In a Congress blog published earlier this month entitled “Reform the IOAS self-referral exemption,” the authors drew an unsupported connection between expected Part B premium increases for many Medicare beneficiaries and current rules that exempt certain in-office services from physician self-referral restrictions. Contrary to the assertions conveyed in the earlier blog, growth in the use of these services is not causing the projected increase in Medicare Part B spending that is helping to produce the premium increases.  In fact, any steps to decrease their use in physician offices will likely cause more services to be provided in higher-cost facility-based settings, which will cause Part B spending growth to rise even more rapidly. 

Last year, the American Medical Association (AMA) contracted with an independent actuarial firm, Milliman Inc., to examine Medicare claims for several types of services that were the subject of scrutiny in the GAO report mentioned by the authors.  These services included advanced imaging, intensity-modulated radiation therapy, physical therapy, and pathology or laboratory services. This analysis covered a longer period of time and included more recent data (2008 to 2012) than the GAO report. 

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In short, Medicare physician claims data simply do not support the argument that physician self-referral encourages inappropriate utilization of services or increased spending. 

Five-year annualized utilization and spending trends for these services generally show declining or even negative growth rates in office settings and, for most, the downward trend was even more remarkable in the last 2 years studied—2011 and 2012.   

In addition, the per-unit costs of these ancillary services are generally less when delivered in the physician office than in the hospital.  Medicare payments in 2014 for advanced imaging services, for example, were 36 to 53 percent higher in the hospital outpatient department than in an office. 

Further, a relatively small proportion of these services, whether referred or self-referred, are provided in physician offices.  For outpatient physical therapy services, physician offices account for less than 20 percent of the services provided. 

There is a real risk that policies intended to preclude or discourage physician investment in ancillary services could backfire by accelerating their movement out of physicians’ offices where Medicare and its beneficiaries often pay less than when the identical services are provided in the hospital.  Further, cutting payments for these services or targeting them for referral restrictions would disrupt multispecialty practice models, discourage the short delivery system innovations envisioned when Congress pass the Medicare Access and CHIP Reauthorization Act, and reduce continuity of care for Medicare beneficiaries with no discernible benefit to the program.

Gurman is president-elect of the American Medical Association.