Increasingly, radiologists are concernedif not alarmedby the profusion of imaging being done by nonradiologists. Lured by technical fees, and often by professional fees, these doctors are buying a new generation of imaging technology, installing it in their offices or their group practices, and referring patients for imaging services to these entities in which they hold a financial stake. Loopholeslawyers are careful to call them exceptionsin physician self-referral statutes make these referrals legal. Some radiologists want tougher laws to close these loopholes. But others see opportunities to collaborate with their non-radiology colleagues for income from an expanded pie of professional fees. Whatever the strategy, there is broad agreement that medical imaging as a field is changing because of the increasing intrusion of non-radiologists onto the imaging turf.

The increase in nonradiologist imaging has been well documented. Certain researchers who have provided the documentationand who have shown that increased utilization and higher medical costs have resultedhave achieved almost celebrity status in the arena of physician self-referral. Jean M. Mitchell, PhD, did extensive research on self-referral in Florida a little over a decade ago. She says the GAO (Government Accounting Office) used her data to determine that MRI referrals were 50% higher and CT referrals were 30% higher among doctors who held a financial stake in the imaging equipment or the imaging centers to which they sent patients.

“My research was the basis for Stark II,” says Mitchell, now a professor at Georgetown University’s Public Policy Institute.

Stark II, as it is called, was a second round of physician self-referral regulations introduced by California Democratic Congressman Pete Stark (see sidebar, page 24). Stark I, the original self-referral regulations that Stark introduced and Congress passed in the late 1980s, dealt mostly with doctors referring to laboratories in which they had a stake. Stark II broadened that scope to include imaging and other services. Under Stark II, radiologists are not considered referring physicians because they do not see and refer patients generally. But the law does restrict the way and the extent to which nonradiologist physicians can refer imaging patients to facilities in which those doctors have a financial stake. The ban applies not just to imaging but to a whole list of health services that doctors are not allowed to both own and refer to for Medicaid and Medicare patients. The latest iteration of Stark II was put forward in 2001. There is a second phase of the regulations still to come. These so-called Phase II regulations were expected last year; now the goal is this summer, but many are skeptical that deadline will be met.

The federal CMS (Centers for Medicare & Medicaid Services) is charged with defining the Stark rules. As the rules now stand, there are two broad but corelated exceptions, which relax the ban on imaging self-referrals. Doctors can legally refer patients for imaging in their own offices. This is called the “in-office ancillary service” exception. While this exception, or loophole, is troublesome to radiologists, it pales in comparison to the second exception, the “group practice” exception, which allows doctors to refer patients for imaging at facilities owned by the group practice to which they belong.

According to attorneys interviewed for this story, the in-office exception is relatively straightforward and mostly applies to family doctors with an x-ray machine or cardiologists, vascular surgeons, or orthopedists with some of the latest stand-alone in-office modalities, which they use essentially for patients they treat personally. The group practice exception, contrarily, is described as extremely complex. It is seen as a much bigger threat to radiologists who fear losing business to nonradiologists.

Under the group practice exception, doctors can effectively join together in co-owned practices to achieve economies of scale that allow them to purchase and to capture the technical and/or professional fees from sophisticated and expensive imaging equipment, which the in-office doctors could never justify purchasing. The group practices can and often do hire radiologists to read on the equipment they own. One of the latest wrinkles in the group practice arena is the creation of legal joint ventures that allow doctors to “share time” on imaging equipment that they have collectively purchased. One user gets Mondays, another Thursdays, for example. The chief restriction on the group practice model, according to several attorneys, is that doctors in the group must perform their normal services at the location where the imaging equipment is installed if they refer patients there. This has led, under the time-share concept, to token office hours or treatments by doctors at facilities that are effectively imaging centers in which the referring doctors have a stake, critics of time-sharing charge.

