The Federal Government has launched an investigation into whether a leading healthcare company potentially broke laws that ban offering incentives for doctors to over-service.
The ABC has obtained an email that shows Primary Health Care made an offer of company share options to two of its radiologists in 2010, which it indicated ended in April 2015.
A University of Sydney health law expert said the offer was a clear breach of two national health laws because it offered radiologists an incentive to make more money which could lead them to suggest more tests than needed.
The company said the offer was withdrawn the next day, is not in effect, and is not a breach of the law.
Following inquiries from the ABC this week the Department of Human Services said it would investigate.
Radiologists are specialist doctors who read scans and help make diagnoses and can make recommendations to referring doctors for more scans.
It is up to the referring doctor to approve the extra investigations.
In the email sent to two of its radiologists in June 2010, Primary Health Care offered the radiologists share options in the company.
It included a “vesting hurdle” of attaining revenues of $6.5 million in 2012.
This meant if the owners of the radiology clinics billed more than $6.5 million in that year, they could take advantage of the offer.
The Royal Australian and New Zealand College of Radiologists said the offer was not necessarily an incentive to over-service.
A college spokesman said there were very few opportunities for radiologists to over-service and statistics suggested self-referred tests were a small part of the Medicare budget.
‘Clear breach of the law’
University of Sydney health law expert Professor Cameron Stewart said the offer was a breach of the Health Insurance Act and national health care laws passed in each state.
He said both laws were in effect when the offer was made in 2010 and at present.
The Health Insurance Act bans offering incentives for medical services, and national healthcare law makes it a form of professional misconduct to offer incentives to provide health services.
“In a public health system, which is a nationalised system, it’s tempting to some doctors to over-service,” Professor Stewart said.
“We have specific laws and mechanisms to police over-servicing.
“And the fact we have those laws is indicative that it is a problem with some doctors.”
Professor Stewart said while the offer was not a direct incentive, it was his view that it still broke the law.
“The obvious effect of those types of offers is to incentivise providing services and to encourage over-servicing,” he said.
“The way it would function as an incentive is the more services that are ordered the more money you get paid.
“In my view it’s a clear breach of the law.”
Offer described as a pyramid scheme
Consumer Health Forum chief executive Adam Stankevicius said the offer was concerning for consumers and regulators.
“This kind of incentive deal could encourage companies to engage in serious levels of over-servicing in order to reach those targets,” he said.
“It has the potential to increase the costs, particularly the out-of-pocket costs for consumers for radiology services, and we know that’s a serious concern.
“It also has the potential to increase [consumers’] exposure to unnecessary levels of radiation.”
He described the offer as a pyramid scheme that also cost taxpayers money.
“The Consumer Health Forum would like to see serious attention being paid by health and corporate regulators as to whether this kind of offer breaches the national health legislation as well as breaching corporate legislation.”
Radiologists bound by Code of Ethics
The Royal Australian and New Zealand College of Radiologists said the option offer was “not necessarily” an incentive to order unnecessary scans and investigations.
Clinical radiology faculty dean Dr Greg Slater said the offer would only be a breach if there was a direct incentive to over-service.
“Radiologists are specialist doctors and we are held by a strict code of ethics to always put the patient first and I believe almost invariably that is the case,” he said.
“When it gets down to contracts and performance stimulants, there are many ways to make a person work harder but still do that legitimately.”
Dr Slater said the offer could encourage practitioners to save money by working longer hours or opening after hours.
He said it was rare for radiologists to “self-refer”, which means individually requesting extra or alternate scans or investigations.
Extra scans or tests were mostly conducted in consultation with the referring doctor and patient.
“Radiologists have got very limited ability to self-refer or to increase their income in any way because all our patients are referred to us by external professionals,” he said.
“Always we want to make sure the patient gets the right test first time, every time.”
Radiologists cannot over-service: Primary Health Care
In letters from its lawyer, Primary Health Care said the email was sent in the context of the acquisition of two diagnostic imaging businesses.
The companies had a combined purchase price of more than $6 million.
Primary Health Care said the offer was related to the companies maintaining their income.
It said the share offer was withdrawn the next day, in writing, because the terms of the offer were not authorised and could not proceed. It did not provide the ABC with a copy of the document indicating it was withdrawn.
The radiologist who received the offer told the ABC it was withdrawn the next day.
In its statement Primary Health Care said it had not provided any options since January 2010, and none to any radiologists since October 2009.
The email with the offer is dated June 2010 and was sent to the radiologist owners of the businesses involved. Laws banning the offering of incentives were in effect at the time.
Primary Health Care said it had never authorised or provided options with a vesting hurdle of $6.5 million.
The email said there was a vesting hurdle of revenues of more than $6.5 million for the two clinics.
Primary Health Care said it had never provided options at an exercise price of $3.79.
The email said the exercise price of each option was $3.79.
Government to investigate alleged offer
Primary Health Care said there can be no incentive for a radiologist to over-service because, in nearly all cases, radiologists can only respond to written requests from doctors and other healthcare practitioners.
“The opportunity, let alone incentive, for the radiologist to over-service does not exist,” it stated.
Primary Health Care said even if the options were granted they would not have breached the law.
A Department of Human Services spokesman said the Government took all allegations of prohibited practice seriously.
“All reports made to the department about potential prohibited practice, by either a member of the public or a medical practitioner, are reviewed in accordance with our compliance assessment procedures,” he said.
“The Department of Human Services will investigate this alleged offer further.”