oversight

Medicare: Higher Use of Advanced Imaging Services by Providers Who Self-Refer Costing Medicare Millions

Published by the Government Accountability Office on 2012-09-28.

Below is a raw (and likely hideous) rendition of the original report. (PDF)

                             United States Government Accountability Office

GAO                          Report to Congressional Requesters




September 2012
                             MEDICARE

                             Higher Use of
                             Advanced Imaging
                             Services by Providers
                             Who Self-Refer
                             Costing Medicare
                             Millions



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GAO-12-966
                                              September 2012

                                              MEDICARE
                                              Higher Use of Advanced Imaging Services by
                                              Providers Who Self-Refer Costing Medicare Millions
Highlights of GAO-12-966, a report to
congressional requesters




Why GAO Did This Study                        What GAO Found
Medicare Part B expenditures—which            From 2004 through 2010, the number of self-referred and non-self-referred
include payment for advanced imaging          advanced imaging services—magnetic resonance imaging (MRI) and computed
services—are expected to continue             tomography (CT) services—both increased, with the larger increase among self-
growing at an unsustainable rate.             referred services. For example, the number of self-referred MRI services
Questions have been raised about self-        increased over this period by more than 80 percent, compared with an increase
referral’s role in this growth. Self-         of 12 percent for non-self-referred MRI services. Likewise, the growth rate of
referral occurs when a provider refers        expenditures for self-referred MRI and CT services was also higher than for non-
patients to entities in which the             self-referred MRI and CT services.
provider or the provider’s family
members have a financial interest.            GAO’s analysis showed that providers’ referrals of MRI and CT services
GAO was asked to examine the                  substantially increased the year after they began to self-refer—that is, they
prevalence of advanced imaging self-          purchased or leased imaging equipment, or joined a group practice that already
referral and its effect on Medicare           self-referred. Providers that began self-referring in 2009—referred to as
spending. This report examines                switchers—increased MRI and CT referrals on average by about 67 percent in
(1) trends in the number of and               2010 compared to 2008. In the case of MRIs, the average number of referrals
expenditures for self-referred and non-       switchers made increased from 25.1 in 2008 to 42.0 in 2010. In contrast, the
self-referred advanced imaging                average number of referrals made by providers who remained self-referrers or
services, (2) how provision of these          non-self-referrers declined during this period. This comparison suggests that the
services differs among providers on
                                              increase in the average number of referrals for switchers was not due to a
the basis of whether they self-refer,
                                              general increase in the use of imaging services among all providers. GAO’s
and (3) implications of self-referral for
Medicare spending. GAO analyzed               examination of all providers that referred an MRI or CT service in 2010 showed
Medicare Part B claims data from 2004         that self-referring providers referred about two times as many of these services
through 2010 and interviewed officials        as providers who did not self-refer. Differences persisted after accounting for
from the Centers for Medicare &               practice size, specialty, geography, or patient characteristics. These two
Medicaid Services (CMS) and other             analyses suggest that financial incentives for self-referring providers were likely a
stakeholders. Because Medicare                major factor driving the increase in referrals.
claims lack an indicator identifying self-
referred services, GAO developed a            Change in Average Number of MRI Services Referred, 2008 and 2010
claims-based methodology to identify
self-referred services and expenditures                                    Average 2008 referred    Average 2010 referred
and to characterize providers as self-                                             MRI services             MRI services      Percentage change
referring or not.                              Switchers                                    25.1                      42.0                  67.3
                                               Non-self-referrers                           20.6                      19.2                   -6.8
What GAO Recommends                            Self-referrers                               47.0                      45.4                   -3.4
GAO recommends that CMS improve               Source: GAO analysis of Medicare data.
its ability to identify self-referral of      Note: Pattern observed for MRI services was similar for CT services. GAO defines switchers as those
advanced imaging services and                 providers that did not self-refer in 2007 or 2008, but did self-refer in 2009 and 2010.
address increases in these services.
The Department of Health and Human            GAO estimates that in 2010, providers who self-referred likely made 400,000
Services, which oversees CMS, stated
                                              more referrals for advanced imaging services than they would have if they were
it would consider one recommendation,
                                              not self-referring. These additional referrals cost Medicare about $109 million. To
but did not concur with the others.
                                              the extent that these additional referrals were unnecessary, they pose
GAO maintains CMS should monitor
these self-referred services and ensure       unacceptable risks for beneficiaries, particularly in the case of CT services, which
they are appropriate.                         involve the use of ionizing radiation that has been linked to an increased risk of
                                              developing cancer.
View GAO-12-966. For more information,
contact James C. Cosgrove at (202) 512-7114
or cosgrovej@gao.gov.

                                                                                                   United States Government Accountability Office
Contents


Letter                                                                                           1
               Background                                                                        7
               Self-Referred MRI and CT Services and Expenditures Grew
                 Overall, While Non-Self-Referred Services and Expenditures
                 Grew Slower or Decreased                                                      10
               Self-Referring Providers Referred Substantially More Advanced
                 Imaging Services on Average Than Did Other Providers                          16
               Higher Use of Advanced Imaging Services by Self-Referring
                 Providers Results in Substantial Costs to Medicare                            22
               Conclusions                                                                     24
               Recommendations for Executive Action                                            25
               Agency Comments and Our Evaluation                                              25

Appendix I     Scope and Methods                                                               30



Appendix II    Select Implemented or Proposed Policies Designed to Address
               Self-Referral or the Utilization of Advanced Imaging Services                   37



Appendix III   Self-Referral of MRI and CT Services, by Provider Specialty,
               in 2004 and 2010                                                                40




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



Appendix V     GAO Contact and Staff Acknowledgments                                           46



Tables
               Table 1: Average Number of MRI and CT Services Referred by Non-
                        Self-Referring and Self-Referring Providers, 2010                      18
               Table 2: Average Number of MRI and CT Services Referred by Non-
                        Self-Referring and Self-Referring Providers in Urban and
                        Rural Locations, 2010                                                  20



               Page i                GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
          Table 3: Patient Characteristics of Non-Self-Referring and Self-
                   Referring MRI and CT Providers, 2010                                   21
          Table 4: Change in Average Number of MRI and CT Services
                   Referred, 2008 and 2010                                                22
          Table 5: Self-referral Rates of MRI and CT Services for Select
                   Provider Specialties                                                   41


Figures
          Figure 1: Distribution of Advanced Imaging Services by Modality
                   and Setting, 2010                                                        9
          Figure 2: Number of Self-Referred and Non-Self-Referred MRI
                   Services, 2004-2010                                                    11
          Figure 3: Number of Self-Referred and Non-Self-Referred CT
                   Services, 2004-2010                                                    12
          Figure 4: Self-Referred and Non-Self-Referred MRI Expenditures,
                   2004-2010                                                              14
          Figure 5: Self-Referred and Non-Self-Referred CT Expenditures,
                   2004-2010                                                              15
          Figure 6: Potential Savings under Alternative Scenario for Self-
                   Referring Providers, 2010                                              23




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

BETOS             Berenson-Eggers Type of Service
CMS               Centers for Medicare & Medicaid Services
CT                computed tomography
DRA               Deficit Reduction Act of 2005
FFS               fee-for-service
HCPCS             Healthcare Common Procedure Coding System
HHS               Department of Health and Human Services
IDTF              independent diagnostic testing facility
MedPAC            Medicare Payment Advisory Commission
MRI               magnetic resonance imaging
NPI               national provider identifier
PC                professional component
PPACA             Patient Protection and Affordable Care Act
TC                technical component
TIN               taxpayer identification number



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Page iii                   GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
United States Government Accountability Office
Washington, DC 20548




