Workers' comp data fuels state referral ban bill

February 12, 1992

A new California study of workers' compensation claims is fuelingsupport for a state proposal to ban physician referrals to clinicsin which they have a financial interest. About $356 million ispaid out annually for unnecessary tests, as a direct result

A new California study of workers' compensation claims is fuelingsupport for a state proposal to ban physician referrals to clinicsin which they have a financial interest. About $356 million ispaid out annually for unnecessary tests, as a direct result ofphysician-owned clinics, according to the study performed by WilliamMercer, Inc.

Mercer conducted the study for Industrial Indemnity of California.Assemblywoman Jackie Speier (D-San Mateo) introduced the results,along with the referral-ban bill, to the California Assembly'sHealth Committee last month.

The study examined 6581 workers' compensation claims involvingthree types of services: MRI, physical therapy and psychiatricevaluation. In each category, reviewers found a substantial increasein the number of patients referred to physician-owned clinicsfor exams that were considered unnecessary.

Physicians who were financially tied to MRI centers were responsiblefor 78% of all imaging studies performed. Insurance reviewersbranded one-third of those studies unwarranted. The other twoservices experienced similar disparities of use between physician-and nonphysician-owned clinics.

Misuse in all of the target areas accounts for about 10%, or$356 million, of the annual workers' compensation bill in thestate, according to Alex Swedlow, a Mercer researcher.

Speier's bill, AB 819, would ban all referrals to clinicaland diagnostic centers in which physicians have an ownership interest.Having passed through the state's health subcommittee, the billis undergoing debate in the Assembly Ways and Means Committee,said Elise Thoreau, a Speier aide.

The Mercer data appear to refute the claim made by the AmericanMedical Association, as well as the California Medical Association,that physicians are capable of policing themselves.

"AB 819 goes too far," said Fred Noteware, a lobbyistwith the CMA. "Without investment by physicians in some ofthese facilities, they wouldn't exist in some of the more ruralareas."

The association has already mounted an extensive lobbying campaignagainst the bill, Noteware said.