New Legislation Seeks to Curb Physician Referral-for-Profit

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ALEXANDRIA, VA, August 1, 2013 — Today Rep Jackie Speier (D-CA) introduced the Promoting Integrity in Medicare Act, which will remove physical therapy and other health care services from the in-office ancillary services (IOAS) exception from the federal Stark laws, also commonly known as self-referral. This effectively eliminates financial incentives from the physician referral process. The American Physical Therapy Association (APTA) and its partners in the Alliance for Integrity in Medicare, or AIM Coalition, strongly support this move to exclude these services from the IOAS exception.

The self-referral law generally prohibits physicians from referring Medicare patients to entities in which they have a financial interest. It seeks to ensure medical decisions are made in the best interest of the patient on the basis of quality, diagnostic capability, turnaround time, and cost without consideration of any financial gain that could be realized by the referring physician. Originally intended for same-day services such as x-rays and blood draws, the IOAS exception allows physicians to bill the Medicare program for procedures that are meant to be integral to the physician’s services and offered for patient convenience.

Unfortunately, using the exception in a manner not originally intended provides physicians incentive to refer patients for services that may not always be necessary or typically provided on the same day of an office visit. This not only increases utilization of services but also Medicare costs. Physical therapy services clearly do not meet the intent of the exception and self-referral by physicians has the potential to increase costs. Physicians and physical therapists have a longstanding professional relationship that serves patients well without the need for adverse financial ties or relationships.

A number of organizations and news sources have raised red flags about the misapplication of the IOAS exception, highlighting the fact that mounting evidence shows that the resulting financial incentives have encouraged physicians to expand their practices and increase the number of procedures they prescribe. Most recently, the Government Accountability Office (GAO), in 2 reports, revealed the results of studies it conducted to examine the clinical and economic impact of physician self-referral arrangements on the advanced diagnostic imaging and anatomic pathology areas of health service. These clearly showed that financial self-interest is driving patient referrals, leading to hundreds of millions of dollars in unnecessary treatments billed to Medicare and, ultimately, the American taxpayer.

In fact, GAO found that for advanced imaging "providers who self-referred made 400,000 more referrals for advanced imaging services than they would have if they were not self-referring." A third GAO report, on radiation oncology, is due out this week, while the last report in the scheduled series, which focuses on physical therapist services, is expected soon. According to the Congressional Budget Office, narrowing the IOAS exception could save the Medicare program at least $1.8 billion over the standard 10-year budget window.

The legislation introduced today will address this issue by removing physical therapy, advanced imaging, radiation oncology, and anatomic pathology from the IOAS exception. This will help decrease inappropriate utilization and overall Medicare costs, while helping to build a bridge to new payment systems currently being discussed in Congress. Moreover, the ability of physicians to order x-rays and routine clinical laboratory tests in order to diagnose and treat patients during office visits will not be affected, and patients will still have access to convenient and appropriate health care.

"APTA strongly supports all efforts to eliminate self-referral situations and relationships that compromise patient access and quality or add cost," said APTA President Paul A. Rockar Jr, PT, DPT, MS. "APTA has worked hard to reach a solution to close this loophole, and we are pleased to see this important legislation introduced."

The American Physical Therapy Association represents more than 85,000 physical therapists, physical therapist assistants, and students of physical therapy nationwide. Learn more about the conditions that physical therapists can treat, and find a physical therapist in your area at www.MoveForwardPT.com. Consumers are encouraged to follow us on Twitter (@moveforwardpt) and Facebook.

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