                                   September 28, 2012

                                   Congressional Requesters

                                   Expenditures for Medicare Part B services—which include physician and
                                   other outpatient services—are expected to continue exceeding the overall
                                   growth rate of the U.S. economy, heightening concerns about the long-
                                   range fiscal sustainability of Medicare. 1 While Medicare spending growth
                                   has slowed in recent years, expenditures for Medicare Part B grew by an
                                   average of 5.9 percent annually from 2007 through 2011 and are
                                   projected to grow by an average of 7.6 percent annually from 2012
                                   through 2016. 2 In comparison, the national economy grew by an average
                                   annual rate of 2.5 percent from 2007 through 2011 3 and is projected to
                                   increase on average by 4.6 percent annually from 2012 through 2016. 4
                                   Medicare Part B spending includes payments for advanced imaging
                                   services—magnetic resonance imaging (MRI) and computed tomography
                                   (CT) services—which providers use in the diagnosis and treatment of
                                   many diseases and disorders, such as different types of cancer,
                                   cardiovascular diseases, and musculoskeletal disorders. 5




                                   1
                                    Medicare is the federally financed health insurance program for persons aged 65 and
                                   over, certain individuals with disabilities, and individuals with end-stage renal disease.
                                   Medicare Part A covers hospital and other inpatient stays. Medicare Part B is optional
                                   insurance, and covers physician, outpatient hospital, home health care, and certain other
                                   services. Medicare Parts A and B are known as original Medicare or Medicare fee-for-
                                   service (FFS).
                                   2
                                    See The Boards of Trustees, 2012 Annual Report of the Boards of Trustees of the
                                   Federal Hospital Insurance and Federal Supplementary Medical Insurance Trust Funds
                                   (Washington, D.C.: April 2012). The projected Medicare Part B growth rate assumes that
                                   scheduled statutory cuts in physician payment rates will be overridden by Congress as
                                   they have been every year since 2003.
                                   3
                                    See Bureau of Economic Analysis, “Gross Domestic Product (GDP) Percent change from
                                   preceding period,” National Economic Accounts (Washington, D.C.: May 31, 2012),
                                   accessed June 27, 2012, http://www.bea.gov/national/xls/gdpchg.xls.
                                   4
                                    See Congressional Budget Office, The Budget and Economic Outlook: Fiscal Years 2012
                                   through 2022 (Washington, D.C.: January 2012).
                                   5
                                    Other advanced imaging services include nuclear medicine services. For the purposes of
                                   this report, “advanced imaging services” refers to only MRI and CT services.




                                   Page 1                     GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Policymakers and researchers have raised questions about the growth in
Part B spending, noting that some of this growth may be partially
attributed to self-referral and that not all of the advanced imaging services
provided may be appropriate or necessary. 6 Self-referral occurs when
providers refer their patients to entities—such as themselves or a group
practice—with which they or an immediate family member has a financial
relationship, such as when a provider refers patients to his or her office
for advanced imaging services after the provider purchases or leases
advanced imaging equipment. 7 Proponents of self-referral point out that
such arrangements allow providers to make rapid diagnoses, improve
coordination of care, and provide convenient access for patients.
However, critics of self-referral note that the incentive for financial gain in
such arrangements may result in inappropriate, unnecessary, or
potentially harmful services. For example, CT services expose
beneficiaries to ionizing radiation, which is associated with an increased
risk of cancer.

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), 8 required that


6
 For example, see Laurence C. Baker, “Acquisition of MRI Equipment by Doctors Drives
Up Imaging Use and Spending,” Health Affairs, vol. 29, no. 12 (2010); Medicare Payment
Advisory Commission, Report to the Congress, Improving Incentives in the Medicare
Program (Washington, D.C.: June 2009); and Senator Grassley Press Release, Grassley
Works to Protect Medicare Dollars, Empower Patients with Information (July 25, 2008),
accessed May 31, 2012.
http://www.finance.senate.gov/newsroom/ranking/release/?id=bb006ccf-dedc-40fd-9b14-
6074cb2687f3.
7
 Compliance with the physician self-referral law, commonly known as the Stark law, is
outside the scope of this report. The Stark law prohibits physicians from making referrals
for certain designated health services paid for by Medicare, to entities with which the
physicians or immediate family members have a financial relationship, unless the
arrangement complies with a specified exception, such as in-office ancillary services.
42 U.S.C. § 1395nn(b)(2).The requirements of the in-office ancillary services exception
are found at 42 C. F. R. § 411.355(b) (2011).The Patient Protection and Affordable Care
Act (PPACA) amended the Stark law to establish an additional requirement with respect to
the in-office ancillary services exception for certain types of advanced imaging services.
That is, self-referring physicians must inform patients in writing at the time of referral for
these services that the patient may obtain the service from a person other than the
referring physician or someone in the physician’s group practice and provide the patient
with a list of suppliers who furnish the service in the area in which the patient resides.
Pub. L. No. 111-148, § 6003, 124 Stat. 119, 697 (codified at 42 U.S.C. § 1395nn(b)(2)).
8
 Pub. L. No. 109-171, § 5102(b), 120 Stat. 4, 39-40 (2006).




Page 2                     GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Medicare payment for certain imaging services under the Medicare
physician fee schedule—the payment system used to determine fees for
physician-billed services in Medicare FFS—not exceed the amount
Medicare pays under the hospital outpatient prospective payment system,
used to pay for hospital outpatient services. In our 2008 report, we
recommended that, to address the rapid growth in Medicare Part B
imaging expenditures, the Centers for Medicare & Medicaid Services
(CMS)—the agency within the Department of Health and Human Services
that administers the Medicare program—examine the feasibility of
expanding the use of front-end approaches for managing the utilization of
advanced imaging services. 9 Front-end approaches to managing services
are conducted prior to, rather than after, services are performed and
payment is made. Examples of such approaches include requiring prior
authorization (specific approval from a payer to perform a service) and
privileging (limiting the authority to order certain services to only providers
with specified qualifications). In contrast, back-end approaches are used
after CMS issues payment, and could include targeted audits of providers
that refer a high volume of services. Further, the Medicare Payment
Advisory Commission (MedPAC) has recommended that certain
providers with higher advanced imaging utilization participate in a prior
authorization program and that CMS reduce payment rates for imaging
services when the same provider orders and performs a service. 10
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. 11 In this



9
 See GAO, Medicare Part B Imaging Services: Rapid Spending Growth and Shift to
Physician Offices Indicate Need for CMS to Consider Additional Management Practices,
GAO-08-452 (Washington, D.C.: June 13, 2008).
10
  See Medicare Payment Advisory Commission, Report to the Congress: Medicare and
the Healthcare Delivery System (Washington, D.C.: June 2011).
11
  In addition to this report on advanced imaging, we also have ongoing work related to the
self-referral of anatomic pathology services, intensity-modulated radiation therapy
services, and physical therapy services.




Page 3                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
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. 12 Because there is no indicator or “flag” on the claim that
identifies whether services are self-referred or non-self-referred and CMS
has no other method for identifying whether a service was self-referred,
we developed a claims-based methodology for identifying self-referred
services. 13 Specifically, we classified services from the period we
reviewed as self-referred if the provider that referred the beneficiary for a
MRI or CT service and the provider that performed the MRI or CT service
were identical or had a financial relationship with the same entity. 14 We
removed MRI or CT services referred by radiologists or other providers
that primarily practice in an independent diagnostic testing facility (IDTF)
because they have limited ability to self-refer services. 15 We limited the
universe for this portion of our analysis to those advanced imaging


12
  For the purposes of our report, we limited MRI or CT services (1) to those that were
designated health services—services which, in the absence of an exception, a physician
may not make a referral to furnish to an entity with which he has a financial relationship
without implicating the Stark law—and (2) to those where the service includes the
performance of the imaging service—which can be billed with or separately from the
interpretation of a MRI or CT imaging service.
13
  An indicator or “flag” could be, for example, a modifier that a provider lists on a claim to
indicate that a service is self-referred. Providers currently use modifiers to provide
additional information about a service to CMS. For example, if a provider is only billing for
the technical component of an imaging service, the provider would use a modifier to alert
CMS that the claim does not cover the professional component of the service.
14
  Providers could have a financial relationship with the same entity if, for example, they
are part of the same group practice.
15
  IDTFs are diagnostic testing facilities that are independent of a physician’s office or
hospital and that comply with a number of requirements including those related to the use
of qualified supervising physicians, qualified nonphysician personnel, performance of only
specifically ordered tests, and compliance with all applicable state laws. See 42 C.F.R.
§ 410.33 (2011). Radiologists and providers in IDTFs predominantly perform advanced
imaging services and have limited ability to refer beneficiaries for advanced imaging
services. These providers are unlikely to self-refer MRI or CT services.




