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Physician self-referrals common in Oklahoma workers' compensation system

Nearly half of the doctors who serve as independent medical examiners in Oklahoma's workers' compensation system have ownership interests in treatment facilities to which patients are referred.
by Randy Ellis Published: April 8, 2013

Oklahoma doctors routinely make extra profits in workers' compensation cases by referring patients to hospitals, imaging centers, physical therapy facilities and other entities in which the doctors have direct ownership interests.

It's a conflict of interest, says Mike Seney of the State Chamber of Oklahoma.

Local neurosurgeon Robert Remondino said he doesn't see it that way.

“We don't believe there is anything wrong with doctors investing in medical businesses,” he said.

Doctors tied to physician-owned entities have become a financial force at the Oklahoma Legislature — pouring hundreds of thousands of dollars into political funds and campaigns as lawmakers consider major changes in workers' compensation laws that could drastically alter the amount doctors are paid for various procedures.

“We believe it is every citizen's civic duty to participate in the political process,” Remondino said. “When matters of public policy involve questions of health care, we doctors make no apology for making our opinions known.”

Over the past 24 years, the federal government has enacted regulations to curb expansion of physician-owned businesses as part of efforts to control Medicare costs — going so far as to issue a special fraud alert March 26 targeting one particular type of business.

But federal limitations on self-referrals to physician-owned entities for Medicare patients generally don't apply to workers' compensation patients and self-referrals remain common in Oklahoma.

Nearly half of the 336 physicians who filed ownership disclosure forms with the Oklahoma Workers' Compensation Court reported having an ownership interest in one or more health care entities outside their primary places of business, a review by The Oklahoman revealed.

Remondino, for example, reported having an ownership interest in Oklahoma Spine Hospital as well as a local diagnostic imaging center and physical therapy rehabilitation facilities in Oklahoma City and Lawton.

So, if a worker comes to Remondino with an ailing back, the doctor might recommend that the worker go to his diagnostic imaging center for an MRI (magnetic resonance imaging). The doctor then might recommend surgery at the Oklahoma Spine Hospital followed by rehabilitation at one of his rehabilitation centers.

“Yeah, I think that's a conflict,” local workers' compensation attorney Jeff Dasovich said of such arrangements.

Critics like Seney of the State Chamber say such arrangements provide financial incentives for doctors to recommend diagnostic procedures and surgeries that might be unnecessary, driving up medical costs.

“It's a big issue, especially in workers' compensation where the medical fee schedule is substantially higher than the Medicare reimbursement rate,” he said.

Surgeon disagrees

Remondino disagrees.

“I don't look at it as a conflict of interest at all. I look at it as really quality of care,” Remondino said.

As a physician, Remondino said his primary interest is the same as that of the patient: Both want the best quality of care possible.

Remondino said it was his desire for quality that drove him to become one of the founders and investors in Oklahoma Spine Hospital, despite personal financial risk.

“We have excellent community hospitals here in Oklahoma City,” he said. “They do a good job. But they are large institutions that have to serve a variety of medical needs.”

That creates frustrations for surgeons because they find themselves competing with doctors who have other specialties as they try to persuade hospital administrators to provide the latest and best equipment, he said.

Remondino recently took visitors on a tour of Oklahoma Spine Hospital where he proudly showed off spacious operating rooms that featured state-of-the-art equipment.

Dr. Steven Gaede, who has an ownership interest in Tulsa Spine & Specialty Hospital, said a desire to ensure consistent, quality nursing care for patients was one of the issues that prompted him to invest in that physician-owned hospital.

“We have one nurse for every four patients,” he said, comparing that to large community hospitals that he said sometimes have ratios of 1 to 10 and rely heavily on aides.

“Nurses love it and patients love it,” he said of his hospital's high concentration of nurses.

Gaede said that non-physician-owned community hospital doctors have limitations on their referral options.

“Community hospitals require physicians they employ to use exclusively only clinics and ancillary services they own,” he said. “There is no choice.”

Remondino and Gaede said their hospitals have high satisfaction ratings.

U.S. Sen. Tom Coburn, an Oklahoma doctor, said he has seen recent studies of physician-owned hospitals that show “outcomes are actually better and costs are actually lower, even though there is a small question of some self-referral and the conflict of interest that comes from that.”

“If you gave me a choice to have a procedure done in a physician-owned hospital or a … supposed nonprofit hospital, … I'd take the physician-owned hospital every time,” Coburn said.

Coburn said he has no financial interest in a physician-owned hospital and that criticism of such hospitals has come from community hospital groups that don't like the competition.

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by Randy Ellis
Investigative Reporter
For the past 30 years, staff writer Randy Ellis has exposed public corruption and government mismanagement in news articles. Ellis has investigated problems in Oklahoma's higher education institutions and wrote stories that ultimately led to two...
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