During her eight-year bout with breast cancer, Julia Lippman had complete faith in her doctor. Then as the illness spread to her abdomen and entered its final stages, her trust turned to doubt.

  A registered nurse in Atlanta, Lippman, 64, required intravenous feeding, or infusion, at home. Her family hired a home-care company whose nurses she liked. But her doctor insisted she use another company. He even phoned Lippmann’s son at work to argue his case.

 Finally giving in, the Lippmans looked into switching, but because the second company charged substantially more and their insurance would not cover the entire cost, they decided not to change. So Lippman’s doctor said he had no choice. Writing his patient that his “ethical responsibilities” required him to pick the “highest caliber of care givers,” he implied that he could no longer be responsible for her care.

The doctor’s letter was dated February 22, 1990. He never saw Julia Lippman again. She died a month later, feeling-says her daughter, Judy- “a sense of abandonment by her doctor.” Only later did the Lippmans learn that he held $300,000 worth of stock in the parent company of the provider he had urged Julia Lippman to use.

 Lippman and her family were victims of physician self-referral: sending patients to facilities in which the doctor has a financial interest. In the past ten years, self-referral has spread quietly into many areas of medicine, including home-infusion, physical therapy and rehabilitation, X rays and magnetic resonance imaging (MRI), walk-in surgery, radiation therapy and laboratory testing. Self-referral operates on a simple principle: the more patients’ doctors refer, the more money they make. The practice has made many physicians rich-while potentially undercutting patient-doctor trust.  

“The erosion of trust is bad for medicine and bad for patients,” says Dr. Arnold Relman, editor emeritus of The New England Journal of Medicine. “I see little reason for self-referral other than the doctor’s business interest.”  

Altough most doctors do not participate in self-referral deals, no one knows for sure exactly how many do. IN Florida, where the practice has comeunder close scrutiny, a survey estimated that 40 percent of all doctors involved in direct patione care had a financial stake in at least one self-referral facility.

“It was difficult to uncover all the doctors who invest in joint ventures because they usually try to hide it,” says Jean Mitchell of Georgetown University in Washington, D.C., who helped perform the Florida survey. “People at one medical-testing facility said it was in effect owned by 200 corporations. We dug a little deeper and found that each ‘corporation’ was solely owned by an individual doctor.”

Significant self-referral problems have also turned up in New Jersey, Texas, South Carolina, Georgia and many other states. Federal health experts estimate that, across the country, at least 25 percent of independent clinical labs and 27 percent of independent physiological labs are owned wholly or partly by referring physicians.

Many doctors justify self-referral by saying it helps assure quality care. “That’s just not true,” Relman counters. “It’s like saying, unless I’m part-owner of Massachusetts General Hospital, I can’t’ be sure it will give quality care. If the hospital doesn’t deliver good care, don’t send patients there anymore. It’s that simple.”

Self-referral proponents also claim the money invested by doctors helps bring needed health care to medically under-served communities. But the overwhelming evidence suggests otherwise. “Self-referral facilities are deliberately located in populated, affluent areas,” says Mitchell, “because that’s where the paying patients are”

Over Diner at a northern California restaurant, Dr. Laurens White listened as the businessman urged him to invest in a home-care operation. “Right to my face,” White says, “he told me that for an investment of $5000, I could count on an annual return of $100,000- if I referred 20 patients a year to the business.”

White refused. “I told him, ‘The only way I could get all that money would be to abuse my patients, and I will not do that for any amount.’”   Since then, White-a respected oncologist who once served as president of the California Medical Association-has become an outspoken opponent of self-referral.

White’s experience is typical. Self-referral entrepreneurs usually offer limited partnerships in joint ventures-so called because many doctors have ownership shares. In many cases, doctors are asked for a minimal investment, sometimes as little as #100. As Relman points out, “The amount the doctor invests is ridiculously small because owners don’t want the doctor’s money. They want his patients’.”

Owners choose physicians selectively, concentrating on specialties guaranteed to produce a high volume of patient referrals. In Florida, for example, radiation-therapy joint ventures brought in medical oncologists, lung specialists, urologists and general surgeons. All treat-and refer-cancer patients. Through the doctors’ ownership of shares in the joint venture, their earnings reflected the number of patients referred. The more patients a doctor has, the more desirable he or she is for self-referral.

“Self-referral,” says Dr. James G. Schwade, chairman of radiation oncology at the University of Miami School Of Medicine, “preys on patients stricken with a catastrophic illness, people who put trust in their doctor to make decisions for them.” Many doctors have chosen to wear ethical blinders. Money, of course , is the obvious reason. At one Florida imaging center, physician partners received an average of $421 for each MRI scan. An orthopedic surgeon raked in $228,660 in one year. Several other doctors made well over $100,000.

“This windfall isn’t earned from any service performed by these doctors,” says Georgetown University’s Mitchell. “It’s just a kickback for referring patients.

“Among the many things I find objectionable about self-referral,” says Dr. Relman, “is that it’s anti-competitive. That’s why self-referrers charge prices that are often higher than they should be.”

During investigations of a self-referral problem in Tennessee, many cases of price gouging came to light. One man needed treatment for a rare condition that produced toxic levels of iron in his body. His doctor referred him to a joint-venture company. After 18 months, the man’s bill reached $86,970-the limit of his insurance coverage. If he’d gone to a different provider for the identical, the cost would have totaled $27,534, more than two-thirds less. When the man later died, his family was left with huge medical bills.

