Examining Drivers of Health Care Spending: Evidence on Self-referral Among a Privately Insured Population

Despite the enactment of laws to restrict the practice of self-referral, exceptions in these prohibitions have enabled these arrangements to persist and proliferate. Most research documenting the effects of self-referral arrangements analyzed claims records from Medicare beneficiaries. Empirical evidence documenting the effects of self-referral on use of services and spending incurred by persons with private insurance is sparse.

We analyzed health insurance claims records from a large private insurer in Texas to evaluate the effects of physician self-referral arrangements involving physical therapy on the treatment of patients with frozen shoulder syndrome, elbow tendinopathy or tendinitis, and patellofemoral pain syndrome.

We used regression analysis to evaluate the effects of episode self-referral status on: (1) initiation of physical therapy; (2) physical therapy visits and services for those who had at least 1 visit; and (3) total condition-related insurer allowed amounts per episode.

For all 3 conditions, we found that patients treated by physician owners were much more likely to be referred for a course of physical therapy when compared with patients seen by physician nonowners. A consistent pattern emerged among patients who had at least 1 physical therapy visit; non-self-referred episodes included more physical therapy visits, and more physical therapy services per episode in comparison with episodes classified as self-referral. Most self-referred episodes were short and the initial visit did not include an evaluation.

Physician owners of physical therapy services refer significantly higher percentages of patients to physical therapy and many are equivocal cases.