Multispecialty group medical practice

Dr. Moe, Dr. Howard and Dr. Fine are principals in a multispecialty group medical practice. Dr. Moe is a primary care physician. Dr. Howard is an internist, and Dr. Fine is a radiologist. They jointly own an office building which also houses a clinical laboratory and state-of-the-art radiology equipment.

Dr. Howard supervises the lab, and makes the most use of its facilities, ordering the majority of lab tests for patients. Dr. Fine uses the radiology equipment almost exclusively. Dr. Moe treats the greatest number of patients, and makes the most referrals to the other two physicians.

All billings to Medicare and other payers for the group practice are made under a group billing number. Income for the practice, though still quite substantial, has declined in recent years.

Dr. Moe is concerned that the costs of the lab and radiology equipment should be charged to each doctor according to utilization, and that he should receive credit for the patient business he refers to the other two doctors, when they divide the group profits at year end. Dr. Howard believes he should likewise receive credit for the revenues he brings in from his use and supervision of the lab, and Dr. Fine believes he should receive credit for the revenues he brings in from his extensive use of the diagnostic radiology equipment.

The three doctors have considered billing separately for the services they each provide to their patients. They do not want to dissolve the group, and have engaged your services with regard to developing a compensation arrangement that will reward their individual productivity while remaining in compliance with the Physician Self-Referral prohibitions.

1. How would you advise each of the three doctors?
2. What are the intra-group referral implications for Medicare billings and physician compensation?