Referrals Drive Up Hospital Revenue—and Health Care Costs

As the health care field becomes increasingly competitive, hospitals are acquiring independent practitioners in order to increase referrals and revenue. The American Medical Association says that one third of all doctors—mostly primary care practitioners—work for hospitals or for practices wholly or partially owned by hospitals. This is in contrast with independent doctors, who work at hospitals but are not employed by them.

Some specialists’ salaries are higher than usual for the field, which raises concerns about whether doctors are being overpaid in order to drive more referrals and thus more revenue to hospitals. If a physician receives compensation in exchange for providing referrals, patients might be subjected to treatments that are excessive, overpriced or unnecessary.

Such “improper financial relationships” have been the focus of multiple whistleblower lawsuits, including a federal whistleblower lawsuit that ended in a $70 million settlement. North Broward Hospital District paid the settlement after allegations that the hospital district overpaid doctors in violation of the False Claims Act and the Stark Statute, which regulates physician compensation for referrals.

Patients who receive a referral for an expensive or invasive procedure should ask the referring physician whether they receive compensation for referrals—and consider seeking a second opinion or consulting a health care consumer advocate.

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