Is it right for a doctor to own a business (or shares in a business) and then refer patients there, profiting both from seeing the patient and from the referral?  From a business standpoint, it makes sense.  If a patient needs the tests, someone is going to get paid for doing those tests.  In any other business, it’s called seeing a need and filling it.

In medicine, if the only place to get x-rays done is at the local hospital, a bunch of doctors could all get together to invest money in establishing a free-standing diagnostic imaging facility, thereby giving patients a choice.  Since x-rays (and labs, and probably everything else) cost less away from the hospital:

  • patients could still get exactly the same tests, but save money.
  • doctors could still send patients for the exact same tests, but earn more money.


The problem is that it can look bad.  It might look like these doctors have a financial incentive to order more tests to generate more money.  Since patients need to trust that their doctors are looking out for their (patient’s) best interests, it’s important to avoid even the hint of impropriety.  Hence, whether or not it makes business sense, or is right, it’s not legal.  There are a few loop holes, but for the most part, since 1989 the law has prohibited doctors from self-referring.

Patients can feel secure in knowing that the referrals a doctor writes are truly important, and in knowing that tests that have been ordered will provide critical treatment information.  Nobody wants to throw away money needlessly just to line someone else’s pockets.

Interesting things are happening locally that got me to thinking about ethics and the real-world use of the aforementioned Stark Law.  A few years ago, the small-town medical practice near here decided to expand.  Instead of the small office they’ve always had off the beaten path, the doctors pooled their resources and bought property that’s more centrally located.  A new building has gone up – the biggest in town – and word has it that now patients will be able to get everything they need – including physical therapy – right here, without having to drive to the city.

But we already have a physical therapy office in town.

A year ago the newspaper reported that our local PT’s office would move into the new medical center once it opened in order to make it more convenient for patients (because driving across the street is so difficult and inconvenient).  Now it seems things have changed.  It turns out that the physical therapist won’t be relocating, and the local doctors will no longer be referring to the local PT.  It has people wondering what’s going on.

These doctors have been referring to this physical therapist for years, and would have been happy to continue referring to her if she would lease office space from them.  However, she told them that it’s not appropriate to charge Seattle-rates in Podunk; she can’t afford to lease space from them so will stick with her current location.

Up to this point, I have no problem with the situation.  Sure, the doctors might be disappointed to lose a potential tenant, but providers are all still available for patients to get needed treatment.  The doctors could then look for a new tenant – meaning patients would get what they need, and the doctors still rent out their building.  Alas, it was not to be.

The building owner’s response was to search for a competing PT.  The building owners are the local doctors, and they’ve rented space to Big-Chain-PT and will be writing referrals to them.  I’m wondering how that’s legal.  Under Stark, not only is self-referral not permitted, but referral to an “entity” with whom the doctor has a financial relationship isn’t permitted.  Yes, there are a few exceptions, but this shouldn’t be one of them.  These PT referrals will-be significantly influenced by money.

There is no reason that patients can’t cross the street to see a physical therapist.  This is a small town, and the fact is that going across the street is not a great distance.  Compared to the distance I travel when my rheumatologist orders x-rays done in the same building, crossing the street here is closer.  Convenience is not a factor.  It’s all about the money.

If this is an example of the local doctors’ ethics, I’m extremely thankful that I don’t see them.  When I need to find a new doctor (because someday, in what I hope is the very distant future, my current doctor will retire), the local docs who’ve sleezily searched out loopholes in the Stark law so that they can line their own pockets, putting financial gain ahead of allowing patients to continue seeing the physical therapist they have an existing relationship with, will not be in the running.  Character matters.


*Supposedly the big chain is planning to lose money here.  A big chain can let the offices in large markets make up for the revenue loss of smaller markets.