report to HHS, which oversees CMS, for  comment. HHS provided written comments, which are reprinted in  appendix VI. We also obtained comments from representatives from four  professional associations selected because they represent an array of  stakeholders with specific involvement in anatomic pathology services.  Three associations provided oral comments: the College of American  Pathologists (CAP), which represents pathologists; the American  Academy of Dermatology Association (AADA), which represents  dermatologists; and the American Gastroenterological Association (AGA),  which represents gastroenterologists. The American Urological  Association (AUA), which represents urologists, provided written  comments. We summarize and respond to comments from HHS and  representatives from the four professional associations in the following  sections.
subsections: section_title: HHS Comments
paragraphs: HHS reviewed a draft of this report and provided written comments, which  are reprinted in appendix VI. In its comments, HHS stated that it  concurred with, and had addressed, one of our recommendations, but did  not concur with our other two recommendations. HHS provided few  comments on our findings that self-referring providers referred  substantially more anatomic pathology services than non-self-referring  providers.
HHS stated that it concurred with, and has already addressed, our  recommendation that CMS develop and implement a payment approach  for anatomic pathology services that would limit the financial incentives  associated with referring a higher number of anatomic pathology services  per biopsy procedure. According to HHS, the payment revaluation for  anatomic pathology services in 2013 decreased payment by  approximately 30 percent and significantly reduced the financial  incentives associated with self-referral for these services. We are pleased  that CMS examines and revalues HCPCS codes to ensure that payment  for services matches the resources involved and adjusts payment to the  extent needed. However, the payment revaluation that occurred in 2013  does not address the higher referral of anatomic pathology services we  found associated with self-referring providers. Although no consensus  exists on the number and type of tissue samples that become a  specimen—an anatomic pathology service—the current payment system  pays more if providers create more specimens from the same number of  samples. We continue to believe that CMS should develop a payment  approach that addresses the incentive to provide more services.
HHS did not concur with our recommendation that CMS insert a self- referral flag on the Medicare Part B claims form and require providers to  indicate whether the anatomic pathology services for which a provider  bills Medicare are self-referred or not. In its response, HHS did not  provide reasons for not concurring with this recommendation, but stated  that the President’s fiscal year 2014 budget proposal includes a provision  to exclude certain services from the in-office ancillary services exception.  HHS added that anatomic pathology services may share some  characteristics with the services mentioned in the proposal. To the extent  that self-referral for anatomic pathology services continues to be  permitted, we 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 anatomic pathology services. Such a  flag would allow CMS to monitor the behavior of self-referring providers  and could be helpful to CMS in answering broader policy questions on  self-referral.
HHS did not concur with our recommendation that CMS determine and  implement an approach to ensure the appropriateness of biopsy  procedures performed by self-referring providers. In its response, HHS  noted that it would be difficult to make recommendations regarding  whether services are appropriate without reviewing large numbers of  claims, reporting that 918,000 instances of self-referral that we identified  would need to be reviewed. Further, the agency stated that it does not  believe that this recommendation will address overutilization that occurs  as a result of self-referral. We do not suggest or intend that CMS review  every anatomic pathology service to determine whether it is appropriate.  Self-referral, however, could be a factor CMS considers in its ongoing  efforts to identify and address inappropriate use of Medicare services. As  noted in the report, CMS could, for example, consider performing targeted  audits of providers that perform a higher average number of biopsy  procedures, compared to providers of the same specialty treating similar  numbers of Medicare beneficiaries. In this regard, a flag that we also  recommended to identify self-referred services would facilitate such  audits.
