ACLA Lauds New Health Affairs Study Finding Medicare Costs Rise and Fewer Cancers Are Detected When Physicians Self-Refer for Prostate Cancer Surgical Pathology Services

Study demonstrates physicians’ financial self-interest may drive unwarranted procedures and unnecessary Medicare spending; highlights the need for Congress to end legal loophole permitting self-referral of surgical pathology services.

Washington, DC – The American Clinical Laboratory Association (ACLA) today welcomed a new study published in Health Affairs providing compelling evidence of the increase in government health care spending that results from urologists performing prostate biopsies and billing Medicare for not only the performance of the biopsy, but also for related surgical pathology services for the detection of prostate cancer.

The study, by public policy professor Dr. Jean Mitchell of Georgetown University, is the first to explore the real-world impact of a loophole in Medicare law allowing urologists to in-source services, such as surgical pathology—hence the term “self-referral.” Otherwise the law would require them to refer such services to providers outside of their own practice. The loophole is the In-Office Ancillary Services (IOAS) exception to the Physician Self-Referral or STARK law.

“This study suggests that men are at heightened risk of unnecessary and costly prostate cancer biopsies when under the care of a physician who benefits financially through self-referral. This is a serious unintended consequence of a legal loophole that needs to be corrected immediately by Congress,” said Alan Mertz, President of ACLA.

According to the study, urologists involved in self-referral arrangements billed Medicare for 72% more specimens for patients with suspected prostate cancer than did urologists who referred specimens to independent providers of pathology services. This result substantiates prior findings from the U.S. Department of Health and Human Services Inspector General in 2007.

Despite increased Medicare billing, the study found that the per-patient cancer detection rate for self-referring urologists was 12 percentage points lower than that for non-self-referring urologists, suggesting the possibility that physicians’ financial self-interest prompted biopsies on men with a lower risk of cancer.

“The significantly lower cancer detection rates linked to self-referral suggests that financial incentives prompt urologists to perform prostate biopsies on marginal cases,” wrote Dr. Mitchell in the study. She also indicated that government and commercial insurers could reduce health care spending “substantially” by adopting measures to restrict self-referral.
Added Mertz, “For the sake of patient safety and government spending, Congress must end loopholes permitting self-referral of surgical pathology testing.”

The Stark law was intended to eliminate financial conflicts-of-interest by prohibiting physicians from referring Medicare and Medicaid patients to health care entities in which the physician has a financial interest. The IOAS exception was included in the Stark law to facilitate the performance of on-site services that could aid in the immediate diagnosis and treatment of patients while they were still present in the doctor’s office. However, surgical pathology services almost never are performed during the patient visit, given the amount of time necessary to prepare and analyze the specimens.

“This study provides new evidence that the IOAS exception is undermining the policy purposes for which the Stark law was designed,” said Mertz. “Indeed, Congress should take legislative action to restrict self-referral in order to safeguard patient quality and better control our nation’s health care costs.”

The cost of the research was defrayed by grants to Georgetown University from the American Clinical Laboratory Association and the College of American Pathologists.

The full study is available at the ACLA website at and

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