According to the GAO, no direct correlation was found between the provision of PT services in a physician-owned setting and billing per patient.
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AAOS Now

Published 7/1/2014
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Alexandra E. Page, MD; Elizabeth Fassbender

GAO Report Examines PT Self-Referral

In June, the U.S. Government Accountability Office (GAO) released a report demonstrating that physicians who provide physical therapy (PT) services in their offices (self-referred) had much lower overall costs of PT during the period studied than those who refer patients to other providers (non–self-referred). The total number of self-referred PT services showed essentially no increase from 2004 to 2010, whereas non–self-referred services increased by 41 percent.

According to the report, the relationship between provider self-referral status and PT referral patterns was mixed and varied on the basis of referring provider specialty, Medicare beneficiary practice size, and geography, but the GAO “did not find a direct correlation between self-referral and billing per patient.”

Additionally, the growth rate in expenditures associated with non–self-referred PT services was also higher than for self-referred services. Self-referring orthopaedic surgeons, on average, referred fewer PT services than non–self-referring orthopaedic surgeons.

According to the GAO report, “… non–self-referred PT services can be performed by providers who can directly influence the amount, duration, and frequency of PT services,” which could explain why the study found more rapid growth in the PT units billed by non–self-referred physicians. As an example, physical therapists in an orthopaedic office will provide treatment as ordered by the physician. Although subject to state legislation, PT providers working in freestanding offices or clinics can expand the services provided through the plan of care.

Frederick M. Azar, MD, president of the American Association of Orthopaedic Surgeons (AAOS), in responding to the report, stressed the importance of integrated care in providing the best value and quality for the patient.

“Physical therapy outcomes are best when a patient’s surgeon and therapist can work closely together,” Dr. Azar stated. “This report confirms the responsible use of in-office ancillary services (IOAS) by orthopaedic surgeons and the importance of maintaining the integration of those services in an orthopaedic surgeon’s office to allow for the continuation of care and to provide the best treatment option for patients.”

Why the concern?
Prompting the report, according to the GAO, were rising Medicare expenditures for PT services and questions about the role of self-referral in this growth. Three provider specialties—family physicians, internists, and orthopaedic surgeons—referred nearly 75 percent of Medicare PT services in 2010. For each group, GAO examined the following three measures of PT referral:

  • number of PT services referred
  • number of beneficiaries referred
  • number of PT services provided per beneficiary

GAO found that self-referring family practice and internal medicine providers in urban areas, on average, generally referred more PT services than their non–self-referring counterparts. In contrast, self-referring orthopaedic surgeons, on average, generally referred fewer PT services than non–self-referring orthopaedic surgeons. Stakeholders, including AAOS fellows and staff, reviewed and commented on the GAO report prior to its release to Congress.

Measuring the impact of IOAS
The report is the fourth and final report in a series requested by Senate Judiciary Committee ranking member Sen. Chuck Grassley (R-Iowa), House Ways and Means Committee ranking member Rep. Sandy Levin (D-Mich.) and House Energy and Commerce Committee ranking member Henry Waxman (D-Calif.) to examine the relationship between providers and entities in which they have a financial interest.

The first report investigated the growth of self-referral in magnetic resonance imaging (MRI) and computed tomography (CT) services. The second examined anatomic pathology tests and procedures, while the third dealt with treatments for prostate cancer. The first three reports argued that utilization increased among physicians who referred patients to a facility in which they or a family member had a financial interest. However, legislators agreed the latest report’s findings were “less clear.”

“Although previous GAO reports have shown a conclusive link between self-referrals and increased medical spending, this report’s findings are less clear,” Sen. Grassley said. “The report does show that we need to continue to monitor this area to be sure doctors aren’t unnecessarily referring patients for physical therapy when they have a financial interest. Medicare dollars should be spent appropriately, not wasted on unnecessary services.”

The reports have generated renewed discussion about the IOAS exception to the Stark Law. The IOAS exception, which allows physicians to provide imaging and physical therapy services in their offices, is vital for providing efficient diagnoses and treatments. However, critics of the exception believe doctors are more likely to refer Medicare patients to PT and other ancillary services if they have a financial interest in the service.

Members of Congress, including Rep. Jackie Speier (D-Calif.), have proposed legislation to remove the IOAS exception and consider it a savings offset, claiming that this could save Medicare billions of dollars. The AAOS has insisted these estimates understate the savings associated with the provision of IOAS.

For example, limiting the IOAS exception would result in the shifting of care toward more expensive settings, significantly raising costs to both Medicare beneficiaries and the Medicare program. In fact, it is estimated that Medicare would incur increased hospital outpatient costs of more than $112 million annually for high-volume musculoskeletal CT scans and MRI services that were previously provided in lower-cost settings. Further, several studies indicate that PT services provided in physician office settings cost less, on average, per episode of care compared to similar services performed in outpatient settings or independently owned PT settings.

The AAOS position
Given the increased criticism of the IOAS exception, the AAOS State Legislative and Regulatory Initiatives Committee earlier this year commissioned a study of Medicare claims data focused on MRI utilization. That study found no statistically significant difference in MRI utilization between orthopaedic surgeons who own MRI equipment and those who do not. (See “Study of Medicare Claims Data Focuses on MRI Use,” AAOS Now, March 2014).

The findings indicate that any changes in Medicare policy related to the current law, which allows self-referral for certain physician activities such as imaging, physical therapy, pathology, radiology, and durable medical equipment, will not lead to reduced advanced imaging utilization.

The AAOS has urged decision makers to consider these findings and the positive results from the latest GAO report, as well as concerns about quality patient care and the patient-physician relationship, when discussing the IOAS exception. Especially for some of the most vulnerable in the U.S. population, such as the elderly or those with mobility issues, the IOAS exception is critically important in providing access to health care because it also eliminates scheduling delays, prolonged waits, and the need to travel to other offices.

“Limiting the IOAS exception would be counter-productive in terms of quality patient care, because it results in both fragmented care and higher costs to patients,” said Dr. Azar. “The ability of orthopaedic surgeons to diagnose, initiate, and oversee a treatment plan quickly and efficiently by offering PT services in their offices is essential to restoring patient mobility and preventing future injury. Without access to in-office ancillary services, patients would be forced to receive ancillary services in new and unfamiliar settings with the probability of a less precise diagnosis, increased inefficiencies, and barriers to appropriate screenings and treatments.”

Alexandra E. Page, MD, chairs the AAOS Health Care Systems Committee. Elizabeth Fassbender is the communications specialist in the AAOS office of government relations.

Additional Information:
AAOS position statement

Ancillary services information