On the basis of HHS’s written response to our report, we are concerned  that HHS does not appear to recognize the need to monitor the self- referral of anatomic pathology services on an ongoing basis and  determine those services that may be inappropriate or unnecessary. HHS  did not comment on our key finding that providers’ referrals for anatomic  pathology services across the three specialties we examined substantially  increased the year after they began to self-refer. Nor did HHS comment  on our estimate that additional referrals for anatomic pathology services  from self-referring providers cost CMS about $69 million in 2010 or   $48 million based on the 2013 payment rates. Given these findings, we  continue to believe that CMS should take steps to monitor the utilization  of anatomic pathology services and ensure that the services for which  Medicare pays are appropriate. By not monitoring the appropriateness of  these services, CMS is missing an opportunity to save Medicare  expenditures.
section_title: Professional Association Comments College of American Pathologists
paragraphs: Representatives from CAP expressed concern that our methodology to  identify self-referral missed certain self-referral arrangements for  anatomic pathology services and that our findings understate effects from  self-referral. According to the CAP representatives, because our  methodology did not identify providers who self-refer the PC only and did  not include financial relationships that do not share TINs, effects from  self-referral are greater than our findings suggest. As noted in the report,  we excluded claims with a only a PC from our finding on utilization and  expenditures trends for anatomic pathology services because we could  not reliably determine that they were performed in the physician office or  independent laboratory. We identified financial relationships among  providers using TINs, which would identify the provider, the provider’s  employer, or another entity to which the provider reassigns payment. To  the extent that providers self-refer only the PCs of anatomic pathology  services or self-refer to entities with which they do not share TINs,  differences between self-referring and non-self-referring providers would  be greater, and our estimate of the differences would be more  conservative. CAP representatives also raised questions about self- referral that our report did not address, such as why the report did not  examine cancer detection rates or whether anatomic pathology services  should be included in the in-office ancillary services exception. These  issues were outside the report’s objectives. While the representatives  from CAP agreed with the recommendation to include a self-referral flag  on the Medicare Part B claims form, they disagreed with our other  recommendations, stating that they would not sufficiently address the  report findings. We believe that our recommendations incorporate actions  that address the problems we identified.
section_title: American Academy of Dermatology Association
paragraphs: Representatives from the AADA stated that dermatologists should  continue to be allowed to prepare and review their own anatomic  pathology services because they receive considerable training as part of  their education and offered several possible explanations for the  additional anatomic pathology services referred and biopsy procedures  performed by self-referring providers. For example, they raised the  possibility that the increase in anatomic pathology services referred and  biopsy procedures performed by providers in the switcher group was due  to increases in patient volume, providers joining a larger group practice or  hiring a mid-level practitioner allowing the provider to see more patients.  They also raised the possibility that providers in the switcher group  became further specialized, resulting in a change in the number and type  of diagnoses for their patients. Also, the AADA reported that our reliance  on TINs to identify self-referral could be problematic because providers  working in large, university-based practices would be flagged as self- referring, despite lacking a financial incentive to provide more services.  As noted in the report, the increase in anatomic pathology 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, had a bigger  increase in the number of anatomic pathology services referred than  providers who did not change their self-referral status. Further, we found  that the types and proportions of patient diagnoses were similar for self- referring and non-self-referring providers of the same specialty and that  self-referring providers referred more anatomic pathology services per  biopsy procedure for nearly all—53 of 54—primary diagnoses for which  beneficiaries were referred for anatomic pathology services. To the extent  that providers who share a TIN, but do not have a financial incentive to  refer more services, are counted as self-referring, our findings would  likely underestimate differences between self-referring and non-self- referring providers and would thus provide a conservative estimate of the  effects of self-referral.
The AADA agreed with our recommendation of determining an approach  to ensure the appropriateness of biopsy procedures, but disagreed with  our recommendation of a payment approach limiting the financial  incentives associated with a higher number of services per biopsy  procedure. Specifically, the AADA expressed concern about any  disincentives for dermatologists to perform biopsy procedures. As noted  in the report, increases in the number of anatomic pathology services per  biopsy procedure were primarily responsible for the growth of anatomic  pathology services referred by providers in the switcher group from 2008  to 2010 across provider specialties. We continue to believe that CMS  should develop and implement a payment approach for anatomic  pathology services that would limit the financial incentives associated with  referring a higher number of services per biopsy procedure.
