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Study Demonstrates Link Between Physician Surgicenter Ownership and Volume of Surgeries

Posted Apr 14 2010 12:00am
Photo by Sarah McD via Flickr

Photo by Sarah McD via Flickr

There has long been a concern reflected in the federal Stark Law and its state law analogues that a conflict of interest arises when a physician refers patients to an ambulatory surgery center he or she owns.  Prior research established that a doctor’s rate of referrals of patients for surgery and other hospital-based services is positively correlated with an ownership stake in a specialty hospital; now there is similarly concrete, empirical evidence of the deleterious effect of the conflict created when doctors own surgicenters.

In an article in the April issue of Health Affairs, John M. Hollingsworth and his co-authors present the results of a study comparing “the practice patterns of physician-owners of surgicenters, before and after they acquired ownership, to those of physician-nonowners over the same time period.”  Using data from Florida for the years 2003-2005, the authors identified all patients who underwent one of five ambulatory procedures carpal tunnel release, cataract excision, colonoscopy, knee arthroscopy, and ear tube surgery.  The procedures were chosen because “substantial variation exists … in their use,” making them “susceptible to the influences of financial incentives associated with surgicenter ownership.”  After accounting for differences in the populations served by physician-owners and physician-nonowners, the authors found that “the mean annual caseloads for owners … were at least twofold greater than those for nonowners.”  Even more telling, using earlier data, from 1998-2000, the authors found that, even after accounting for the fact that some of the eventual owners had higher-volume practices before they invested in a surgicenter, for four of the five procedures studied, “acquisition of ownership status kicked owners’ already high volumes even higher.”

In an earlier post , I noted that a 2009 New Jersey law conditions physicians’ ability to refer patients to surgicenters on the following: (1) for patients they refer, they personally perform the surgery; (2) they be paid in proportion to their ownership interests, not the number of patients they refer; (3) they and their physician partners make all healthcare decisions, leaving non-physician partners without a say; and (4) they inform their patients in writing of their ownership interest at the time they make the referral.

The work done by Hollingsworth and his co-authors suggests that while the first and second conditions might eliminate certain especially troubling payment arrangements, a “relationship between surgicenter ownership and surgical volume” can persist even when physician-owners personally perform the surgeries.  Similarly, while the third condition would require that physicians make healthcare decisions, it would do nothing to ensure that those decisions are uninfluenced by conflicts of interest.  The fourth condition which puts the burden on patients to suss out which referrals are medically necessary and which result from a physician-owner inappropriately lowering his or her threshold for intervention due to a financial conflict of interest is also unlikely to reduce “physician-induced demand.”  There is no evidence that patients are able to perform such a sifting function.  To the contrary, existing evidence suggests that they are not.

Ultimately, as Hollingsworth and his co-authors suggest, the government may need to “intervene through physician reimbursement.”  “[P]artial capitation or global payment schemes, or both, implemented in the context of proposed delivery system reforms (such as accountable care organizations) may be needed to discourage the over-use that fee-for-service payment rewards.”

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