December 1992 XIV/4


Physician self referral occurs when physicians refer their patients for tests or treatments to medical centers in which the referring physician has at least a partial financial interest. The referring physician does not provide direct patient services at the center in question, but does share in the revenue and profits of the center. Patients may be aware or unaware of the fact that their physicians own the facility to which they have been referred. The propriety of physician self referral has been questioned by many. (1) In 1991, the Council of Judicial Affairs of the American Medical Association stated that physicians should not practice self referral. In 1992 however, the House of Delegates of the American Medical Association adopted a more lenient policy which allows physicians to make such referrals if patients are informed of the physicians financial interest and of any alternative facilities for testing or treatment. Clearly, physicians referral is a contentious-topic This essay will present an ethical evaluation of the issue in the context of reimbursement of physicians for the services when they offer to the general public.


Professional persons render services which promote the common good of the community, or they perform services which promote to the private good of individuals. For example, police personnel are committed to maintaining peace and justice in the life of a community. This service benefits all in the community. People in the community receive police protection based upon their needs, not upon their ability to pay. On the other hand, stock brokers perform a private service. They help people who can pay for the service to make a profit on their investments. Stock brokers do not help clients invest money unless the clients are able to pay for their services. People who perform a public service related to the common good are compensated by the community for whom they perform the service. In general, activities associated with the common good of the community are not considered as for-profit endeavors. The society limits or eliminates for-profit activity in this section of community life. The police force of a city for example, is not allowed to set up private sources of revenue associated with their police work. If they do, the revenue is considered graft. On the other hand, services performed in the private sector are usually considered to be for-profit endeavors. People who perform a private service are usually compensated in direct relationship to the services rendered. Their compensation may vary greatly depending upon their ability to offer adequately the service in question. If the stock broker helps people to increase their investments, she makes more money. If she doesn't, she loses customers and her income.

Where do physicians fit in this division of public and private service to the community? Are they involved in a service of the public or private nature? This depends upon the way in which health care is envisioned and managed in a particular country. In most industrialized countries in the world, health care is considered a public service relating to the common good of the country. In these countries, physicians receive a stipend from the community which they serve. Usually, physicians have a definite number of people to care for (a panel) and they are remunerated whether or not the people request medical care. In this system, physicians are considered to be public servants of the community; not private entrepreneurs. In Canada for example, physicians receive a stipend from the federal or provincial government and are not allowed to engage in a for-profit practice. Moreover, in countries in which health care is considered as a service related to the common good the health care facilities are part of the public system of health care. Physicians and others are not able to own for-profit facilities to which they can direct patients and thus make a profit from these enterprises. In countries where health care is considered a right for all citizens, facilities are either owned by the community, or a privately owned, they are not for-profit enterprises and are integrated into the public system serving the common good of all members of the community. Thus, the concept of for-profit health care is not compatible with the provision of health care as a public service related to the common good.

In the United States, the situation in regard to health care is ambiguous. For some persons, health care is considered a public service pertaining to the common good. For example, the medicare, medicaid, and veterans health care programs are of this nature because admittance to these programs is based upon need, not upon ability to pay. Insofar as the greater portion of people in the United States is concerned however, health care is treated as a private good. Hence, patients need to be able to pay, usually through private insurance, in order to access the system. In the United States, compensation of physicians varies greatly depending upon the type and amount of services rendered. In addition, for-profit health care facilities are welcomed, not merely tolerated and physicians are allowed to act as entrepreneurs. At present, health care in the United States for the most part is a good of the private sector and medical care is looked upon as a commodity in the free market. Compensation for physicians services is limited only by the free market, as opposed to being limited by the need to provide a public service for society as it is in other countries. Given the manner in which health care is envisioned and managed in the United States, and given the latitude that for-profit corporations have in supplying health care in our country, there does not seem to be anything intrinsically unethical with self referral by physicians. If for-profit health care facilities are considered an integral part of the health care system in the United States, it seems that physicians have just as much right as anyone else to invest in these facilities.


Whether the provision of health care in the United States will be considered a private good in the near future is debatable. It seems the two main drawbacks of health care service in the U.S., namely continual escalation of cost and lack of access for over 30 million people, are due to treating health care as a private good. But for the time being, self referral on the part of physicians, does seem to be an ethical practice. The ethical problems which result from physician self referral stem from the way in which the centers are conducted, rather than from the fact that they are physician owned. Recent studies make it clear that self referral to facilities owned by physicians result in greater costs and more procedures than when patients are referred to independent health care facilities. (2) Moreover, the access to care is often limited by physician owned facilities. A recent study in Florida for example, showed that no physician owned centers providing radiation therapy were in inner city neighborhoods or rural areas while independent facilities, usually in not for-profit hospitals, were located in these areas.

In order to limit unethical practice in physician owned health care facilities, it seems the following safeguards should be followed: 1) If patients are referred to facilities in which physicians have a financial interest, patients should be informed of this fact. Moreover, as the House of Delegates of the A.M.A. stated, patients should also be informed of alternate facilities and be allowed to use these facilities. 2) A board of trustees or directors involving people from the community should be formed to monitor the activities of the physician owned facility. This board would monitor costs and services in relation to free standing centers and provide information to the public concerning the activities and profits of the facility. The profession of medicine is undergoing a crisis of confidence insofar as the American public is concerned. This crisis will only be exacerbated if the practices revealed in self referral centers are allowed to continue. At the heart of effective medicine is trust between physician and patient. There is no surer way to destroy trust than to demonstrate that profit rather than patient well-being is the goal of medical care.


Attitudes toward the provision of health care in the United States are changing. Treating health care as a service of the private sector is simply not working. Escalation of costs and lack of access prompt many to call for a recognition pf health care as a public service pertaining to the common good. Another factor hastening the transition to a concept of heath care as a public good is the way in which self referral centers are administrated in the U.S.

Kevin O'Rourke, OP


1. A. Sedlow et al, "Increased Costs and Rates of Use as a Result of Self Referral by Physicians," NEJM (November 19, 1992) p.1502.

2. J.M. Mitchell, and J.N. Sunshine, "Consequences of Physician Ownership of Health Care Facilities," NEJM(November 19, 1992) p.1497.

© Kevin O'Rourke, O.P.