section_title: American Gastroenterological Association
paragraphs: Representatives from the AGA asked for further information about the  providers in our analysis (particularly gastroenterologists in the switcher  group) and diagnoses of the beneficiaries referred for anatomic pathology  services, and offered several possible explanations for the additional  anatomic pathology services referred and biopsy procedures performed  by self-referring providers. Specifically, the AGA raised the possibility that  providers in the switcher group joined larger groups that perform more  anatomic pathology services or changed the types of biopsy procedures  they performed. Finally, the AGA also noted that an appropriate number  of anatomic pathology services is not known. Specifically, they reported  that larger practices, which are also more likely to self-refer, are more  likely to have formal peer review, which could result in more anatomic  pathology services referred. We have included an appendix with  additional information on the number of services per biopsy procedure for  the most common diagnoses for which beneficiaries were referred for  anatomic pathology services in 2010. As noted, the types and proportions  of diagnoses for which beneficiaries were referred for anatomic pathology  services were similar for self-referring and non-self-referring providers.  We found that self-referring providers referred more services per biopsy  procedure on average than non-self-referring providers for nearly all of  these diagnoses. We acknowledge that the appropriate number of  referrals for these services is not known, but the consistent pattern of self- referring providers’ higher use suggests that additional scrutiny is  warranted. The AGA agreed with our recommendations, but did not think  the recommendation on a payment approach for anatomic pathology  services limiting the financial incentives associated with referring a higher  number of specimens per biopsy procedure was as applicable to  providers of their specialty.
section_title: American Urological Association
paragraphs: The AUA agreed with our recommendation to identify self-referred  services but did not agree with our other recommendations to examine  the appropriateness of biopsy procedures performed by self-referring  providers or develop a payment approach that would limit the financial  incentives for referring a higher number of anatomic pathology services.  The AUA said that there were problems with the study’s design and data  gathering methodology originating from problems with identifying self- referral which resulted in their questioning the validity of the report  findings. AUA did not provide further detail on their methodological  concerns. We believe our methodology to identify self-referred services  and classify providers as self-referring using one hundred percent of  Medicare Part B claims is a reasonable and valid approach. In designing  our methodology, we consulted with officials from CMS, specialty  societies, and other researchers. Our approach is similar to the one used  by MedPAC for its study of the effect of physician self-referral on use of  imaging services.
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 Health  and Human Services, 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 VII.
section_title: Appendix I: Special Stains Used in Conjunction with Anatomic Pathology Services Paid under Medicare
paragraphs: As part of our work, we also analyzed additional anatomic pathology  services—known as special stains—that providers may use in conjunction  with anatomic pathology services to enhance their ability in making a  diagnosis. We focused our special stains analysis on services with  Healthcare Common Procedure Coding System (HCPCS) codes 88312,  88313, and 88342 that were used in conjunction with the anatomic  pathology service, HCPCS code 88305. We considered special stains  billed on the same date, by the same provider, for the same beneficiary  as those used in conjunction with anatomic pathology services. In 2010,  expenditures under the physician fee schedule for these three special  stain services totaled approximately $387 million. Providers may utilize  special stains with a HCPCS code of 88312 on specimens to detect the  presence of infectious organisms such as bacteria and fungus, special  stains with a HCPCS code of 88313 to detect the presence of iron, and  special stains with a HCPCS code of 88342 to identify the origin of a   Use of special stains is determined by the provider referring  cancer.anatomic pathology services, the pathologist interpreting the anatomic  pathology service, or both. We examined (1) trends in the number of and  expenditures for self-referred and non-self-referred special stains, and   (2) how the provision of special stains differs for providers who self-refer  when compared with other providers.
subsections: section_title: Utilization of and Expenditures for Self- referred and Non-self- referred Special Stains
paragraphs: Similar to anatomic pathology services, the number of both self-referred  and non-self-referred special stains increased from 2004 through 2010,  with self-referred special stains increasing at a faster rate than services  that were not self-referred. Specifically, the number of special stains that  were self-referred increased from about 60,000 in 2004 to about 340,000  in 2010, an increase of more than 400 percent (see fig. 5). Further, we  found that self-referred special stains increased more than non-self- referred special stains for each of the three special stains we studied. In  contrast, non-self-referred special stains grew from about 710,000  services to about 1.80 million services, an increase of about 150 percent.
