The need for a Chinese Wall in Medical Care

As medical care becomes more and more technology-intensive, there has been a rapid expansion of the use of diagnostic testing and imaging services (different types of blood and urine tests, X-rays, ultrasonic scans, CT scans, MRI scans, PET scans etc) on patients. This has led to concerns that the incentive structure, especially in an insurance-based health care system, is aligned to encourage this trend.

Patients have an obvious interest in getting their condition checked with the best available diagnostic facilities. But they are unaware of the real need of these tests. In an insurance-based system, patients need not even pay for these additional tests. From the doctors' side, the availability of these test results enables them to minimize clinical judgements and use more objective information to base their diagnosis. It also reduces their clinical error risks, that often leaves them vulnerable to litigation.



In the circumstances, as the graphic above shows, the volume of testing and imaging services per beneficiary have shot up in the US whereas the volume of evaluation and management services (E&M in the chart), the bread and butter of primary care physicians, rose only modestly. In other words, doctors are increasingly relying on diagnostic testing to base their diagnosis.

However, this incentive eco-system has bred another pernicious trend. As diagnostic testing has grown, an uncomfortably close and unhealthy relationship has emerged between the referral doctors and the testing and imaging service providers. The interests of both parties coincide in having the patient undergo the widest array of testing and imaging services. The fee-for-service based insurance payment system (as against the system of bundled payments for all the care going into the treatment of defined episodes of illness) in the US exacerbates these trends.

More seriously, this coincidence of interests have spawned a system of physician self-referrals. Self-referral describes any arrangement in which physicians who are not radiologists use imaging equipment installed in their own offices, or refer patients to imaging services in facilities in which they or their family members have an indirect ownership interest or with which they have compensation agreement rewarding them for such referrals.

Prof Uwe Reinhardt points to research over the years in the US which has shown that, other things being equal, self-referring physicians with direct or indirect financial interests in imaging services tend to authorize far more imaging services (and the spending on them) than do colleagues without this apparent conflict of interests. As Prof Reinhardt has illustrated, the relationships come in different forms. He sums up the challenge nicely,

"The issue of self-referral merely illustrates the great difficulty third-party payers face in general when they compensate physicians for procedures and products that are incidental to the referring physician’s own services and do not require much or any of referring physician’s time – but that yield the referring physician a profit."

In India too, it is by now a widespread practice that doctors get a share from their referrals to diagnostic testing and imaging centers. The slippery slope means that many of these doctors refer patients indiscriminately to the full-range of diagnostic tests. Corporate hospitals, which house all the testing and imaging services under a single roof, too do the same with their patients.

In view of the exploding health care costs (driven by these services), it is imperative that serious action be taken to curb such practices and strike a balance on referrals. The challenge is to arrive at a practical solution - one which balances the doctor's clinical judgement skills with the need for important and unavoidable diagnostic tests and imaging services. Medical care being a doctor-centric service, it is the doctor's discretion on referrals that matter. No algorithm-based approach to testing and imaging diagnostics, however comprehensive, can be effective.

Regardless, there is need for some basic broad principles that govern such testing. Any exceptions need to be considered differently based on another set of pre-defined protocols. Further, the medical care system needs its version of Glass-Steagall Act (which separated deposit taking retail and commercial banking from investment banking) to establish an arms-length relationship between doctors and diagnostic testing and imaging service providers so as to minimize conflicts of interests.