Last week, I wrote about how increasing competition could reduce the total cost of healthcare. While reducing hospital stays and increasing the capacity of physician clinics would be an effective means of increasing competition, a series of laws presently prohibits doctors from opening their own day surgery centers.
The Stark Laws prevent physician self referrals. These laws were designed to prohibit kickbacks to physicians for diagnostic testing. The reasoning was largely to protect patients, who have limited transparency into financial relationships their physicians have, from being unnecessarily directed to diagnostic centers that in turn pay the doctor for the referral. It was meant to limit conflicts of interest that patients would not be privy to. It has since limited doctor's offices from expanding their business to include diagnostic testing and surgery centers.While preventing kickbacks is a noble cause, the Stark laws create a barrier in the market's ability to grow. The Sherman Laws were designed to distribute market share and prevent monopolies. Antitrust suits commonly arise when a single firm is occupying too much space in any single market. For clinicians, then, the two laws are at odds with each other.Physician practices are only permitted to grow as a function of their clinical practice. Stark laws prevent new divisions such as diagnostic imaging or labs to be created under the same business entity. This requires other entities to create ancillary services. Limiting practices from opening these divisions limits the total capacity of a market and thus potentiates a Sherman violation: should one diagnostic center suddenly capture a majority of the market share, most of the professionals who could respond with new businesses are limited in their ability to do so.
A trend is emerging for physicians to disclose their financial and consulting relationships with patients. This is the professionalism expected of doctors and is gaining traction. As this trend continues and even becomes compulsory, then the worries of the Stark Law began to fall away. In order to reduce the cost of healthcare, it is important to give physicians the ability to expand their businesses and create a more competitive economy. Until a re-thinking of the interaction of Stark Laws and Sherman Laws occurs, competition will be limited.Sherman law:
http://www.stolaf.edu/people/becker/antitrust/statutes/sherman.html
Stark Law:
http://www.aishealth.com/Compliance/HCFA/StarkII.html
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