Stark bill on imaging referrals gains surprise help from Bush

February 26, 1992

Rep. Fortney "Pete" Stark, (D-CA), the leading congressionaladvocate for self-referral reform, has found an unlikely allyin President George Bush. Bush went on record this month as favoringthe prohibition of Medicare payments to physicians with

Rep. Fortney "Pete" Stark, (D-CA), the leading congressionaladvocate for self-referral reform, has found an unlikely allyin President George Bush. Bush went on record this month as favoringthe prohibition of Medicare payments to physicians with financialinterests in medical facilities to which they refer.

A one-two punch served up by Bush and Stark could propel legislationthrough Congress this year that would ban referring-physicianownership in Medicare-supported imaging centers.

The Bush administration's health-care-reform proposal introducedFeb. 6 included unexpectedly strong language on self-referrals.Support from Bush could persuade some previously reluctant Republicansto vote for stronger Medicare antifraud and abuse rules.

A prohibition on Medicare payments to referring-physician-ownedcenters will effectively ban all referring-physician joint ventures,according to imaging service industry representatives.

The executive branch, through the Department of Health and HumanServices, spent several years interpreting and readying enforcementof existing Medicare antifraud and abuse legislation. Last July,HHS finally released rules limiting referring-physician investments,but allowing specific "safe harbor" cases where physicianinvestments would be deemed acceptable (SCAN 7/31/91).

Stark maintains that the safe harbor regulations do not go farenough in preventing kickbacks and other forms of medical fraud.The congressman previously sponsored the Ethics in Patient ReferralsAct of 1989, which originally included tough restrictions on referring-physicianinvestment in imaging centers. Although parts of Stark's billrestricting ownership in clinical in-vitro testing laboratorieswere passed into law in 1989, language relating to medical imagingwas omitted (SCAN 12/13/89).

President Bush drew on data gathered by the Florida Health CareCost Containment Board for his proposal, citing self-referralabuses documented in that state (SCAN 8/28/91).

"The Florida study showed that physicians who self-referutilize services at a far higher rate than physicians who do nothave these financial interests," the Bush proposal reads."The result is a significant increase in public and privatesector health costs."

While Stark disagrees with the president's overall health-reformstrategy, he is delighted with the statements regarding self-referral,according to William K. Vaughan, a Stark aide.

"The overall proposal is awful; it won't work," he said."But we love the stuff related to physician self-referral.We are pretty certain this will give us the push we need to enactour bill this year."

Stark's bill would strengthen the clinical lab ban while addingphysician investors in diagnostic imaging centers to it, Vaughansaid.

"We hope to close some of the Mickey Mouse loopholes peopleare using to evade the clinical lab ban, and make sure that theyare not extended to the diagnostic lab (imaging center) field,"he said.

The end result may go farther than that, said E. Lawrence Atkins,president of American Health Services of Newport Beach, CA (seestory, page 5).

"It's the ultimate extension of safe harbors," he said."There are not going to be any regulatory niceties that willprovide ways to comply. If you're a physician, you will not beable to invest in anything that will put you in a position ofbeing referred to."

Atkins calls safe harbors an insoluble Rubik's Cube.

"There are no safe harbors. And after spending many legaldollars and time in seminars, (it turned out) there never wereany safe harbors," he said. "Every time you compliedwith one, you tripped over another."

Although about 90% of referring-physician investments do not appearto result in fraudulent activities, the public's focus on healthcosts and expensive high-technology medical equipment makes aself-referral ban inevitable, he said.

"We (imaging service providers) are going to have to looksqueaky clean if we want people to understand that the high-techservices we offer are above suspicion," he said.

Bad tidings for physician investors could means good news formany imaging center chains.

"If this becomes law, it will be good for American HealthServices," Atkins said. "It will create opportunitiesfor us to acquire centers and restructure partnerships. This isnot the way I would have wanted opportunities to be created, however.You don't want to benefit because someone else gets hammered."

Another imaging center chain, Health Images of Atlanta, welcomesmore stringent restrictions, according to Robert D. Carl, companypresident.

"Health Images won't be hurt by the president's proposals,"Carl said. "Unlike most companies in our industry, HealthImages does not rely on physician-investor referrals to our clinics,since the majority of our centers are wholly owned by the company."

Health Images' strategy in preparation for a physician-investorban is to repurchase the remaining minority interests in the company'solder imaging centers.

"We welcome the proposals as evidence that lawmakers at thestate and federal level will take proactive steps to end self-referral,"Carl said.

American Health Services hopes to provide a graceful exit forphysician partners in imaging centers, Atkins said.

"We have a few of these partnerships that we're going tohave to address, but we don't want to react out of a sense ofpanic," he said. "The returns for our physician partnershave ranged from respectable to some that just didn't work. Butin our experience there haven't been any abuses (behind these)returns."