Page 4                      GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
services performed in a provider’s office or in an IDTF, which represents
approximately one-fifth of all advanced imaging services provided to
Medicare FFS beneficiaries. 16 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.

To determine the extent to which the provision of advanced imaging
services differed for providers who self-refer when compared with other
providers, we performed two separate analyses. First, we compared the
provision—that is, the number of referrals made—of MRI and CT services
by self-referring providers and non-self-referring providers in 2010, after
accounting for factors such as practice size (i.e., the number of Medicare
beneficiaries), provider specialty, geography (i.e., urban or rural), and
patient characteristics. 17 For this analysis, our universe of providers
included all those providers that referred at least one MRI or CT service,
except for providers that had a specialty of radiology, emergency
medicine, or provided services in an IDTF. 18 Second, we determined the
extent to which the number of MRI and CT referrals made by providers
changed after they began to self-refer. Specifically, we identified a group



16
  Providers can also provide advanced imaging services in settings other than physician
offices or IDTFs, such as hospitals.
17
  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.
18
  Providers with a radiology or IDTF specialty were removed because they have limited
ability to refer beneficiaries for advanced imaging services, and thus are not likely to self-
refer MRI or CT services. We excluded emergency medicine providers from our analysis
because they did not practice in provider offices. After we made our exclusions, there
were 419,884 providers that referred at least one MRI service and 477,547 providers that
referred at least one CT service in 2010.




Page 5                      GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
of providers that began to self-refer advanced imaging services in 2009.
We then calculated the change in the number of MRI or CT referrals
made from 2008 (i.e., the year before they began self-referring) to 2010
(i.e., the year after they began self-referring). We compared the change in
the number of referrals made by these providers to the change in the
number of referrals made over the same time period by providers who did
not change whether or not they self-referred advanced imaging services.
We classified providers as self-referring if they self-referred at least one
MRI or CT service and non-self-referring if they referred—but did not self-
refer—at least one MRI or CT service. 19 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. 20

We took several steps to ensure that the data used to produce this report
were sufficiently reliable. Specifically, we assessed the reliability of the
CMS data we used by interviewing officials responsible for overseeing
these data sources, reviewing relevant documentation, and examining the
data for obvious errors. We determined that the data were sufficiently
reliable for the purposes of our study. (See app. I for more details on our
scope and methodology.)



19
  In 2010, 35,950 providers self-referred an MRI service and 39,913 providers self-
referred a CT service. In comparison, there were 383,934 non-self-referring MRI providers
and 437,634 non-self-referring CT providers.
20
  We defined physician specialty using the specialty codes included in the Medicare
claims. These specialty codes include physician specialties, such as cardiology and
hematology/oncology, and nonphysician provider types, such as nurse practitioners and
physician assistants.




Page 6                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                      We conducted this performance audit from May 2010 through September
                      2012 in accordance with generally accepted government auditing
                      standards. Those standards require that we plan and perform the audit to
                      obtain sufficient, appropriate evidence to provide a reasonable basis for
                      our findings and conclusions based on our audit objectives. We believe
                      that the evidence obtained provides a reasonable basis for our findings
                      and conclusions based on our audit objectives.


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


MRI and CT Services   Medical imaging is a noninvasive process used to obtain pictures of the
                      internal anatomy or function of the anatomy using one of many different
                      types of imaging equipment and media for creating the image. MRI and
                      CT services are two of the six medical imaging modalities. 21 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.




                      21
                        The other four imaging modalities are nuclear medicine, ultrasound, X-ray and other
                      standard imaging, and procedures that use imaging.




                      Page 7                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Medicare Billing and         Medicare payments for advanced imaging services are separated into two
Payment Policies for         components—the technical component (TC) and the professional
Advanced Imaging             component (PC). The TC is intended to cover the cost of performing a
                             test, including the costs for equipment, supplies, and nonphysician staff.
Services                     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.


2010 Advanced Imaging        In 2010, Medicare FFS beneficiaries received 30.0 million advanced
Utilization by Setting and   imaging services, approximately 6.8 million (23 percent) of which were
Medicare Physician Fee       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
Schedule Expenditures        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.


                             Page 8                 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                              Figure 1: Distribution of Advanced Imaging Services by Modality and Setting, 2010




Select Implemented or         Numerous policies have been implemented or proposed by CMS,
Proposed Policies             MedPAC, or other researchers that are designed to limit self-referral or
Designed to Address           reduce inappropriate utilization of advanced imaging services. These
                              policies can affect self-referral or advanced imaging utilization through
Utilization or Expenditures   various means such as prohibiting different types of physician self-
Associated with Self-         referral, informing beneficiaries of physician self-referral, mandating
Referral of Advanced          accreditation of staff performing MRI and CT services, improving payment
Imaging Services              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




                              Page 9                  GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                             services were performed on the same day as an office visit less than a
                             quarter of the time, with only 8.4 percent of MRI services of the brain
                             being performed on the same day as an office visit. 22 Appendix II lists a
                             select number of such policies in addition to these two policies that have
                             been implemented or put forth by CMS, MedPAC, and other researchers.


                             From 2004 through 2010, the number of self-referred MRI and CT
Self-Referred MRI and        services performed in a provider’s office and non-self-referred MRI and
CT Services and              CT services performed in a provider’s office or IDTF increased, with the
                             larger increase for self-referred services. Similarly, expenditures for self-
Expenditures Grew            referred advanced imaging services also increased over this period, and
Overall, While Non-          this increase was larger than the changes in expenditures for advanced
Self-Referred Services       imaging services that were not self-referred. Over the period we
                             reviewed, the share of advanced imaging services that were self-referred
and Expenditures             also increased overall and across all provider specialties we examined.
Grew Slower or
Decreased
Number of Self-Referred      While the number of self-referred MRI services performed in a provider’s
and Non-Self-Referred MRI    office and non-self-referred MRI services performed in a provider’s office
and CT Services Increased    or IDTF both increased from 2004 through 2010, a significantly larger
                             increase occurred among the self-referred services. 23 Specifically, the
Overall from 2004 to 2010,
                             number of self-referred MRI services increased from about 380,000
with the Larger Increase     services in 2004 to about 700,000 services in 2010—an increase of more
among Self-Referred          than 80 percent (see fig 2). In contrast, the number of non-self-referred
Services                     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



                             22
                              Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in
                             Medicare (Washington, D.C.: June 2010).
                             23
                               As noted in the Scope and Methodology section, the universe of services for this finding
                             refers to advanced imaging services performed in a provider’s office or in an IDTF. We
                             focused on these settings because our previous work showed rapid growth among such
                             services and because the financial incentive for providers to self-refer is most direct when
                             the service is performed in a physician office.




                             Page 10                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
earlier years and declined less in the later years than the number of non-
self-referred services.

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




Note: Results include services performed in a physician office or IDTF. Services performed in other
settings, such as hospital outpatient departments, are not included.


Similar to MRI services, the number of self-referred and non-self-referred
CT services both increased from 2004 through 2010, with a considerably
larger increase occurring in self-referred services. Specifically, the
number of self-referred CT services more than doubled from 2004
through 2010, growing from about 700,000 services to about 1.45 million
services (see fig. 3). In contrast, the number of non-self-referred CT
services increased about 30 percent during these years, from about
1.90 million services to about 2.48 million services. Although the number
of both self-referred and non-self-referred CT services increased over the
period of our study, the number of non-self-referred CT services
decreased from 2009 through 2010.




Page 11                       GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                            Figure 3: Number of Self-Referred and Non-Self-Referred CT Services, 2004-2010




                            Note: Results include services performed in a physician office or IDTF. Services performed in other
                            settings, such as hospital outpatient departments, are not included.


                            The number of self-referred advanced imaging services increased from
                            2004 through 2010, even after accounting for change in the number of
                            Medicare FFS beneficiaries. Specifically, the number of self-referred MRI
                            services per 1,000 Medicare FFS beneficiaries grew from 10.8 in 2004 to
                            20.0 in 2010—an increase of about 85 percent. Similarly, the number of
                            self-referred CT services per 1,000 Medicare FFS beneficiaries more than
                            doubled, growing from about 19.6 in 2004 to 41.2 in 2010.


