The U.S. Government Accountability Office (GAO) recently published the results of a study examining trends in the number of self-referred anatomic pathology services and the impact on Medicare spending.  Anatomic pathology services involve the preparation and examination of tissue samples to diagnose disease.  These types of services fall within an exception to the Stark law, which means that physicians are permitted to self-refer the preparation or the examination of a tissue sample for diagnosis, or both. 

GAO reviewed Medicare Part B claims data from 2004 through 2010 and performed two separate analyses to assess trends in referral rates for anatomic pathology services.  First, GAO looked at the number of referrals made for anatomic pathology services by self-referring providers in 2010 and compared it to the number of referrals by non-self-referring providers during the same year.  Next, GAO looked at the referral rates of a sub-set of providers who, in 2009, began to self-refer anatomic pathology services.  For these providers—referred to in the report as “switchers”—GAO compared the changes in their referral rates to the changes in rates among providers who had already been self-referring and among providers who did not self-refer.  GAO limited both analyses to the self-referral of the preparation of anatomical pathology services; it did not analyze the self-referral of interpretation services.

Some of the key findings of the GAO report include:

• From 2004 through 2010, self-referrals for anatomic pathology services increased at a faster rate than non-self-referrals.  The number of self-referred anatomic pathology services increased more than two-fold during this period – from roughly 1.06 million services to about 2.26 million services.  Non-self-referred services, on the other hand, increased roughly 38 percent – from about 5.64 million services to about 7.77 million services over the same period.

• In 2004, self-referred anatomic pathology services made up 15.9 percent of all such services.  This number increased to 22.5 percent in 2010.

• In 2010, three provider specialties—dermatology, gastroenterology and urology—accounted for over 90 percent of self-referred anatomic pathology services.  GAO found that for these specialties, self-referring providers generally referred more anatomic pathology services than other providers.  Further, across these specialties, the increase of referrals by “switchers” substantially outpaced increases in referrals by providers already self-referring and providers who did not self-refer.

• Medicare expenditures for self-referred anatomic pathology services grew faster than expenditures for non-self-referred services from 2004 through 2010—though the non-self-referred services accounted for a larger share of overall spending.  During this period, Medicare expenditures for self-referred services increased about 164 percent (from $75 million to $199 million), whereas expenditures for non-self-referred services increased about 57 percent (from $473 million to about $741 million).

• In 2010, Medicare spent an estimated $69 million more than it would have spent if self-referring providers had performed tissue biopsy procedures at the same rate as non-self-referring providers.  GAO notes that this estimate probably understates the level of additional Medicare spending because its analysis was limited to anatomic pathology services referred by dermatologists, gastroenterologists and urologists.

To address the rise in self-referral of anatomic pathology services—and the resulting increases in Medicare spending—GAO proposed that, among other things, CMS implement a “self-referral flag” scheme for Medicare Part B claims submitted by providers who bill for biopsy procedures.  GAO said this would allow CMS to be able to better identify the improper utilization of such services through targeted audits.  According to HHS’s comments to a draft of the report, which are attached as an appendix, HHS did not concur with GAO’s self-referral flag recommendation.  In response to another GAO recommendation, HHS also noted that it has already taken steps to limit the incentives associated with the referral of a higher number of anatomic pathology services per biopsy procedure by reducing payment for a the most commonly provided anatomic pathology service by approximately 30 percent in calendar year 2013.

To view GAO’s report, click here.

Reporter, Greg Sicilian, Atlanta, +1 404 572 2810, gsicilian@kslaw.com.