Similarly, expenditures for self-referred anatomic pathology  services increased at a faster rate than expenditures for non-self-referred  services. Number of Self-referred Anatomic Pathology Services Increased at a Faster Rate Than Non-self- referred Services

While both the number of self-referred and non-self-referred anatomic  pathology services grew overall from 2004 through 2010, self-referred  services increased at a faster rate than non-self-referred services. Specifically, the number of self-referred anatomic pathology services  more than doubled over the period we reviewed, growing from about   1.06 million services in 2004 to about 2.26 million services in 2010 (see  fig. In contrast, the number of non-self-referred anatomic pathology  services increased about 38 percent, growing from about 5.64 million  services to about 7.77 million services. Self-referring Providers Generally Referred More Anatomic Pathology Services Than Other Providers Regardless of Practice or Patient Characteristics

Across the three provider specialties—dermatology, gastroenterology,  and urology—that refer the majority of anatomic pathology services, we  found that in 2010, self-referring providers referred more anatomic  pathology services, on average, than other providers, regardless of  number of Medicare FFS beneficiaries seen. For further information on referral of anatomic pathology  services across provider specialties and size categories in urban and  rural areas, see appendix V.

		Providers’ Referrals for Anatomic Pathology Services Increased the Year after They Began to Self-refer

Our analysis shows that, across the three provider specialties we  reviewed, providers’ referrals for anatomic pathology services  substantially increased the year after they began to self-refer. In our  analysis we examined the number of anatomic pathology referrals made  by “switchers”—those providers that did not self-refer in 2007 or 2008 but  began to self-refer in 2009 and continued to do so in 2010—and  compared these referrals to the number made by providers that did not  begin to self-refer during this period. Higher Use of Anatomic Pathology Services by Self- Referring Providers Results in Substantial Additional Medicare Spending

We estimate that Medicare spent about $69 million more in 2010 than the  program would have spent if self-referring providers performed biopsy  procedures at the same rate as and referred the same number of services  per biopsy procedure as non-self-referring providers of the same provider  size and specialty (see fig. Taken together, this suggests that  financial incentives for self-referring providers were likely a major factor  driving the increase in anatomic pathology referrals. To the extent that these additional services are unnecessary,  avoiding them could result in savings to Medicare and to beneficiaries. We continue to believe that CMS should develop a payment  approach that addresses the incentive to provide more services. To the extent  that self-referral for anatomic pathology services continues to be  permitted, we believe that including an indicator or flag on the claims  would likely be the easiest and most cost-effective approach to improve  CMS’s ability to identify self-referred anatomic pathology services. Self-referral, however, could be a factor CMS considers in its ongoing  efforts to identify and address inappropriate use of Medicare services. 5). Appendix II: Scope and Methods

This section describes the scope and methodology used to analyze our  three objectives: (1) trends in the number of and expenditures for self- referred and non-self-referred anatomic pathology services from 2004  through 2010, (2) how the provision of anatomic pathology services may  differ for providers who self-refer when compared with other providers,  and (3) the implications of self-referral for Medicare spending on anatomic  pathology services. For all three objectives, we used the Medicare Part B Carrier File, which  contains final action Medicare Part B claims for noninstitutional providers,  such as physicians. As part of  developing this claims-based methodology to identify self-referred  services, we interviewed officials from CMS, provider groups, and other  researchers.
Why GAO Did This Study

Questions have been raised about self-referral's role in Medicare Part B expenditures' rapid growth. Self-referral occurs when providers refer patients to entities in which they or their family members have a financial interest. Services that can be self-referred under certain circumstances include anatomic pathology--the preparation and examination of tissue samples to diagnose disease. GAO was asked to examine the prevalence of anatomic pathology self-referral and its effect on Medicare spending. This report examines (1) trends in the number of and expenditures for self-referred and non-self-referred anatomic pathology services, (2) how provision of these services may differ on the basis of whether providers self-refer, and (3) implications of self-referral for Medicare spending. GAO analyzed Medicare Part B claims data from 2004 through 2010 and interviewed officials from the Centers for Medicare & Medicaid Services (CMS) and other stakeholders. GAO developed a claims-based approach to identify self-referred services because Medicare claims lack such an indicator.

What GAO Found

Self-referred anatomic pathology services increased at a faster rate than non-self-referred services from 2004 to 2010. During this period, the number of self-referred anatomic pathology services more than doubled, growing from 1.06 million services to about 2.26 million services, while non-self-referred services grew about 38 percent, from about 5.64 million services to about 7.77 million services. Similarly, the growth rate of expenditures for self-referred anatomic pathology services was higher than for non-self-referred services. Three provider specialties--dermatology, gastroenterology, and urology--accounted for 90 percent of referrals for self-referred anatomic pathology services in 2010.
Referrals for anatomic pathology services by dermatologists, gastroenterologists, and urologists substantially increased the year after they began to self-refer. Providers that began self-referring in 2009--referred to as switchers--had increases in anatomic pathology services that ranged on average from 14.0 percent to 58.5 percent in 2010 compared to 2008, the year before they began self-referring, across these provider specialties. In comparison, increases in anatomic pathology referrals for providers who continued to self-refer or never self-referred services during this period were much lower. Thus, the increase in anatomic pathology referrals for switchers was not due to a general increase in use of these services among all providers. GAO's examination of all providers that referred an anatomic pathology service in 2010 showed that self-referring providers of the specialties we examined referred more services on average than non-self referring providers. Differences in referral for these services generally persisted after accounting for geography and patient characteristics such as health status and diagnosis. These analyses suggest that financial incentives for self-referring providers were likely a major factor driving the increase in referrals.
GAO estimates that in 2010, self-referring providers likely referred over 918,000 more anatomic pathology services than if they had performed biopsy procedures at the same rate as and referred the same number of services per biopsy procedure as non-self-referring providers. These additional referrals for anatomic pathology services cost Medicare about $69 million. To the extent that these additional referrals were unnecessary, avoiding them could result in savings to Medicare and beneficiaries, as they share in the cost of services.

What GAO Recommends

CMS should identify self-referred anatomic pathology services and address their higher use. The Department of Health and Human Services, which oversees CMS, agreed with GAO's recommendation that CMS address higher use of self-referral through a payment approach, but disagreed with GAO's other two recommendations to identify self-referred services and address their higher use. GAO believes the recommended actions could result in Medicare savings.