Self-Referred MRI and CT    Expenditures for self-referred MRI services grew overall from 2004
Expenditures Grew More      through 2010, while expenditures for non-self-referred MRI services
Than Non-Self-Referred      declined. Specifically, self-referred MRI expenditures grew about
                            55 percent during the time of our review, from approximately $239 million
Expenditures Overall with   in 2004 to about $370 million in 2010 (see fig. 4). In contrast,
Non-Self-Referred MRI       expenditures for non-self-referred MRI services decreased about
Expenditures Declining      8.5 percent during the same period. Expenditures for both self-referred



                            Page 12                       GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
and non-self-referred MRI services increased rapidly from 2004 through
2006, then decreased sharply in 2007. These declines in 2007
corresponded with the first year of implementation of a DRA provision that
reduced fees for certain advanced imaging services. 24 Since the declines
in 2007, expenditures for non-self-referred MRI services have declined
further while self-referred expenditures have increased.




24
  Under a provision in the DRA, Medicare fees for certain imaging services covered by the
Medicare physician fee schedule cannot exceed what Medicare pays under the hospital
outpatient prospective payment system, effectively mandating reduction in fees for certain
services. Pub. L. No. 109-171, § 5102(b), 120 Stat. 4, 39-40 (2006). See GAO, Medicare:
Trends in Fees, Utilization, and Expenditures for Imaging Services before and after
Implementation of the Deficit Reduction Act of 2005, GAO-08-1102R (Washington, D.C.:
September 26, 2008).




Page 13                   GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Figure 4: Self-Referred and Non-Self-Referred MRI Expenditures, 2004-2010




Note: Expenditures include those services we could determine were performed in a physician office
or IDTF setting. This included global claims where the performance and interpretation of the
advanced imaging service were billed together—and claims where the performance of the advanced
imaging service was billed separately from the interpretation of the image. We excluded expenditures
for claims where the interpretation of the exam was billed separately because this service may have
been performed in another setting, such as a hospital outpatient department.


Relative to 2004, expenditures for both self-referred and non-self-referred
CT services have grown through 2010, but the increase was larger for
self-referred CT services (see fig. 5). Specifically, expenditures for 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.




Page 14                      GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                             Figure 5: Self-Referred and Non-Self-Referred CT Expenditures, 2004-2010




                             Note: Expenditures include those services we could determine were performed in a physician office
                             or IDTF setting. This included global claims where the performance and interpretation of the
                             advanced imaging service were billed together—and claims where the performance of the advanced
                             imaging service was billed separately from the interpretation of the image. We excluded expenditures
                             for claims where the interpretation of the exam was billed separately because this service may have
                             been performed in another setting, such as a hospital outpatient department.



Share of Self-Referred MRI   Because the self-referred advanced imaging services grew at a greater
and CT Services Increased    rate than non-self-referred services from 2004 through 2010, the
Overall and across All       proportion of MRI and CT services that were self-referred increased
                             during that time period. Specifically, the proportion of MRI services that
Major Referring Provider     were self-referred increased from 16.3 percent in 2004 to 24.2 percent in
Specialties                  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




                             Page 15                      GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                            we studied. 25 For further information on self-referral rates across provider
                            specialties, see appendix III.


                            We found that, in 2010, providers that self-referred beneficiaries for MRI
Self-Referring              and CT services referred substantially more of those services than did
Providers Referred          providers who did not self-refer these services, even after we accounted
                            for differences in practice size, specialty, geography, and patient
Substantially More          characteristics. We also found that the year after providers purchased
Advanced Imaging            MRI or CT equipment, leased MRI or CT equipment, or joined a group
Services on Average         practice that self-referred, they increased the number of services they
                            referred when compared with providers that did not begin to self-refer
Than Did Other              advanced imaging services.
Providers
Self-Referring Providers    In 2010, self-referring providers referred substantially more advanced
Referred Substantially      imaging services than providers who did not self-refer such services that
More MRI and CT Services    year. 26 Specifically, providers that self-referred at least one beneficiary for
                            an MRI service in 2010 averaged 36.4 MRI referrals, compared with an
Than Other Providers,
                            average of 14.4 MRI referrals for non-self-referrers. Similarly, providers
Regardless of Practice or   that self-referred at least one beneficiary for a CT service in 2010
Patient Characteristics     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


                            25
                              We included specialties that referred at least 1.5 percent of self-referred MRI or CT
                            services in 2004 and 2010. Sixteen provider specialties met these criteria for MRI
                            services, CT services, or both types of services. These specialties were Cardiology,
                            Family Practice, Gastroenterology, General Surgery, Hematology/Oncology, Internal
                            Medicine, Medical Oncology, Neurology, Neurosurgery, Physical Medicine, Pulmonary
                            Disease, Orthopedic Surgery, Otolaryngology, Radiation Oncology, Rheumatology, and
                            Urology.
                            26
                              As discussed earlier, the scope of services included in this analysis is broader than our
                            analysis of self-referred services. Specifically, this analysis includes settings other than a
                            physician office or IDTF, such as a hospital. We did this to fully capture the advanced
                            imaging referral patterns of self-referring and non-self-referring providers to ensure that
                            the comparison between the groups was comparable.




                            Page 16                     GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                resulted from how the services are provided, and we recently
                recommended that CMS expand these efforts. 27

                Differences in advanced imaging referrals between self-referring and non-
                self-referring providers persisted after accounting for differences in
                practice size, specialty, geography, or patient characteristics.


Practice Size   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.




                27
                  CMS has a long-standing policy called a multiple procedure payment reduction that is
                meant to avoid duplicate payments for expenses that are incurred only once when two or
                more surgical services are furnished together by the same physician during the same
                operating session. CMS expanded the multiple procedure payment reduction to include
                certain imaging services in 2006. Medicare Program: Revisions to Payment Policies
                Under the Physician Fee Schedule for Calendar Year 2006, 70 Fed. Reg. 70116 (Nov. 21,
                2005). In our 2009 report, we recommended that CMS expand its efforts to ensure that
                fees for services paid under the physician fee schedule reflect efficiencies that occur when
                services are performed by the same physician to the same beneficiary on the same day.
                See GAO, Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved
                When Services Are Provided Together, GAO-09-647 (Washington, D.C.: July 31, 2009). In
                2012, CMS expanded its multiple procedure payment reduction policy by applying a
                reduction to the PC of imaging services that are provided during the same session, to the
                same patient, on the same day; the agency had previously applied the multiple procedure
                payment reduction to only the TC of imaging services that met the same criteria.




                Page 17                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Table 1: Average Number of MRI and CT Services Referred by Non-Self-Referring and Self-Referring Providers, 2010

                                          MRI services                                                        CT services
Number of unique                                       Relative rate of                                                    Relative rate of
Medicare FFS                                             self-referring                                                     self-referring
             a                                                        b                                                                   b
beneficiaries        Non-self-referring Self-referring     providers                     Non-self-referring Self-referring     providers
1 to 50                             3.2                  5.7                       1.8                  5.2                7.1                  1.4
51 to 100                           7.2                12.3                        1.7                13.7               19.0                   1.4
101 to 250                        13.0                 24.0                        1.8                26.7               40.8                   1.5
251 to 500                        20.4                 42.8                        2.1                48.7               78.8                   1.6
>500                              29.7                 71.1                        2.4                89.9              151.0                   1.7
                                          Source: GAO analysis of Medicare data.

