The rates reflect several aspects of American medicine: increasing specialization, the lack of time for any doctor to give to complex cases, and fear of lawsuits over not consulting an expert. At the same time, referrals are a way for cash-strapped doctors to generate business.

Image Credit... Mark Allen Miller

When I was in training, simple referrals from internists, like patients with only mild hypertension, bothered me as a waste of time. Now that I am in practice, I welcome them. I haven’t changed my mind that these referrals are probably unnecessary, and there is plenty of evidence that wasteful expert consultation is adding to health costs and creating redundant care. But as a full-fledged doctor, I appreciate the business. It is hard not to view a referral as an overture from another physician, and it is equally hard not to return the favor.

A sort of paradox is at work. Specialists are better paid than primary care physicians, but they are also less autonomous because, unlike primary care physicians, they depend on other doctors for referrals. There is pressure on specialists to keep referral sources happy, especially in doctor-saturated metropolitan areas like New York City.

There are limits, of course, on the autonomy of referring physicians, too. For instance, by federal law a doctor cannot refer patients to himself or to a business in which he has a significant financial stake, like a laboratory or imaging center, and he cannot be paid for a referral. The reasoning is that such behavior can interfere with clinical judgment, decrease quality and increase costs.

In 2006, Tenet Healthcare Corp., based in Dallas, agreed to pay $21 million to settle a whistleblower lawsuit asserting that a hospital it owned in San Diego had paid kickbacks to physicians for referrals. (Tenet did not admit wrongdoing.) That same year, a New Jersey teaching hospital was investigated for giving sham salaries to community doctors in a reported attempt to increase the number of referrals to its cardiac surgery program. Two cardiologists pleaded guilty to federal fraud charges.

But there are gray areas in practice. The Office of the Inspector General in the Department of Health and Human Services has investigated office space rentals, for example. Across the country, mobile medical imaging companies have made arrangements with internists to perform, in their offices, cardiac ultrasounds, which the companies send to cardiologists for interpretation. Insurance companies that cover the imaging pay the companies, and the companies pay rent to the internists. By law, these rent payments must reflect fair market value and be unrelated to the volume of patients referred by the internists for imaging. But according to doctors familiar with these agreements, that isn’t always the case.