For her part, Georgetown’s Jean Mitchell says group practice exceptionsoriginally written to bring a handful of old-line, family-name clinics into compliancehave been distorted. She says group practice exceptions now are “big loopholes,” and she would eliminate this provision. “Radiologists are being exploited,” she adds. “These are all turf wars. The Stark law has resulted in a proliferation of self-referral-based’ group practices&. I can tell you what my research has done, it has made a lot of money for a lot of lawyers.

David C. Levin, MD

David C. Levin, MD, is another prominent researcher of physician self-referral patterns. Like Mitchell, he favors tougher regulations. “Policy makers, payors, they all complain about the rise in costs for diagnostic imaging. The reason for that is largely self-referral by nonradiologists,” Levin says. He contends his research proves it. Levin recently retired as chairman of the radiology department at Thomas Jefferson University (TJU) in Philadelphia. He now works part-time as a consultant for HealthHelp, Inc, Houston, and is continuing his research. It was at TJU that Levin and his colleagues conducted a massive study of Medicare imaging.

“We looked at the utilization trends for all noninvasive diagnostic imaging, among radiologists and then among nonradiologists using the national Medicare database from 1993 to 1999,” Levin says. “We calculated the utilization rate per 1,000 Medicare Part B patients. We found that the utilization rate among radiologists for those 6 years went down by 4%. The utilization by nonradiologists went up by 25%. What this means in essence is that all the growth in costs and utilization in noninvasive diagnostic imaging is occurring at the hands of nonradiologists.”

Levin was lead author in a more recent study looking at practice patterns for radionuclide myocardial perfusion imaging from 1996 to 1998. “There are four specific CPT codes that address blood flow to the heart muscle. We found that the utilization rate per 1,000 Medicare Part B beneficiaries went up by 4% for radiologists who were doing this procedure. For cardiologists, utilization went up by 39%. That was 10 times the increase among radiologists for the same procedure. There’s a blatant example of self-referral,” Levin says.

Final Stark II: Don’t Hold Your Breath

Rep. Pete Stark

Congressman Pete Stark (D-Calif) was chairman of the Health Subcommittee of the House Ways and Means Committee when in the late 1980s he introduced the physician self-referral legislation for Medicare and Medicaid that will probably forever bear his name. In a recent interview, Stark talked about that legislation and what is-or more pointedly, what is not-likely to happen with it now.

Stark, who represents a Bay Area district, is a former banker with an MBA from the University of California, Berkeley. He is, he says, someone “who feels the federal government has a role in helping society.” When it comes to expanding self-referral regulations, Stark finds that the winds of change are blowing against him. Taking the pulse of the Republican-dominated Congress, he is resigned, at times even bleak.

“I don’t think we should do any more regulations,” he says. “My fear is that in the current Republican mood they might just eliminate all the regulations….I’d rather leave the current regulations alone for awhile. This is neither the time nor the climate to talk about changing regulations in any radical way.” Stark is not optimistic on the likelihood of large-scale health care reform either. He helped author proposed universal health care coverage that failed under the Clinton Administration. He says he plans to reintroduce a version of that bill, and a single-payor bill too. “But I think those are just benchmarks to debate around,” he says. “I can’t believe there’s any interest in providing universal health care coverage that requires any government involvement on the part of the Republicans.”

Stark describes a Congress that to him is mean-spirited. “Let’s talk about kids,” he says. “We’re going to cut back on Medicaid and then try to lock the states into a bloc grant, which means if the Medicaid population increases, their amount per case will drop, and then we say that’s helping the states? They’re going to ask the children to bring their parents’ tax returns before they get school lunches because they think second and third graders are the new wave of welfare cheats. It boggles my mind. These are the children who are going to be punished for the sins of the adults. I have never seen the divisions [in Congress] so far apart as I have in the past couple of years. I’m not very optimistic-at all.”