                                          Notes: Providers were considered to be self-referring if they self-referred beneficiaries for at least one
                                          service. Providers with a specialty of radiology or independent diagnostic testing facility (IDTF) were
                                          removed from this analysis because they should not be able to self-refer services. Additionally,
                                          because emergency medicine providers generally did not practice in provider offices, they were
                                          removed from our analysis. Of the 419,884 providers that referred at least one beneficiary for an MRI
                                          service in 2010, 35,950 were self-referring and 383,934 were non-self-referring. Of the 477,547
                                          providers that referred at least one beneficiary for a CT service in 2010, 39,913 were self-referring
                                          and 437,634 were non-self-referring.
                                          a
                                           The number of unique Medicare FFS beneficiaries refers to the number of unique beneficiaries that
                                          received at least one service from a provider.
                                          b
                                           The relative rate of self-referring providers refers to the factor by which the average number of
                                          services referred by self-referring providers is greater than the average number of services referred
                                          by non-self-referring providers. For example, if the relative rate of self-referring providers is equal to
                                          3, it would mean that, on average, self-referrers refer 3 times as many advanced imaging services as
                                          do non-self-referrers.



Specialty                                 Self-referring providers generally referred more MRI and CT services than
                                          did non-self-referring providers, regardless of differences in specialties.
                                          Self-referring providers were more likely than non-self-referring providers
                                          to belong to specialties that had a greater-than-average number of
                                          referrals per physician for advanced imaging services in 2010. However,
                                          for the 7 specialties that had at least 1,000 providers that self-referred
                                          beneficiaries for MRI services, self-referring providers generally averaged
                                          more referrals for MRI services than did non-self-referring providers,
                                          regardless of practice size. 28 Similarly, self-referring providers in 9 of the


                                          28
                                             We grouped providers of each specialty with at least 1,000 self-referring providers into
                                          five provider-size categories: (1) fewer than 50 unique Medicare FFS patients; (2) 51-100
                                          unique Medicare FFS patients; (3) 101-250 unique Medicare FFS patients; (4) 251-500
                                          unique Medicare FFS patients; and (5) more than 500 unique Medicare FFS patients. The
                                          seven specialties that had at least 1,000 self-referring providers were Family Practice,
                                          Hematology/Oncology, Internal Medicine, Neurology, Nurse Practitioners, Orthopedic
                                          Surgeons, and Physician Assistants.




                                          Page 18                              GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
            13 specialties that had at least 1,000 self-referring CT providers generally
            referred more beneficiaries for CT services than non-self-referring
            providers, regardless of practice size. 29


Geography   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).




            29
              The nine specialties where self-referring providers referred more beneficiaries for CT
            services than non-self-referring providers across the majority of provider size categories
            were: Cardiology, Gastroenterology, General Surgery, Hematology/Oncology, Nurse
            Practitioners, Orthopedic Surgery, Otolaryngology, Urology, and Pulmonary Disease
            specialists. The four specialties where non-self-referring providers referred more
            beneficiaries for CT services, on average, than self-referring providers across the majority
            of provider size categories were Family Practice, Internal Medicine, Neurology, and
            Physician Assistants.




            Page 19                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Table 2: Average Number of MRI and CT Services Referred by Non-Self-Referring and Self-Referring Providers in Urban and
Rural Locations, 2010

                                                 MRI services                                                 CT services
               Number of
               unique                                                  Relative rate of                                   Relative rate of
Geographic     Medicare FFS     Non-self-                                self-referring      Non-self-                     self-referring
                            a                                                         b                                                  b
designation    beneficiaries    referring    Self-referring                providers         referring     Self-referring     providers
Urban          1 to 50                3.3                    5.8                     1.8           5.4                   7.3                  1.4
               51 to 100              7.5                  12.4                      1.7          14.2                 19.4                   1.4
               101 to 250            13.5                  24.4                      1.8          27.2                 41.9                   1.5
               251 to 500            20.8                  43.9                      2.1          48.2                 80.8                   1.7
               >500                  29.5                  72.1                      2.4          86.5                151.5                   1.8
Rural          1 to 50                2.8                    4.7                     1.7           4.3                   5.2                  1.2
               51 to 100              5.7                  10.2                      1.8          10.4                 12.7                   1.2
               101 to 250            10.5                  20.1                      1.9          23.8                 30.3                   1.3
               251 to 500            19.0                  34.6                      1.8          51.3                 64.7                   1.3
               >500                  30.5                  65.4                      2.1         102.8                147.8                   1.4
                                        Source: GAO analysis of Medicare data.

                                        Notes: Providers were considered to be self-referring if they self-referred beneficiaries for at least one
                                        service. Providers with a specialty of radiology or independent diagnostic testing facility (IDTF) were
                                        removed from this analysis because they should not be able to self-refer services. Additionally,
                                        because emergency medicine providers generally did not practice in provider offices, they were
                                        removed from our analysis. Of the 419,884 providers that referred at least one beneficiary for an MRI
                                        service in 2010, 35,950 were self-referring and 383,934 were non-self-referring. Of the 477,547
                                        providers that referred at least one beneficiary for a CT service in 2010, 39,913 were self-referring
                                        and 437,634 were non-self-referring.
                                        a
                                         The number of unique Medicare FFS beneficiaries refers to the number of unique beneficiaries that
                                        received at least one service from a provider.
                                        b
                                         The relative rate of self-referring providers refers to the factor by which the average number of
                                        services referred by self-referring providers is greater than the average number of services referred
                                        by non-self-referring providers. For example, if the relative rate of self-referring providers is equal to
                                        3, it would mean that, on average, self-referrers refer 3 times as many advanced imaging services as
                                        do non-self-referrers.



Patient Characteristics                 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.



                                        Page 20                              GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Table 3: Patient Characteristics of Non-Self-Referring and Self-Referring MRI and CT Providers, 2010

                                                               MRI services                                        CT services
Patient characteristics, average                 Non-self-referring               Self-referring      Non-self-referring          Self-referring
Average age (years)                                                      70                  71                           70                    71
Percent female                                                           59                  60                           59                    57
                     a
Average risk score                                                    1.53                 1.40                        1.57                  1.44
                                         Source: GAO analysis of Medicare data.
                                         a
                                          A beneficiary’s risk score is a proxy for health status and is equivalent to the ratio of expected health
                                         care expenditures for that beneficiary under Medicare FFS relative to the average health care
                                         expenditures for all Medicare FFS beneficiaries. For example, a beneficiary with a risk score of 1.05
                                         would have expected expenditures that were 5 percent higher than an average Medicare FFS
                                         beneficiary. The risk scores presented are normalized using the FFS normalization factor of 1.041
                                         that CMS used to normalize risk scores in 2010. Normalization keeps the average Medicare FFS risk
                                         score constant at 1.0 over time.



Providers’ Referrals for                 Our analysis indicated that providers’ referrals for MRI and CT services
MRI and CT Services                      substantially increased the year after they began to self-refer. In our
Substantially Increased the              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
Year after They Began to                 self-refer in 2009 and 2010—to providers that did not change their self-
Self-Refer                               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.)




                                         Page 21                              GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Table 4: Change in Average Number of MRI and CT Services Referred, 2008 and 2010

                                       MRI Services                                                          CT Services
                                   Average      Average                                                  Average       Average
                      Number           2008         2010            Percentage             Number            2008          2010    Percentage
Provider                    of referred MRI referred MRI               change,                   of   referred CT   referred CT       change,
referral type        providers     services     services           2008 to 2010           providers      services      services   2008 to 2010
Switchers               2,803          25.1              42.0                      67.3       3,329          56.3          93.9              66.7
Non-self-referrers    199,102          20.6              19.2                      -6.8    241,097           59.1          58.1              -1.7
Self-referrers         17,753          47.0              45.4                      -3.4     19,756           89.6          87.3              -2.6
                                          Source: GAO analysis of Medicare data.

                                          Note: We define switchers as those providers that did not self-refer in 2007 or 2008, but did self-refer
                                          in 2009 and 2010.


                                          The increase in MRI and CT referrals for providers that began 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
                                          status. 30 Providers that remained in the same practice from 2008 through
                                          2010, but began self-referring in 2009 had a 21.0 percent increase in MRI
                                          referrals and a 14.4 percent increase in CT referrals.


                                          On the basis of our estimates, Medicare spent about $109 million more in
Higher Use of                             2010 than the program would have if self-referring providers referred
Advanced Imaging                          advanced imaging services at the same rate as non-self-referring
                                          providers of the same specialty and provider size (see fig. 6). This
Services by Self-                         additional spending can be attributed to the fact that self-referring
Referring Providers                       providers referred over 400,000 more MRI and CT services in 2010 than
Results in Substantial                    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
Costs to Medicare                         additional referrals for MRI services and 283,725 additional referrals for
                                          CT services.



