Bill on self-dealing pits Md. doctors, Ga. business Company claims physicians want to shut out competition

April 02, 1992|By David Conn | David Conn,Annapolis Bureau

SAN DIEGO — ANNAPOLIS -- An effort to put a stop to financial self-dealing among physicians has ignited a battle between the state medical society, which in a turnaround supports the bill, and a Georgia radiation therapy company that is accusing the Maryland doctors of trying to shut out competition.

Supporters of House Bill 1374 insist it is aimed at ending the practice of physicians' referring their own patients to diagnostic and therapeutic facilities in which they have a financial stake. The Georgia company, Radiation Care Inc., says the bill is aimed at putting it out of business in Maryland.

"We're dealing here clearly with a turf battle," said Sen. Michael J. Collins, a Baltimore County Democrat whose Economic and Environmental Affairs Committee heard more than four hours of testimony on the bill. "I think there's a hidden agenda [behind the Medical and Chirurgical Faculty of Maryland's turnaround], and I think it's aimed at Radiation Care," he said.

The bill has been assigned officially to the Senate Finance Committee, however, and that panel is expected to take action today on the bill, which already has passed in the House.

Physician self-referral has often been cited as one cause of out-of-control inflation in health-care costs. According to several studies, doctors with a financial interest in a lab tend to order more tests and X-rays for their patients than do physicians with no financial interest.

In Maryland, 18 percent of clinical labs are owned by physician-investors who do not work in the labs.

Two years ago, the General Assembly considered a similar bill. The measure died, largely at the hands of the state medical society, which lobbied hard against the bill. Now the legislation is back, but this time the group is its strongest supporter.

"Anecdotes of excessive profits and [excessive] utilization are widespread," Dr. Albert Blumberg, chairman of the medical society's legislative committee, told a House panel in March. "To the extent possible, physicians should not be in the business of profiting purely from their investments in outside facilities."

Radiation Care is only one symptom of a pervasive disease in the medical profession, Dr. Blumberg said.

But Radiation Care, which operates a College Park radiation center and plans to open another in Rockville, disagrees. It argues that the bill, which also would prohibit physicians who are stockholders in a company from referring patients to one of its facilities, would protect Maryland's existing radiation oncologists from a strong competitor.

To bolster its argument, Radiation Care cites the bill's exemption from the restrictions for many kinds of health-care providers and businesses. One company clearly not exempted is Radiation Care.

In fact, some Maryland physicians who own stock in Radiation Care charge that Dr. Blumberg, himself a radiation oncologist at Greater Baltimore Medical Center, persuaded the medical society to support the bill in order to help Maryland's established radiation therapists.

Medical society officials deny the charge, pointing out its 100-member legislative committee has voted on the bill several times.

Dr. Blumberg said the society switched its position because new information has come to light and because a committee of the American Medical Association took a similar position in December.

Radiation Care officials don't deny that self-referral is a problem for diagnostic labs, such as X-ray or blood-testing centers. But they say the House bill is flawed because it attacks a problem that doesn't exist and because it lets the most blatant potential abusers off the hook.

The potential abuses of radiology -- excessive X-rays, MRIs and CAT scans -- are not present with radiation therapy, said Thomas E. Haire, Radiation Care's chairman. "Physicians simply do not refer patients for the potentially invasive therapy of radiation unless the patient has cancer," he said in a statement.

Further, the company argues, one physician shareholder, a relatively minor investor in what is now a $50 million company, can't influence the stock price by his actions and therefore has no financial incentive to send patients to Radiation Care centers.

Finally, the company says, the bill fails to address the purest forms of potential abuse: the radiation therapist who owns his own practice, or the hospital therapist who is paid for each treatment.

The state medical society and the American College of Radiology -- whose members include the radiation therapists who own and operate their own radiation centers -- point to a Florida study that shows patients at self-referring radiation centers had 52 percent more treatments on average than at centers not owned by referring physicians. Radiation Care disputes the study as severely flawed.

As for the argument that there are no financial incentives for self-referral abuses, medical society lobbyist Gerard Evans says the answer is on Page 16 of Radiation Care's January prospectus:

Any impediments to tapping the local markets for radiation therapy, the document says, have been "counterbalanced by the fact that the Company's stockholders include practicing physicians who are in a position to influence their patients' choice of radiation therapy providers."

If all of those physicians recognize their role in the grand scheme, Mr. Evans said, the company and its stockholders will benefit immensely. In fact, many of those physicians were sold Radiation Care stock at $1 a share before it went public at $8; it closed yesterday at $12.75.

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