Referral fees hospitals charge doctors may be illegal, investigators say

September 28, 1992|By New York Times News Service

WASHINGTON -- Federal investigators say that hospitals, under severe financial stress, are increasingly looking to doctors as a source of additional money and demanding payments for the referral of patients, in apparent violation of federal Medicare law.

A recent study by the Department of Health and Human Services said there has been "a proliferation of contracts" requiring such payments by doctors in return for the hospitals' efforts to direct patients to them.

Doctors who refuse to make the payments say they sometimes lose the right to practice at the hospital, a particular burden to radiologists and other specialists who are based in hospitals.

D. McCarty Thornton, chief counsel to the inspector general of the department, said these payments were often disguised as reimbursement for billing, marketing or other services. He said he had examined many contracts in which hospitals required doctors to provide "payments or remuneration far in excess of the fair market value of any services" supplied to the doctors.

In one case, he said, radiologists had to pay half their gross receipts to a hospital's endowment fund.

Hospital executives deny that the payments are illegal and say the federal government has no business interfering in contractual relationships between doctors and hospitals.

But federal law prohibits the solicitation or receipt of any payment or remuneration -- direct or indirect, overt or covert -- in return for the referral of business financed by Medicare or Medicaid, the programs for the elderly and the poor. A hospital or doctor found to have violated the law is subject to civil penalties, including exclusion from Medicare and Medicaid, and criminal penalties, including fines up to $25,000.

The law reflects congressional concern that kickbacks encourage the ordering of unnecessary medical services and thus contribute to higher costs. Nearly 50 percent of hospital patients are covered by either Medicare or Medicaid. The programs account for nearly 40 percent of total spending on hospital care.

Federal officials are investigating the complex ties between doctors and hospitals at a time when hospitals are facing severe financial pressures and are aggressively trying to increase their revenues.

The study by the department says that hospitals are in a pivotal position to influence the flow of business under Medicare and Medicaid because they select radiologists, pathologists and anesthesiologists for hospital patients. For example, the study said, if a hospital gets half a radiologist's billings over $250,000, the hospital has a strong incentive to increase the use of X-rays and diagnostic imaging services, and the doctor may be tempted to do more procedures to offset the cost of the payments to the hospital.

At the same time, many doctors are complaining that hospitals decide whether to grant medical staff privileges on the basis of a doctor's ability to generate revenue for the hospital and not on the basis of the doctor's competence.

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