                                          30
                                            We considered a provider to have remained in the same practice if the entity to which
                                          they most commonly referred MRI or CT services remained the same from 2007 through
                                          2010.




                                          Page 22                              GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Figure 6: Potential Savings under Alternative Scenario for Self-Referring Providers,
2010




Note: We included imaging expenditures for those specialties that had at least 1,000 self-referring
providers. Overall, specialties that met these criteria referred approximately 66 percent of self-
referred MRI services and approximately 81 percent of self-referred CT services. Under the
alternative scenario, we calculated expenditures for services as if self-referring providers referred MRI
and CT services at the same rate as non-self-referring providers of the same specialty and practice
size in 2010.


The additional Medicare imaging expenditures attributed to self-referring
providers is likely higher than $109 million in 2010. 31 This is because a
significant portion of self-referring providers are not included in this
estimate. Specifically, we limited our analysis to those specialties that had
at least 1,000 self-referring providers. Approximately 34 percent of the


31
  We limited our analysis to expenditures directly related to imaging services. There may
be additional costs associated with the increased use of advanced imaging services by
self-referring providers, if these imaging services reveal abnormalities that have no clinical
relevance or result in unnecessary surgeries. In contrast, increased use of advanced
imaging may partially offset some of these direct imaging costs if increased use led to the
early detection of disease and resulted in less-invasive and less-costly treatments.




Page 23                        GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
              providers who self-referred beneficiaries for MRI services and 19 percent
              of the providers who self-referred beneficiaries for CT services belonged
              to a specialty other than those that met the 1,000 self-referring providers
              criteria.


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


              Page 24                GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                      advanced imaging services referred by self-referring physicians in 2010
                      were also performed and interpreted by the same physician. Certain
                      efficiencies may be gained when the same provider orders, performs, and
                      interprets an advanced imaging service, such as reviewing a patient’s
                      clinical history only once. MedPAC recommended in 2011 that CMS
                      should reduce its payments for advanced imaging services in which the
                      same provider refers and performs the service, to account for efficiencies
                      that are realized in these circumstances. This is consistent with previous
                      efforts by CMS to reduce fees for services paid under the physician fee
                      schedule when efficiencies are realized and with our previous
                      recommendation that CMS expand these efforts. Third, if CMS were able
                      to easily identify self-referred services, the agency may be better
                      positioned to implement an approach that ensures the appropriateness of
                      advanced imaging services that Medicare beneficiaries receive—beyond
                      examining the feasibility of such methods, as we recommended in our
                      2008 report. Approaches for managing advanced imaging utilization could
                      be “front-end” or used before CMS issues payment, such as prior
                      authorization. CMS could also explore back-end approaches used after
                      CMS issues payment, such as targeted audits of self-referring providers
                      that refer a high volume of services.


                      In order to improve CMS’s ability to identify self-referred advanced
Recommendations for   imaging services and help CMS address the increases in these services,
Executive Action      we recommend that the Administrator of CMS take the following three
                      actions:

                      1. Insert a self-referral flag on its Medicare Part B claims form and
                         require providers to indicate whether the advanced imaging services
                         for which a provider bills Medicare are self-referred or not.
                      2. Determine and implement a payment reduction for self-referred
                         advanced imaging services to recognize efficiencies when the same
                         provider refers and performs a service.
                      3. Determine and implement an approach to ensure the appropriateness
                         of advanced imaging services referred by self-referring providers.

                      HHS reviewed a draft of this report and provided written comments, which
Agency Comments       are reprinted in appendix IV. In its comments, HHS stated that it would
and Our Evaluation    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



                      Page 25               GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
than non-self-referring providers or our conclusion that financial
incentives for self-referring providers may be a major factor driving the
increase in referrals for advanced imaging services.

HHS noted that it would consider our recommendation that CMS
determine and implement an approach to ensure the appropriateness of
advanced imaging services referred by self-referring providers. According
to HHS, CMS would consider this recommendation when refining its
medical review strategy for advanced imaging services. HHS also
indicated that CMS does not have statutory authority to implement some
of the approaches discussed in the report. We are pleased that CMS
plans to consider this recommendation and note that we did not identify a
specific approach, having identified several examples in our report of both
front-end and back-end approaches to managing utilization of advanced
imaging services. As we reported, CMS could explore back-end
approaches used after CMS issues payment, such as targeted audits of
self-referring providers. CMS could also explore other approaches the
agency determines are within its statutory authority. Further, if deemed
necessary, CMS could seek legislative authority to implement promising
approaches to managing advanced imaging utilization.

HHS did not concur with our recommendation that CMS insert a 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.



Page 26                GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
HHS also did not concur with our recommendation that CMS determine
and implement a payment reduction for self-referred advanced imaging
services to recognize efficiencies when the same provider refers and
performs a service. According to HHS, CMS’s multiple procedure
payment reduction already captures efficiencies inherent in providing
multiple advanced imaging services by the same physician or group
practice during the same session. CMS also noted that a further payment
reduction may reduce, but not eliminate, the underlying financial incentive
to self-refer advanced imaging services and may cause providers to refer
more services, in an effort to maintain their income. CMS also noted that
providers in a group practice could easily avoid this reduction by having
one physician order the service while another furnishes the service.
According to HHS, CMS also questions its statutory authority to impose
the payment reduction for the subset of physicians who self-refer, citing a
prohibition on paying a differential by physician specialty for the same
service. Our report shows that self-referring providers generally referred
more MRI and CT services, regardless of differences in specialties, and
CMS did not indicate how this recommendation would implicate the
prohibition on paying a differential by specialty. Additionally, while HHS
cites the multiple procedure payment reduction as a means to address
certain efficiencies in the delivery of advanced imaging services, these
are not the efficiencies targeted by our recommendation. Instead, as
noted in our report, our recommended payment reduction would capture
those efficiencies gained when the same provider orders and performs an
advanced imaging service. Such efficiencies could be captured in a
single—rather than multiple—advanced imaging service. This
recommendation is also consistent with a 2011 MedPAC
recommendation. As noted in our report, this payment reduction would
affect about 10 percent of advanced imaging services referred by 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


Page 27                GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
in 2010 alone. Given these findings, we continue to believe that CMS
should take steps to monitor the utilization of advanced imaging services
and ensure that the services for which Medicare pays are appropriate.

HHS also provided technical comments that we incorporated as
appropriate.


As agreed with your offices, unless you publicly announce the contents of
this report earlier, we plan no further distribution until 30 days from the
report date. At that time, we will send copies to the Secretary of HHS,
interested congressional committees, and others. In addition, the report
will be available at no charge on the GAO website at http://www.gao.gov.

If you or your staff has any questions about this report, please contact me
at (202) 512-7114 or cosgrovej@gao.gov. Contact points for our Offices
of Congressional Relations and Public Affairs may be found on the last
page of this report. GAO staff who made major contributions to this report
are listed in appendix V.




James C. Cosgrove
Director, Health Care




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

The Honorable Max Baucus
Chairman
Committee on Finance
United States Senate

The Honorable Chuck Grassley
Ranking Member
Committee on the Judiciary
United States Senate

The Honorable Henry A. Waxman
Ranking Member
Committee on Energy and Commerce
House of Representatives

The Honorable Sander Levin
Ranking Member
Committee on Ways and Means
House of Representatives

The Honorable Pete Stark
Ranking Member
Subcommittee on Health
Committee on Ways and Means
House of Representatives




Page 29              GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix I: Scope and Methods
             Appendix I: Scope and Methods




             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. 1 Each service or service component is
             identified on a claim by its Healthcare Common Procedure Coding
             System (HCPCS) code, which the Centers for Medicare & Medicaid
             Services (CMS) assigns to products, supplies, and services for billing
             purposes. HCPCS codes are also categorized by CMS using the
             Berenson-Eggers Type of Service (BETOS) categorization system, which
             assigns HCPCS to broad service categories. 2

             We limited our universe of services and service components for our study
             to those for magnetic resonance imaging (MRI) and computed
             tomography (CT) services. We classified MRI and CT services and
             service components as those with HCPCS codes included in a BETOS
             category where the first two digits were equal to “I2”, defined as advanced
             imaging services. We further limited our universe to only those MRI and
             CT services that were considered designated health services—services
             for which, in the absence of an exception, a physician may not make a
             referral to furnish to an entity with which he has a financial relationship




             1
              Services can have technical components (TC) and professional components (PC). The
             TC of a service is intended to cover the performance of a test, including the cost of
             equipment, supplies, and nonphysician staff. In addition, services have a PC, which for
             advanced imaging services is intended to cover the physician’s time in interpreting an
             image and writing a report on the findings. The TC and PC of a service can be billed
             together on the same claim—called a global claim—or separately.
             2
              The BETOS categorization system was developed by CMS primarily for analyzing the
             growth in Medicare expenditures by broad categories. Each billing code is assigned to
             only one BETOS category.