Stark gives physician self-referral legislation high marks for ending or containing the so-called “passive” self-referral, by which physicians would send patients to facilities where they had an ownership interest but did not practice. Elsewhere, he sees the laws as effective but not perfect. “Have they reduced the amount of kickbacks and referral fees, I suspect they have. Have they eliminated them, no. But that’s like trying to eliminate marijuana.

“Times have changed. Some of the stuff that troubles me lately doesn’t have so much to do with the imaging guys but with these new boutique hospitals, which I see could be very harmful to the hospital structure as we know it…. If I were running an acute care hospital, I’d worry…. If you begin to balkanize all the good profit centers in a hospital, you’re going to be left with an emergency department and drug detox wards and that’s it.”

Asked if the in-office and group practice self-referral exceptions have been interpreted too broadly, Stark says lawyers finding and legislators closing loopholes is something of a game. “It’s like taxes, once you close a loophole, somebody dreams up another one. I have no righteous indignation on that….I’ll close a loophole, they’ll dream up a new one. It’s kind of fun to figure out how to close the next one.”

But one side effect of this legal gaming is that the complexity of regulations spins out of control, Stark says. “If you want to have some fun, read the original law. It was less than a paragraph, ?Whosoever shall take a kickback or a referral in cash or in kind for a referral of somebody to a Medicare-approved service, you’ll do 5 years or pay a fine of $50,000.’ That was about it. Then these lawyers got involved in ?what’s a bright line [Stark test to determine if service is covered as a designated entity]?’, and ?how do you prove intent?’ and all of that.

“I wouldn’t mind going back to the old system…. There was in fact in that original law enough uncertainty that you kept the highbinders off balance. Once you start down this other road…it’s ever more complex. It goes up geometrically. There’s something to say for some simplicity and some aggressive prosecution.”

-G. Wiley

Levin says the federal Office of Inspector General (OIG) used his data to confront the American College of Cardiology (ACC) about the increased utilization and was told by the ACC that cardiologists were using the procedure to substitute for invasive cardiac catheterizations. “I was dubious about that,” Levin says, “so I looked at those 2 years for cardiac cath, and cardiac cath went up by 9% for those 2 years. Where were they substituting? So that claim was nonsense.”


Levin also raises the ticklish question of quality of images and of image interpretations. “I don’t think the nonradiologists are doing a very good job on that side either,” he says. He cites a study in which 462 imaging sites of all kinds were inspected on behalf of a major health care insurance carrier in a western state. The deficiencies ranged from “no collimation to no ID markers or patient names on the film to no left-right markers,” he says. They also included poor film quality and lack of a state license to perform imaging. Levin says one third of the facilities checked had at least one deficiency, and some had as many as nine. Of the 77 radiologist sites that were checked, only one had a deficiency, he says. “The failure rate among others was much higher. Among chiropractors it was 49%, among podiatrists 45%, and among family practitioners 43%.”

Bruce Hillman, MD, is yet another researcher who has documented overutilization when self-referrers do imaging. A professor of radiology at the University of Virginia, Hillman says self-referral regulations are needed “to guard against broad conflicts of interest that physicians can involve themselves in that can be dangerous for patients.

“It’s clear from my research and others’ research that self-referral leads to more testing, and the implication is that many tests may be borderline or unnecessary. It can lead to incorrect diagnoses and even inappropriate treatments,” he says.

Hillman says that, to a degree, radiologists, because of the advances in imaging technology, are getting hoisted on their own petard. “The problem here, of course, is that our treatments are beginning to infringe on traditional treatments, and the people who are normally the specialists in those traditional treatments are worried that they’re going to start seeing fewer and fewer patients. For that reason, they’d like to take on what we do.”

Hillman says the nonradiologist practitioners who are taking up imaging run the gamut. “Vascular surgery, cardiology, anybody and almost everybody,” he says. “The ultrasonic physical exam’ is growing in popularity. Then there is this whole world of disruptive technology’ where you have in-office ultrasound machines on the market for $20,000 and where you can have an in-office MRI scanner like orthopedists use for limbs and cardiologists use for hearts for $200,000. It’s changing the landscape, certainly increasing the opportunity to self-refer on a higher scale.”