Similar to expenditures for anatomic pathology services, Medicare’s  expenditures for both self-referred and non-self-referred special stains  used in conjunction with HCPCs code 88305 also grew rapidly during the  period we studied, with the greater rate of increase among expenditures  for self-referred services. Specifically, expenditures for self-referred  special stains grew more than six-fold, increasing from about $4 million in  2004 to about $30 million in 2010 (see fig. 6). In comparison,  expenditures for non-self-referred special stains more than tripled during  these years, growing from about $46 million in 2004 to about $162 million  in 2010.
For two of the three specialties we examined, self-referring providers  referred a higher number of special stains on average than non-self- referring providers of the same specialty treating similar numbers of  Medicare fee-for-service (FFS) beneficiaries. Specifically, self-referring  gastroenterologists and urologists referred more special stains on  average than non-self-referring gastroenterologists and urologists treating  a similar number of Medicare beneficiaries. We also found this pattern for  self-referring dermatologists treating small numbers of Medicare FFS  beneficiaries. Provider specialty and size category combinations we  studied where self-referring providers referred more special stains on  average than non-self-referring providers represented about 86 percent of  special stains referred by these specialties.
Our analysis shows that, for two of the three specialties we reviewed,  providers’ referrals for special stains substantially increased the year after  they began to self-refer. Specifically, urologists and gastroenterologists  that were “switchers”—those providers that did not self-refer in 2007 or  2008 but began to self-refer in 2009 and continued to do so in 2010—saw  larger increases in the number of special stain referrals they made  relative to other providers (see table 7). Dermatologists in the switcher  group had a 17.6 percent increase in the number of special stains  referred from 2008 to 2010, but this was roughly equivalent to the  increase for providers in the non-self-referring group and only slightly  higher than the increase for providers in the self-referring group.
section_title: Appendix II: 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 anatomic pathology services from 2004  through 2010, (2) how the provision of anatomic pathology services may  differ for providers who self-refer when compared with other providers,  and (3) the implications of self-referral for Medicare spending on anatomic  pathology 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.
For the purposes of this report “anatomic pathology” services refer to HCPCS 88305  services, and “special stains” refer to HCPCS 88312, 88313, and 88342 services that  were used in conjunction with these anatomic pathology services. with which he or she has a financial relationship without implicating the  Stark law.
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 to identify services as either self-referred or non-self- referred. Specifically, we classified services as self-referred if the provider  that referred the beneficiary for an anatomic pathology service and the  provider that performed the anatomic pathology service was identical or  had a financial relationship. 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. referring and performing providers, we created a crosswalk of the  performing provider’s unique physician identification number or national  provider identifier (NPI) to the TIN that appeared on the claim and used  that to assign TINs to the referring and performing providers.
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.
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. We did not count  claims with PC only as self-referred because we could not reliably  determine whether they corresponded to anatomic pathology services  that were performed in a provider’s office or laboratory. Further, we  excluded claims where a HCPCS code of 88305 was billed with another  anatomic pathology service and a special stain, because we could not  determine which service required the use of the special stain. 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  anatomic pathology 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 anatomic pathology services, both in  aggregate and per beneficiary. We limited this portion of our analysis to  global claims or claims for a separately-billed TC for anatomic pathology  services, which indicates that the performance of the anatomic pathology  service was billed under the physician fee schedule. As a result, the  universe for this portion of our analysis is those anatomic pathology  services performed in a provider’s office or in an independent clinical  laboratory that both bill for the performance of an anatomic pathology  service under the physician fee schedule. We focused on these settings  because the financial incentive for providers to self-refer is most direct  when the service is performed in a physician office. Further, we limited  our analysis to self-referral of the preparation—as opposed to the  interpretation—of these services, because we could determine the site of  service as a physician’s office or laboratory. Accordingly, we did not  examine self-referral of the interpretation of these services as we could  not reliably determine their site of service. Approximately two-thirds of all  anatomic pathology services billed under the physician fee schedule were  performed in a physician’s office or clinical laboratory. 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. We also examined the utilization for self-referred anatomic  pathology services by provider specialty for 2004 and 2010.
