Scan brokering foes battle in California

May 5, 1993

Opponents of a form of imaging center networking known as scanbrokering are waging a battle against the practice in California.A bill that would ban scan brokering is undergoing hearings inthe state Legislature. Assembly bill 1898 was sponsored by the

Opponents of a form of imaging center networking known as scanbrokering are waging a battle against the practice in California.A bill that would ban scan brokering is undergoing hearings inthe state Legislature.

Assembly bill 1898 was sponsored by the California RadiologicalSociety and introduced in January by Assemblywoman Julie Bornstein(D-Palm Desert). It would ban third parties from submitting claimsfor medical imaging services and would essentially put scan brokersout of business.

Scan brokers act as middlemen between imaging centers and third-partypayers by contracting with centers to form loose networks. Brokersallow insurers to deal with a single entity for imaging servicesacross a wide geographic area. In the process, they provide imagingcenters with access to patients covered by the insurer.

Brokering originated in the California workers' compensationsystem, a relatively deregulated environment that has provideda fertile breeding ground for scan brokers. Scan brokers generallyfall into two camps: those who work with insurers and those whowork with claimants' attorneys.

Typically, a broker secures a price discount from an imagingcenter in exchange for patients referred from the broker's networkof physicians and attorneys. The imaging center bills the brokerfor scans, and the broker in turn bills the insurance companyafter adding what is sometimes a hefty markup.

Brokers are able to wrest large discounts from centers in overbuiltmarkets such as Southern California that are fiercely competitivefor patient referrals.

"What makes brokering feasible is the fact that thereis a large number of imaging centers (in California). There ismore capacity than there are patients to take up the capacity,"said Dr. John V. Crues of Cottage Community Magnetic ResonanceCenter in Santa Barbara, CA. "Centers are looking aroundfor added volume to fill up their scanners. That makes the abilityto contract for discounted scans possible."

THE RISE OF SCAN BROKERING, however, has sparked turf battlesbetween radiologists cooperating with brokers and those who believethat the process is not compatible with the practice of medicine.

"We're not convinced that (brokers) have to exist,"said Robert Achermann, executive director of the California RadiologicalSociety. "Radiologists discount their fees to almost everypatient they see. There's no reason why there has to be a middlemanhere. Paying someone 20% for scheduling seems extreme."

The size of brokers' markups has generated criticism from insurersand regulators concerned about rising health-care costs. Mostmarkups are in the range of 20%, while some industry observerssay they have seen markups of up to 400%.

Scan brokering has also developed a shady reputation as a resultof fly-by-night operators using the practice to defraud the worker'scomp system. The first scan brokers won notoriety by providingoutlets for workers' comp and personal injury attorneys to havescans read in favor of their claimants' cases.

Some scan brokers have also been known to offer kickbacks tosecure referrals. A recent episode of the ABC news program PrimeTimeLive illustrated the most extreme example of scan brokering, inwhich several medical imaging center professionals, includingone radiologist, haggled over the price of patient referrals asif they were so many widgets (SCAN 2/24/93).

But are there legitimate scan brokers? Even radiologists opposedto the practice agree that many brokers--who usually prefer tobe called marketers or managed service organizations--do performuseful functions. In some cases, MSOs have been founded to combatthe fraud and abuse perpetrated by their less-than-ethical brethren.

Perhaps the largest such organization is Future DiagnosticsInc. of Los Angeles. FDI contracts with close to 150 imaging centersthroughout the state and uses quality control mechanisms to offerinsurers a source of high-quality, unbiased scans (SCAN 3/10/93).

FDI in many ways exemplifies how scan brokering has dividedCalifornia's radiology community. While several prominent radiologistssuch as Crues are associated with the organization on a consultingbasis, others believe even FDI's form of scan brokering is unhealthybecause of its emphasis on third-party control of many functionsonce shouldered by physicians.

Given what's at stake, it's no surprise that the battle overscan brokering was carried to the California Legislature.

In addition to its ban on third-party insurance claims, A.B.1898 would also prohibit physicians from charging for servicesthey do not provide themselves, unless they impose no additionalcharge for the service and disclose the name of the diagnosticimaging facility and the amount it charged for the scan. The legislationwould not apply to imaging services providers who own, lease orcontrol their own equipment. There are also exemptions for grouppractices and billing services.

The legislation will affect legitimate scan brokers as wellas fly-by-night operators. If the bill passes in its current form,companies like FDI will be legislated out of business.

An aide to Bornstein said the assemblywoman is amenable toamendments to the bill that could preserve the legal status ofcompanies like FDI.

"We're not trying to put anybody out of business,"said Mike Rapport, an aide to Bornstein. "We're just tryingto limit fraud in the workers' comp system."

A similar bill was introduced in the Legislature last yearbut did not pass.

In an ideal imaging center universe, radiologists would beable to deal directly with third-party payers, offering the samediscounts they give to brokers but without the middlemen. Sucha network--in effect a radiology preferred provider organization--wouldenable radiologists to maintain control over the practice of medicinewhile at the same time cutting costs by eliminating the markupscharged by scan brokers.

One group that is perhaps farthest along in the radiology PPOprocess is California Managed Imaging. That firm will link some30 imaging centers and will be completely owned by centers, accordingto Dr. Paul Berger of Long Beach Memorial Medical Center. Thenetwork is bidding on an imaging contract with State CompensationInsurance Fund, the largest workers' comp insurer.

"They don't want to deal with the little guy any longer,"Berger said of insurers. "The PPO gives us the ability tocontract on a regional basis with large payers."

California Managed Imaging could benefit handsomely from ascan broker ban. Such a ban would leave the company as one ofthe few organizations able to legally supply insurers with a statewidenetwork of imaging centers.

Crues sees radiology PPOs and scan brokers as part of a largershift toward managed health care that imaging centers cannot avoid.Scan brokers can be viewed as a harbinger of health-care reform,according to Crues.

"It's going to be less and less possible for a radiologygroup not to cooperate with managed medicine," Crues said."Scan brokers like FDI are in the initial stages of creatingsystems by which a marketplace can set the cost-effective valueof medical services. It may very well be that states and maybeMedicare will eventually use (scan brokers) to manage regionalmedicine."