Faced with the new competition, radiologists have been pressing the quality patient care button hard. “The stance of the radiology community has been that it’s best for the patient if the radiology is performed by radiologists,” Hillman says. “Patients take a chance if they have their imaging done by somebody less well trained. That would be my stance as well, but I will tell you there’s very little literature on the quality side of self-referral, and that’s mainly because it’s very hard to study.”


Hillman says there are three basic strategies being advocated by radiologists to combat self-referred imaging by nonradiologists. One strategy is what Mitchell and Levin and others advocate as foremostnew federal regulations to make self-referral more difficult. But Hillman says that will not fly. “It hasn’t flown in the 13 years that I’ve tried to work with legislators. That’s not to say there have been no victories, but [what] people are scared to death of is in-office, and that will only continue to increase. I just don’t see more regulation as politically feasible.”

A second strategy is for radiologists to collaborate with nonradiologists who own and operate modalities, whether in-office or more likely in group practices. “That is trying to form centers of excellence with other specialists, trying to share expertise,” Hillman says. “It’s certainly something that’s happening. Is it a positive for radiologists? I don’t think we know that yet. My take is that it’s very dependent from site to site, which is true of almost all these turf issues.”

The third strategy Hillman mentions is for radiologists to convince insurance companies and other payors that nonradiologists who do imaging ought to have some sort of professional accreditation to demonstrate that they are competent. “I think that’s a strategy we’ll see the ACR pursue over time,” Hillman says. He says an earlier effort to convince some payors to bar studies by nonradiologists altogether was unsuccessful. “The hope of this current strategyrather than say no nonradiologists,’ insurers will say no one who’s not accredited’is in many cases that would be all nonradiologists,” Hillman contends.


Thomas R. Hoffman, JD, is associate general counsel for the American College of Radiology. Hoffman states the ACR’s position concisely by saying, “The ACR supports current and future federal and state legislation and regulatory action designed to inhibit self-referral or restrict its influence on patient care decisions… The College opposes any financial arrangement such as self-referral that improperly affects a physician’s medical judgment on how he or she should treat a patient.”

Hoffman says the phones at ACR have been ringing a lot in the last 3 to 6 months as radiologists have become increasingly concerned about imaging being lost to nonradiologists. “I can tell you generally,” he adds, “that the quality of care is at stake where less costly technology is available and being used by professionals who see opportunities to order and interpret studies in their own offices that are medically questionable and may harm patient care.”

Whistleblower Enforcement

Douglas Mancino, JD, and Eric Gordon, JD, MD, are partners in the Los Angeles law firm of McDermott, Will & Emery. They specialize in handling legal matters for doctors and health care entities. They say there are broad differences between the Stark self-referral laws and the federal antikickback statutes that can also act as a prohibition on physician self-referral.

“Stark operates like tax rules,” says Gordon. “There are technical rules, and either you comply or you don’t. The kickback statute is an intent-based statute. With Stark your underlying intent typically doesn’t matter. Either you’re inside the rule or you’re outside the rule. But under the kickback statute, you could look at two different circumstances that appear pretty similar but come up with different results, because it really depends on what the parties meant to do by virtue of any arrangement.”

Mancino adds, “Planning for compliance with Stark is therefore easier and done with much more certainty about the outcome from a legal point of view than under the antikickback rules.”

While the Justice Department’s Office of Inspector General is technically in charge of enforcing antikickback and the Centers for Medicare & Medicaid Services is charged with monitoring Stark, Gordon and Mancino say the real enforcement comes from whistle-blowers-employees or insiders with knowledge about banned practices who choose to take legal action. Often, the whistle-blowers seek out attorneys to represent them. The whistle-blowers stand to profit by receiving a portion of any judgment levied against the defendants they have accused.

