Physician self-referral: empirical evidence and policy implications

Ownership of health care businesses to which physicians refer patients but at which they do not directly provide services, has become commonplace in recent years. Perhaps these self-referral arrangements, known as "joint ventures," have proliferated because they are lucrative investments whereby physicians can earn legalized kickbacks for patient referrals. This article reviews existing empirical studies documenting the effects of physician self-referral arrangements. The general concensus of the empirical evidence on physician self-referral reveals that the financial incentives inherent in such arrangements are associated with increased utilization of services and higher costs to patients. None of the studies to date, however, has been able to determine whether the increased utilization that accompanies the practice of physician self-referral represents inappropriate or unwarranted services. Policy options which address the problem of physician self-referral are also discussed.