For years now, physicians who see Medicare and Medicaid patients have been required to comply with the suite of anti-kickback rules known as the Stark laws. The laws govern physician self-referral, and are intended to stamp out the alleged conflict of interest that arises when, for example, a physician refers a patient to a hospital or facility in which the physician has an ownership interest.

The latest expansion to the Stark laws is tucked away on page 1,534 of the health reform legislation signed into law by President Obama.¹ It specifically targets physicians who order MRIs, CT scans, PET scans, or "any other designated health services that the Secretary determines appropriate" for their Medicare and Medicaid patients.

As Kaiser Health News sums it up:

Under the new health care overhaul law, doctors who refer Medicare and Medicaid patients to in-house imaging machines must disclose in writing that they own the equipment. They'll also have to tell their patients they can get the services elsewhere, and provide a list of 10 alternative sites within 25 miles.²

So if you are a physician working in group practice, and you determine that you can better serve your patients through faster turnaround or more consistent quality by having your own advanced diagnostic machines onsite, you might want to think twice before making that purchase. For starters, you will be forced to advertise on behalf of your competitors. But worse, you will be placing yourself in the crosshairs of yet another set of compliance auditors. And don't think for a moment that Congress would not someday pass a law to reduce reimbursement rates for services delivered in-house, in the name of equalizing "excess" profits. If that happens, it would come after you've committed to your million-dollar investment.

Self-referral isn't some inherently pernicious business practice. It's the medical equivalent of horizontal integration in the business world. Are consumers' rights violated when a automobile dealership opens up its own on-site service garage, or when Amazon.com recommends a book to a visitor and then provides the link to the Amazon page from which the book can be purchased? Of course not.

The only "conflict" here is artificial. It is introduced when the government inappropriately gets involved in paying the claims for what ought to be private transactions between individuals. In a free market, physicians would be able to expand their service offerings without being presumed crooked. Meanwhile, in today's semi-free society, let the federal investigators of waste, fraud, and abuse direct their searches elsewhere. Let's show doctors and their patients some respect.

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¹ Patient Protection and Affordable Care Act, as signed into law by the President on March 23, 2010

² "Physicians must disclose if they own CT, MRI, or PET scanners" Kaiser Health News, August 23 2010

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