“The government’s position is that if you violate Stark or the anti-kickback statute, that violation can create a false claim,” Gordon says. “That allows whistle-blowers to file under the False Claims Act, saying that you [the defendant] have been submitting false claims all this time.”

Adds Mancino, “The typical case would be a large medical group where the volume of alleged bad behavior is great enough that it justifies taking the risk, because that whistle-blower will end up a multimillionaire. Or it might be a smaller practice, but one that has a heavy Medicare/Medicaid focus so there are a lot of dollars involved under these alleged false claims. Or it could be an institutional provider. But people who are in the position of being whistle-blowers are seldom going to run the risk of losing their jobs and becoming pariahs in the industry, absent the prospect of making a million or several million dollars as a result.”

Gordon says a whistle-blower’s share of any judgment could be in the 15% to 30% range. “There are private lawyers out there who specialize in these kinds of cases,” Mancino adds, “but they are very selective because they have to invest large amounts of time and capital to prosecute one of these cases.”

-G. Wiley

Adds Joshua J. Cooper, the ACR’s director of Congressional relations, “Manufacturers of imaging equipment have been making lower technology, less expensive machines that nonradiologists can now afford, and so they’re able to get inside the Stark laws because the equipment is now inside their own offices. Our members are more concerned about quality. They seem to think these new machines, the less expensive ones, are not taking as good a picture.” Cooper says he is not the expert to back up that charge, however.

Hoffman notes that the ACR’s support of self-referral regulation extends not just to the Stark laws but to the federal antikickback statutes that have been around since the 1970s and that ban some self-referral practices. “We view enforcement of the antikickback laws as an essential brake on improper financial arrangements.” Hoffman also says the ACR is eager to see the Stark II, Phase II regulation updates that CMS is supposed to issue this summer. “We would be pleased to see [amended] regulations that would provide further guidance to radiologists and nonradiologists on how to comply with very broad and vague statutes.”

Hoffman says the ACR is also promoting the accreditation programs that it extends to both radiologists and nonradiologists. But he points out these accreditation programs apply to facilities, not to individual doctors.


Radiologists are not the only ones being affected by the swing of imaging to nonradiologists. Bob Maier is president and CEO of Regents Health Resources, LLC, a consulting firm for all kinds of clients who provide imaging services. Maier calls the Stark II exceptions “loopholes you could drive a Mack truck through.” He says the same nonradiologists who are capturing business at the expense of radiologists are sucking the imaging out of hospitals as well.

“We worked for a hospital in Pennsylvania that generated an $8 million bottom line from outpatient imaging services,” he says, “but the hospital as a whole  made only about $2 million for the year. That meant that $6 million [of the outpatient imaging income] went to subsidizing other services that hospital needed to provide in order to survive.”

Maier says outpatient imaging is not the only imaging being lost to outside competitors. Specialized imaging is also being taken over by nonradiologists. “We see it all the time in hospitals that are being coerced into allowing nonradiologists to provide services such as nuclear cardiology. We are seeing almost continuously where business that had been almost the exclusive domain of radiologists is being given to cardiologists and vascular surgeons.”

Maier says this trend hurts radiologists as well as hospitals because it undercuts a radiology group’s ability to provide specialized services. “In the long run it’s harmful to everybody,” he says, “because in the long run the radiology groups can no longer afford to hire the subspecialists, for example, that all the other physicians [in their market] require.”

Maier urges hospitals to regain lost revenues by forming joint ventures for outpatient imaging with radiological groups. But such competition can cut both ways. Hospitals looking to retain imaging income can also install their own outpatient modalities in an effort to capture the technical fees. Fred Gaschen, executive vice president of Radiological Associates of Sacramento in California, cites such an incident in his market. He says a nonprofit hospital/health care provider recently committed to putting in three MRI scanners in “a two-block radius” where there were already five MRIs. “They are putting them in to take business away from us, but we will probably do the professional services for them,” Gaschen says.