             Page 30                   GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix I: Scope and Methods




without implicating the Stark law. 3 Annually, CMS publishes a list of
designated health services as part of the physician fee schedule. We also
restricted our universe to those HCPCS codes that involved the
performance of an advanced imaging service, which can be billed with or
separately from the interpretation of a MRI or CT imaging service. We
identified 125 HCPCS codes that met these criteria.

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. 4 In order to identify the associated TINs for the referring and
performing providers, we created a crosswalk of the performing provider’s
unique physician identification number or national provider identifier (NPI)




3
 Compliance with the physician self-referral law, commonly known as the Stark law, is
outside the scope of this report. The Stark law prohibits physicians from making referrals
for certain designated health services paid for by Medicare, to entities with which the
physicians or immediate family members have a financial relationship, unless the
arrangement complies with a specified exception, such as in-office ancillary services.
42 U.S.C. § 1395nn(b)(2).
4
 Some providers may be associated with TINs with which they do not have a direct or
indirect financial relationship and thus would not have the same incentives as other 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.




Page 31                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix I: Scope and Methods




to the TIN that appeared on the claim and used that to assign TINs to the
referring and performing providers. 5

We considered global services and separately-billed TCs to be 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



5
 The final rule implementing the Health Insurance Portability and Accountability Act
established the standard for a unique health identifier for health care providers for use in
the health care system and announced the adoption of the NPI as that standard. HIPAA
Administrative Simplification: Standard Unique Health Identifier for Health Care Providers,
69 Fed. Reg. 2424 (Jan. 23, 2004) (adding a new subpart D to 45 C.F.R. part 162).
Performing physicians were required to include their NPI on any claim submitted to
Medicare as of May 23, 2008. Prior to implementation of the NPI, Medicare required
providers to submit another type of unique provider identifier called the unique physician
identification number.

Our methodology for identifying self-referred services was similar to the methodology used
by MedPAC for its study of the effect of physician self-referral on use of imaging services
within an episode. See Medicare Payment Advisory Commission: Report to the Congress:
Improving Incentives in the Medicare Program (Washington, DC, June 2009).




Page 32                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix I: Scope and Methods




advanced imaging services provided to Medicare FFS beneficiaries were
performed in a physician office or IDTF. To calculate the number of
Medicare beneficiaries from 2004 through 2010 needed for per
beneficiary calculations, we used the Denominator File, a database that
contains enrollment information for all Medicare beneficiaries enrolled in a
given year. Because radiologists and IDTFs are limited in their ability to
generate referrals for advanced imaging services, we removed services
referred by an IDTF or radiologist.

To determine the extent to which the provision of advanced imaging
services differs for providers who self-refer when compared with other
providers, we first classified providers on the basis of the type of referrals
they made. Specifically, we classified providers as self-referring if they
self-referred at least one beneficiary for an advanced imaging service. 6
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



6
 Providers in our analysis that could self-refer include primarily physicians, but also could
include other providers, such as nurse practitioners and physician assistants.




Page 33                     GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix I: Scope and Methods




using 100 percent of providers’ claims from the Medicare Part B Carrier
File. We defined urban settings as metropolitan statistical areas, a
geographic entity defined by the Office of Management and Budget as a
core urban area of 50,000 or more population. We used rural-urban
commuting area codes—a Census tract-based classification scheme that
utilizes the standard Bureau of Census Urbanized Area and Urban
Cluster definitions in combination with work-commuting information to
characterize all of the nation’s Census tracts regarding their rural and
urban status—to identify providers as practicing in metropolitan statistical
areas. 7 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.

Second, we determined the extent to which the number of MRI and CT
referrals made by providers changed after they began to self-refer.
Specifically, we identified a group of providers that began to self-refer
advanced imaging services in 2009. 8 We refer to this group of providers
as “switchers” because it represents providers that did not self-refer in
2007 or 2008, but did self-refer in 2009 and 2010. We then calculated the
change in the number of MRI or CT referrals made from 2008 (i.e., the



7
 We considered a location with a rural-urban commuting area code of 1.0, 1.1, 2.0, 2.1, or
3.0 to be a metropolitan statistical area.
8
 We used 4 years of experience (2007 through 2010) to categorize providers even though
we compared referrals in 2008 to 2010 because we wanted to ensure that providers that
began self-referring in 2009 did not self-refer for at least the 2 prior years.




Page 34                   GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix I: Scope and Methods




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.




Page 35                  GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix I: Scope and Methods




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.




Page 36                  GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix II: Select Implemented or Proposed
                                       Appendix II: Select Implemented or Proposed
                                       Policies Designed to Address Self-Referral or
                                       the Utilization of Advanced Imaging Services


Policies Designed to Address Self-Referral or
the Utilization of Advanced Imaging Services

Policy approach                        Description and examples of policies
Informing Beneficiaries of Physician   Effective January 1, 2011, the Patient Protection and Affordable Care Act of 2010
Self-Referral                          (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
                                                                a
                                       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
                                                                  b
                                       implementation of PPACA.
Mandating Accreditation of Staff       In 2008, the Centers for Medicare and Medicaid (CMS) proposed, but did not adopt, a
Performing MRI and CT Services         requirement that provider office-based imaging practices enroll as independent diagnostic
                                                                 c
                                       testing facilities (IDTF). 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
                                                                                                         d
                                       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.
Improving Payment Accuracy             The Medicare Payment Advisory Commission (MedPAC) has noted that improving the
                                       payment accuracy of services could reduce the incentive to self-refer those services by
                                                                                 e
                                       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
                                                                                       f,g
                                       services on the same patient on the same day.
Reducing Payments for Physician        In its June 2010 report, MedPAC noted that reducing payments for physician self-referred
Self-Referred Services                 services could limit Medicare expenditures when self-referral occurs and reduce the
                                                                                                        h
                                       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.
Ensuring Services are Clinically       In addition to a similar recommendation from MedPAC, we have recommended CMS
Appropriate                            consider expanding its front-end management capabilities, such as prior authorization—
                                       an approach whereby providers must seek some sort of approval before ordering an
                                                                    i,j
                                       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
                                                                                           k,l
                                       for medical review by recovery audit contractors.




