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Doctor, Refer Thyself

Imagine this scenario: After battling weeks of fatigue, you visit your general practitioner. To aid in diagnosis, the doctor suggests you submit to blood tests three times a week. If you found out that the physician had a financial interest in the lab that was testing your blood, you might be outraged--and with good reason. Self-referral is a conflict of interest that Congress has banned for nearly all physicians. Kidney doctors, however, are exempt. They can--and do--refer patients to dialysis clinics in which they have a financial stake. "Dialysis is almost unique [in this respect]," says Jim Kronenberg of the Oregon Medical Association. It's not clear why kidney doctors got their exemption. Industry sources say that in the early days of dialysis there were few machines and few kidney doctors. Today, however, dialysis machines are plentiful, yet it is common practice for nephrologists to refer patients to their own dialysis clinics. In fact, self-referral is an important part of Renal Care Group, Inc.'s strategy. The company, which owns the majority of Pacific Northwest Renal Services, came to Portland in February 1998, buying an interest in clinics owned by Legacy and OHSU. It also bought 90 percent of the Comprehensive Kidney Center, located at 2300 SW 6th Ave., from nine physicians. Those doctors now have an incentive to refer patients to PNRS--which is the idea, according to the RCGI documents. "In many instances, stockholders of the company are the primary referral sources for dialysis centers operated by the company," states the most recent quarterly report. Doctors are ethically bound to deliver the best patient care possible, but as owners of a publicly traded company they are also beholden to shareholders, whose only concern is profit. Until recently RCGI was a fabulous investment. Results exceeded analysts' profit expectations for 12 consecutive quarters. On March 2, the company announced that its profits for the fourth quarter were 72 percent higher than for the same period last year. But the stellar results couldn't stem RCGI's free fall in the stock market. The company's share price has dropped more than 50 percent since mid-January. It's not clear what caused the drop, but since last September RCGI insiders have been heavy sellers. More recently, poor results by a competitor, Los Angeles-based Total Renal Care, have weighed on the dialysis industry.--NJBack to Lead Story- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -Willamette Week | originally published March 24, 1999