Publication

“The Legal Regulation of Referral Incentives: Physician Kickbacks and Physician Self-Referral under Provincial Rules of Physician Professional Misconduct” in C.M. Flood, ed., Just Medicare: What’s In, What’s Out, How We Decide (Toronto: University of Toronto Press, 2005) (with N.K. Choudhry & A. Brown) 261-280.

Abstract

The regulation of private health care has become a central issue in Canadian health policy. But there has been relatively little discussion of the regulation of independent health facilities (IHFs), even though they are, for the most part, privately owned, for-profit entities, and are assuming increasing prominence in the landscape of health care institutions. IHFs provide a range of diagnostic and therapeutic services, such as physiotherapy and laboratory testing. As with other health care facilities, IHFs depend on physician referrals for patients. Because IHFs bill on a fee-for-service basis, physician referrals ultimately determine revenues and profitability. This raises two important issues for public policy. First, as experience in the United States has shown, institutional providers such as hospitals and IHFs have often compensated physicians for patient referrals. If physicians are compensated for making referrals, they may be placed in a financial conflict of interest, because referral incentives may overwhelm their clinical judgment. Second, experience in the United States has also shown that similar incentives can exist when physicians refer to IHFs in which they have an investment interest, giving rise to similar problems. The potential for both kickbacks and self-referral to give rise to financial conflicts of interest raises the question of what the existing regulatory framework is, if any. In this chapter, we review provincial laws and regulations to determine whether they adequately protect patients against conflicts of interest arising from referral incentives. These rules take the form of rules of professional conduct for physicians. Our conclusion is mixed; in some respects these rules adequately protect patients, but in others they do not. Following our review of existing regulation, in this chapter we propose regulatory models to be implemented before the further proliferation of IHFs.