                                       Page 37                    GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                                           Appendix II: Select Implemented or Proposed
                                           Policies Designed to Address Self-Referral or
                                           the Utilization of Advanced Imaging Services




Policy approach                            Description and examples of policies
Prohibiting Different Types of Physician   CMS has prohibited different types of physician self-referral that the agency deemed
Self-Referral                              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
                                                                                            m
                                           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
                                                          n
                                           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
                                                                              o
                                           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
                                                                                                                                   p
                                           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.
                                                                                                                                            q
                                           Maryland prohibits providers from making self-referrals for certain MRI and CT services.
                                           Source: GAO analysis of select self-referral regulations and proposals.
                                           a
                                               Pub. L. No. 11-148, § 6003, 124 Stat. 199, 697.
                                           b
                                            American College of Radiology, State-by-State Comparison of Physician Self-Referral Laws,
                                           accessed July 26, 2010.
                                           c
                                           Medicare Program; Revisions to Payment Policies Under the Physician Fee Schedule and Other
                                           Revisions to Part B for CY 2009, 73 Fed. Reg. 38502, 28533 (July 7, 2008).
                                           d
                                               Pub. L. No. 110-275, §135(a), 122 Stat. 2494, 2532.
                                           e
                                            See Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in Medicare
                                           (Washington, D.C.: June 2010).
                                           f
                                           See GAO, Medicare Physician Payments: Fees Could Better Reflect Efficiencies Achieved When
                                           Services Are Provided Together, GAO-09-647 (Washington, D.C.: July 31, 2009).
                                           g
                                            For instance, in 2006, CMS began reducing the payment for the technical component of the lower-
                                           priced imaging service by 25 percent when multiple services are performed on contiguous body parts
                                           during the same session. See Medicare Program: Revisions to Payment Policies Under the Physician
                                           Fee Schedule for Calendar Year 2006, 70 Fed. Reg. 70116 (Nov. 21, 2005). PPACA increased the
                                           payment reduction from 25 percent to 50 percent beginning July 1, 2010. Pub. L. No. 111-148,
                                           §3135(b), 124 Stat. 119, 437. CMS also expanded this policy beginning January 1, 2012 by reducing
                                           payments for the lower-priced professional component of advanced imaging services by 25 percent
                                           when two or more services are furnished by the same physician to the same patient, in the same
                                           session, on the same day.
                                           h
                                            See Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in Medicare
                                           (Washington, D.C.: June 2010).
                                           i
                                             See Medicare Payment Advisory Commission, Report to the Congress: Medicare and the Healthcare
                                           Delivery System (Washington, D.C.: June 2011).
                                           j
                                            See GAO, Medicare Part B Imaging Services: Rapid Spending Growth and Shift to Physician Offices
                                           Indicate Need for CMS to Consider Additional Management Practices, GAO-08-452 (Washington,
                                           D.C.: June 13, 2008).
                                           k
                                             Donald H. Romano, “Self-Referral of Imaging and Increased Utilization: Some Practical Perspectives
                                           on Tackling the Dilemma,” Journal of the American College of Radiology (2009): 773-779.




                                           Page 38                                 GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix II: Select Implemented or Proposed
Policies Designed to Address Self-Referral or
the Utilization of Advanced Imaging Services




l
 The stated goal of the recovery audit program is to identify improper payments for services provided
to Medicare beneficiaries. Improper payments may be overpayments or underpayments.
Overpayments can occur when health care providers submit claims that do not meet Medicare’s
coding or medical necessity policies.
m
 Medicare Program; Changes to Disclosure of Physician Ownership in Hospitals and Physician Self-
Referral Rules, 73 Fed. Reg. 48434, 48713 (Aug. 19, 2008).
n
Medicare Program; Changes to Disclosure of Physician Ownership in Hospitals and Physician Self-
Referral Rules, 73 Fed. Reg. 48434, 48719 (Aug. 18, 2008).
o
Medicare Program; Proposed Revisions to Payment Policies Under the Physician Fee Schedule, and
Other Part B Payment Policies for CY 2008, 72 Fed. Reg. 38122, 38181 (July 12, 2007).
p
 See Medicare Payment Advisory Commission, Report to Congress: Aligning Incentives in Medicare
(Washington, D.C.: June 2010).
q
    Md. Code Ann., Health Occ. § 1-301(k)(2).




Page 39                         GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix III: Self-Referral of MRI and CT
               Appendix III: Self-Referral of MRI and CT
               Services, by Provider Specialty, in 2004 and
               2010


Services, by Provider Specialty, in 2004 and
2010
               The proportion of MRI services and CT services that were self-referred
               increased from 2004 through 2010 for all provider specialties we
               examined for our study. We examined all provider specialties that
               performed a minimum proportion of either self-referred MRI or CT
               services in 2004 and 2010. 1 While this increase across provider
               specialties is consistent with the overall trend of increased self-referral,
               the increases varied among provider specialties. For MRI services,
               increases in the self-referral rate for provider specialties ranged from
               about 4 percentage points (Internal Medicine) to about 19 percentage
               points for Hematology/Oncology. Similarly, for CT services, increases in
               the self-referral rates for provider specialties ranged from about
               2 percentage points (Internal Medicine) to over 38 percentage points
               (Radiation Oncology). (see table 5).




               1
                Specifically, for MRI and CT services, we examined provider specialties that referred at
               least 1.5 percent of the MRI or CT services that were self-referred in both 2004 and 2010.
               Specialties we examined referred about 86 percent of self-referred MRI services in 2004
               and about 81 percent of self-referred MRI services in 2010. These specialties referred
               about 82 percent of self-referred CT services in 2004 and about 88 percent of self-referred
               CT services in 2010.




               Page 40                     GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
                                          Appendix III: Self-Referral of MRI and CT
                                          Services, by Provider Specialty, in 2004 and
                                          2010




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

                                                                      Change in                                                      Change in
                                                                MRI Self-referral                                               CT self-referral
                       Percentage of Percentage of                     rate from          Percentage of    Percentage of              rate from
                        MRI services MRI services                  2004 to 2010             CT services      CT services          2004 to 2010
                        self-referred self-referred                 (percentage            self-referred    self-referred          (percentage
          a
Specialty                     in 2004       in 2010                      points)                 in 2004          in 2010               points)
Cardiology                        n/a                 n/a                           n/a          33.5 %              55.4%                    21.9
Family Practice                  10.8               15.7                            4.8            25.0                27.6                    2.6
Gastroenterology                  n/a                 n/a                           n/a            18.5                24.0                    5.5
General Surgery                   n/a                 n/a                           n/a            21.5                24.8                    3.3
Hematology/Oncology              15.3               34.3                           19.0            39.8                48.7                    9.0
Internal Medicine                12.1               16.1                            4.0            27.2                29.0                    1.8
Medical Oncology                  n/a                 n/a                           n/a            39.7                51.7                   12.0
Neurology                        19.7               28.9                            9.1              n/a                 n/a                   n/a
Neurosurgery                     20.5               26.1                            5.6              n/a                 n/a                   n/a
Physical Medicine                22.7               29.4                            6.7              n/a                 n/a                   n/a
Orthopedic Surgery               27.1               38.4                           11.4              n/a                 n/a                   n/a
Otolaryngology                    n/a                 n/a                           n/a            21.3                32.4                   11.1
Pulmonary Disease                 n/a                 n/a                           n/a            27.8                29.7                    1.9
Radiation Oncology                n/a                 n/a                           n/a            37.7                76.1                   38.4
Rheumatology                     29.4               38.6                            9.2              n/a                 n/a                   n/a
Urology                           n/a                 n/a                           n/a            27.8                51.2                   23.4
                                          Source: GAO analysis of Medicare data.

                                          Notes: “n/a” indicates that the provider specialty referred less than1.5 percent of all self-referred
                                          services, for MRI or CT services, in either 2004 or 2010. If a provider specialty did not refer at least
                                          1.5 percent of all self-referred services for both 2004 and 2010 for either MRI or CT services, it is not
                                          included in the table.
                                          a
                                           Provider specialties are included in Medicare claims data and are self-reported.




                                          Page 41                              GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix IV: Comments from the
             Appendix IV: Comments from the Department
             of Health and Human Services



Department of Health and Human Services




             Page 42                  GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix IV: Comments from the Department
of Health and Human Services




Page 43                  GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix IV: Comments from the Department
of Health and Human Services




Page 44                  GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix IV: Comments from the Department
of Health and Human Services




Page 45                  GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
Appendix V: GAO Contact and Staff
                  Appendix V: GAO Contact and Staff
                  Acknowledgments



Acknowledgments

                  James C. Cosgrove, (202) 512-7114 or cosgrovej@gao.gov
GAO Contact
                  In addition to the contact named above, Jessica Farb, Assistant Director;
Staff             Thomas Walke, Assistant Director; Manuel Buentello; Krister Friday;
Acknowledgments   Gregory Giusto; Brian O’Donnell; and Daniel Ries made key contributions
                  to this report.




(290864)
                  Page 46                   GAO-12-966 Medicare Self-Referral of Advanced Imaging Services
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