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Published on July 16, 2013

Contact: Julie Monzo
Phone: 847-832-7538
E-mail: jmonzo@cap.org

GAO Reports Physicians Who Self-Refer Anatomic Pathology Cost Medicare Millions

CAP Calls on Congress to Act Immediately

Northfield, IL—The College of American Pathologists today called attention to a new report from the Government Accountability Office (GAO) documenting millions of dollars in wasteful health care spending by physicians who self-refer anatomic pathology services, and called on Congress to take immediate action outlawing this business practice.

“GAO issued a report today with irrefutable evidence that physician self-referral is a national problem,” said CAP President-Elect Gene Herbek, MD, FCAP. “It contributes to widespread abuses, increased medical costs and over utilization, and it allows physicians to exploit a loophole that permits them to bill Medicare for certain additional services they provide to patients at the time of the office visit.̶

“However, this provision was never intended to protect self-referral of anatomic pathology services because unlike clinical laboratory services they can almost never be performed at the time of an office visit,” Herbek said.

The GAO study found that financial incentives for self-referring providers were likely “a major factor driving the increase in anatomic pathology referrals”, and in 2010, providers who self-referred made an estimated 918,000 more referrals for anatomic pathology services than they likely would have if they were not self referring. CMS estimated these additional referrals cost Medicare about $69 million in 2010.

While CAP applauded the GAO’s findings and call for action, CAP said it disagreed with some of the GAO’s recommendations for correcting the problem.

“The only correct course of action now is to remove anatomic pathology from the In-Office Ancillary Services (IOAS) exception as quickly as possible,” said CAP’s Gene Herbek. “There is no better way to protect patients and eliminate a wasteful loophole that lets physician entrepreneurs line their pockets without any added benefit or convenience for patients.

In fact, CAP believes the reverse is true. Self-referral of anatomic pathology leads to added inconvenience, increased testing procedures, and increased costs for patients, which is completely counter to the intent of the law. “We call on Congress to act on behalf of patients and their constituents and pass legislation to close this loophole,” Herbek said.

There is a mountain of research documenting wasteful Medicare spending by self-referring physicians. So much that the overwhelming evidence compelled a diverse group of leading patient and health policy groups such as the Simpson-Bowles Commission, AARP, the New England Journal of Medicine, and the Bi-Partisan Policy Group to call for tighter restrictions and closing the loophole.

CAP was instrumental in drawing attention to the problem in anatomic pathology by co-sponsoring the first independent research published last year on the impact of self-referral of anatomic pathology (AP) services on utilization, patient care, and health care costs.

The research was conducted by well known health care economist, Jean Mitchell, PhD, and published in the leading peer-reviewed health policy journal, Health Affairs. It compared Medicare billing practices for anatomic pathology services related to prostate biopsies by self-referring and non self-referring urologists, and using Medicare’s own data showed that self-referring urologists billed Medicare for 72% more prostate biopsy specimens compared to non self-referring physicians, with no increase in cancer detection. In fact, self-referring urologists had a 40% lower cancer detection rate than those who did not self refer despite billing for nearly twice as many specimens.

The Loophole

The CAP is the leading critic of a loophole that exists in the IOAS exception in the physician self-referral law, aka the Stark Law. The IOAS exception allows physicians to bill for certain medical services where an ownership interest exists. It was intended to apply to services provided at the time of an office visit as a convenience to patients. It also specifies clinical laboratory services rather than anatomic pathology.

Clinical pathology tests such as blood tests and urinalyses that do inform diagnosis and treatment at the time of the patient visit are rightly included in the exception. However, anatomic pathology services, which require extracting and analyzing human tissue or specimen during a biopsy or other surgical procedure and a complex multi-step process that cannot be performed at the time of an office visit were never intended to be included in the IOAS exception.

Over utilization by self-referring practices is costing Medicare billions, well over six billion dollars according to the President’s 2014 budget proposal.

For more information on CAP’s position on physician self-referral of anatomic pathology services, visit our Self-Referral Resource Center.

Reporters Note: Dr. Herbek serves as CAP’s official spokesperson on this issue. Contact Julie Monzo (847-832-7538) to arrange an interview.

Reporters should plan to attend CAP’s Expert Panel Discussion “GAO Report on AP Self-Referral: A Panel Discussion”, covering the significance of the GAP report and its potential impact on health policy. The panel will be held on Thursday, August 8, 2013 at 3:00 p.m. Eastern Time. Contact Julie Monzo to register.

About the College of American Pathologists

As the leading organization for board-certified pathologists, the College of American Pathologists (CAP) serves patients, pathologists, and the public by fostering and advocating excellence in the practice of pathology and laboratory medicine worldwide. With more than 18,000 physician members, the CAP has led as the gold standard in laboratory accreditation for 50 years with more than 7,300 CAP-accredited laboratories in 50 countries. Find more information about the CAP at cap.org.