Similarly, a 1991 study in New York City found that self-referred facilities marked up home-infusion drugs and other supplies as much as eight times higher than retail pharmacies did.

Self-referrers also run up profits by “churning” – ordering expensive tests and procedures for questionable medical reasons. One case involved a 35-year-old California bank clerk with writs pain. The cause was carpal tunnel syndrome, resulting from a compressed nerve. The clerk’s doctor ordered an MRI scan, which costs about $1000. Then he ordered a scan on the healthy wrist- “for comparison” –even though the syndrome seldom, if ever, merits such an additional procedure. The doctor did not reveal he was part-owner of the MRI center.

Research by the General Accounting Office, Congress’s investigative arm, showed that when doctors in Florida held a financial stake in MRIs, they referred patients for scans 54 percent more often than doctors who didn’t self-refer.

How much does churning cost the American public? Ales Swedlow, a health-care analyst, estimates that self-referral adds hundreds of millions of dollars a year to California’s workers’ compensation costs. And a study by the Center for Health Policy Studies in Columbia, Md., estimated that questionable MRIs performed at joint ventures nationwide totaled $728 million in additional costs for one year alone.

“The major reason our health-care costs continue to skyrocket is the overuse of high-tech procedures like MRIs,” says Mitchell. “Self-referral is helping fuel that overuse. It’s just plain wrong.” 

Not long ago, a Fort Lauderdale, Fl., radiation oncologist was surprised by a telephone call from a physician who had once referred many patients to him. But after the doctor joined a radiation-therapy joint venture, he self-referred all his patients.  

            “Good to hear your voice again,” the oncologist tweaked. “I’d like you to take care of one of my patients,” the doctor said.

            “Be glad to,” the oncologist replied, somewhat surprised. The doctor who’d telephoned then explained that the patient was his mother-in-law, who was suffering from cancer. He wanted the oncologist because, he said, “You’re the best radiation therapist around.”

             “If you feel that way, “the oncologist answered, “it would be nice to take care of your other patients.” The other physician sounded annoyed. “Look” he said, “this is family. The other is business.”

Is the quality of care delivered by joint ventures equal to that provided iby independently owned facilities? There’s no conclusive proof one way or the other, but the anecdotal evidence is disturbing.

Dr. Mickey Isikoff, a Florida radiologist, told Congress about a self-referral mammography center in central Florida that charged twice as much as a nearby facility-yet was not accredited. Rosana Trinidad, a 38-year-old mother of two, was referred to the center by her doctor for a routine exam. Two separate mammograms apparently revealed a problem, and her doctor ordered her hospitalized for breast biopsy. While biopsy preparations were under way, surgeons requested a mammogram on the hospital’s machine. In repeated tests, no problem could be found.

Told there was no evidence of a tumor and that she could go home, Trinidad thought, Oh God, a miracle! But her joy turned to anger when she found out her doctor had a vested interest in the mammography center, and that the center was not accredited by the American College of Radiology, a professional group that sets standards for facility accreditation, equipment checks and checks on mammogram quality.

Even some doctors who oppose self-referral say there is no convincing proof that self-referrers do a poorer job medically. But concerns remain. “When the dividend check paid to the self-referring doctor is the only quality control, everything suffers” says the Fort Lauderdale radiation oncologist.  Shortcuts are taken with the equipment and staff, and the ones that suffer most are patients.”

Since the problem of self-referral first emerged, several states have passed laws banning the practice. In Florida, for example, a doctor found guilty of self-referral can be fined $15,000. But many physicians will find ways to skirt the law.

“Doctors investing in hospitals is the next stage of self-referral, and it’s already happening here,” says Rep. Charlie Roberts, a Florida state legislator. Roberts fears these doctors will send their paying patients to their “own” private hospitals and their poor patients to competing hospitals, weakening the latter hospitals financially. If the competing hospitals then go under, the self-referring hospitals would gain a competitive stranglehold.

Roberts is also concerned about “group practice without walls.” Doctors in separate locations form legal partnerships=for example, an internist joins a radiologist across town. Then the internist refers all his patients to the radiologist, and the “partners share the profits.

A Bill now pending in Congress and endorsed by members of both political parties seeks to ban physician self-referral nationally. But the law is expected to allow doctors time to divest their financial interests in joint ventures-and to find new loopholes.

“Laws alone will never stop self-referral,” says Mitchell. “There are too many legal ways around it, and too much money in it.”

Patients can protect themselves and their pocketbooks. Here are some warning signs that your doctor may be involved I self-referral:

If your suspicions are aroused, ask these questions: Does the doctor have a financial interest in the facility to which he is referring you? Will he receive any fee or benefit, either direct or indirect, if you go there? What will you be charged?  If you decide not to go to the facility the doctor recommends, will he refer you to another one? Does the facility accept payments from Medicare or Medicaid? (If not, this should raise a red flag. Some self-referral facilities won’t accept Medicaid payment because it isn’t profitable. Others can’t because federal law prohibits laboratory self-referral under Medicaid and Medicare.)       If the answers to your questions leave you uncertain, get another opinion.

“Our society has become increasingly distrustful of physicians,” says Relman. “Unfortunately, many doctors have brought this on themselves by allowing commercialism to encroach on the practice of medicine. When patients suspect something improper, they can help protect themselves by asking their doctor questions-and insisting on straight answers.

Reader’s Digest September, 1993