To determine the extent to which the provision of anatomic pathology  services differs for providers who self-refer when compared with other  providers, we first classified providers based on the type of referrals they  made. Specifically, we classified providers as self-referring if they self- referred at least one beneficiary for an anatomic pathology service. We  classified providers as non-self-referring if they referred a beneficiary for  an anatomic pathology service, but did not self-refer any of the services.  We assigned to each provider the anatomic pathology services, including  those for the performance of an anatomic pathology service and those for  the interpretation of the anatomic pathology 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, independent clinical laboratory, or other setting. We  classified anatomic pathology services as being from the same biopsy  procedure if the services were referred by the same provider for the same  beneficiary on the same day. We then performed two separate analyses.
First, we compared the provision—that is, the number of referrals made— of anatomic pathology services by self-referring providers and non-self- referring providers in 2010, disaggregated by the number of Medicare  beneficiaries seen by the provider, provider specialty, and 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.providers’ specialties on the basis of the specialties listed on the claims.  These specialty codes include physician specialties, such as dermatology  and urology, 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.
We considered all other settings to be rural. We identified  Second, we determined the extent to which the number of anatomic  pathology service referrals made by providers changed after they began  to self-refer. Specifically, we identified a group of providers that began to  self-refer anatomic pathology services in 2009. 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 anatomic pathology referrals  made from 2008 (i.e., the 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 anatomic pathology  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 anatomic pathology 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  anatomic pathology services, we summed the number of and  expenditures for all anatomic pathology services performed in 2010  across the three provider specialties we reviewed. We then calculated the  number of and expenditures for anatomic pathology services if self- referring providers performed biopsy procedures at the same rate as and  referred the same number of services per biopsy procedure as non-self- referring providers of the same provider size and specialty. We repeated  this analysis incorporating an approximation of the payment reduction for  anatomic pathology services that became effective in 2013.
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, including CMS and Medicare contractor officials. We  also reviewed relevant documentation, and examined the data for obvious  errors, such as missing values and values outside of expected ranges.  We determined that the data were sufficiently reliable for the purposes of  our study, as they are used by the Medicare program as a record of  payments to health care providers. As such, they are subject to routine  CMS scrutiny.
We conducted this performance audit from January 2012 through June  2013 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 III: Average Number of Medicare Anatomic Pathology Services per Biopsy Procedure for Most Common Diagnoses
section_title: Appendix IV: Age and Sex of Medicare Beneficiaries for Select Provider Specialties by Practice Size in 2010
paragraphs: Appendix IV: Age and Sex of Medicare  Beneficiaries for Select Provider Specialties by  Practice Size in 2010 Provider specialty and number of  unique Medicare FFS beneficiaries Dermatology  The number of unique Medicare FFS beneficiaries refers to the number of unique beneficiaries that  received at least one service from a provider.
The number of unique Medicare FFS beneficiaries refers to the number of unique beneficiaries that  received at least one service from a provider.
section_title: Appendix V: Average Number of Medicare Anatomic Pathology Referrals by Provider Self-Referral and Urban-Rural Status in 2010
subsections: section_title: Geographic designation Urban
paragraphs: The number of unique Medicare FFS beneficiaries refers to the number of unique beneficiaries that  received at least one service from a provider.
section_title: Appendix VI: Comments from the Department of Health and Human Services
section_title: Appendix VII: GAO Contact and Staff Acknowledgments
subsections: section_title: GAO Contact
section_title: Staff Acknowledgments
paragraphs: In addition to the contact named above, Thomas Walke, Assistant  Director; Todd D. Anderson; Manuel Buentello; Krister Friday;   Gregory Giusto; Brian O’Donnell; and Daniel Ries made key contributions  to this report.