Not everyone sees radiologists being hurt by the proliferation of nonradiology self-referrals. Gaschen’s example of losing technical fees but in the same instance gaining professional fees is a case in point. Gaschen says the proliferation of nonradiology imaging is a big concern, especially from nonradiology group practices, but for now, he adds, his radiology group is benefiting. “We are doing net-net more business than ever before. I talk to my physicians about the pie getting bigger.”

Attorneys who help physicians structure their practices to conform to the Stark and antikickback regulations make the same argument. Thomas W. Greeson, JD, is an attorney with Reed Smith LLP in Falls Church, Va. He was formerly a lawyer for the ACR, adding, “My bias supports the underlying intent of the Stark laws.” But he does not want to see them made stricter. Greeson says he advises his radiology clients to focus on new opportunities resulting from changes made by CMS in the final Stark regulations for collaboration with nonradiologists. While some may see the proliferation of nonradiology imaging as a glass half empty for radiologists, Greeson contends that the opposite is happening.

“I see the glass as at least half full,” he says. “Radiologists may have the ability to involve themselves in a significant way. Consistent with federal and state law, the astute radiology group is going to develop relationships as a marketing plan with physicians throughout the community.” Greeson adds that radiologists who want to provide interpretations both for hospitals and for nonradiologists with imaging equipment should be careful about signing noncompete clauses in hospital contracts. Do not bind yourself to a hospital and regret it later, he advises.

“To the extent that nonradiologists see the financial opportunity to capture technical fees, radiologists should demonstrate that their involvement can result in a net benefit to patients. The radiologists’ involvement does nothing but improve the quality, appropriateness, and viability of these services,” Greeson says.

Douglas Mancino, JD, is a partner in the Los Angeles law firm of McDermott, Will & Emery. He says that because they are not classified as referrers, radiologists can more easily form joint ventures for outpatient imaging than can nonradiologists. “Radiologists continue to enjoy a lot more freedom to expand the scope of their practices separately or in conjunction with other groups of radiologists than does any other specialty that comes into contact with imaging,” he adds. “Many specialists who would effectively be competing with radiologists are not very well organized. They’re not in practices that would meet the bona fide group practice exception.”

Michael R. Burke, JD, is a partner with the law firm of Kalogredis, Sansweet, Dearden and Burke, Ltd, in Wayne, Pa. He says the use of time-share imaging by non-radiologists is growing. “What I see more and more is nonradiologists forming joint ventures for equipment purchases. They buy the equipment together, they provide a separate location, and then they divide up the time on the equipment.” In these time-sharing arrangements, the Stark law requires that doctors perform their normal services at the location where the imaging is done, Burke adds. “If it’s cardiology, you have to have a cardiologist there. But there’s a gray area as to what is substantial enough to comply with Stark.” He adds that equipment makers are well aware of the regulations and use their exceptions as selling points. “We recently met with an equipment manufacturer, and they referred us to a web site essentially espousing this time-share arrangement,” he says.

In addition to the Stark laws, there are state laws and antikickback safe harbors that have to be met, Burke notes. “A good consultant is invaluable,” he says. Burke says the possibility of malpractice lawsuits is another argument radiologists can use if they are trying to convince nonradiologists who own imaging equipment to let them do the professional reads. But radiologists should be careful to negotiate who pays for malpractice insurance, Burke says. “In this day and age, you want to make sure you know what you are doing. You want to make sure your insurance carrier knows what you are doing. They may not cover you unless you tell them.”


There is no question that more and more imaging is being performed by nonradiologists. Nor is there much question that more and more nonradiologist physicians are investing in imaging equipment with an eye on the money to be made. For radiologists, this may mean that more than ever they have to market their skills. Says attorney Thomas Greeson, “I think it is incumbent on radiologists to show that they can add value in those settings.”

George Wiley is a contributing writer for Decisions in Axis Imaging News.