Unregulated private markets for health care in Canada? Rules of professional misconduct, physician kickbacks and physician self-referral.

T he regulation of private health care has become a central issue in Canadian health policy. The legality of private markets for medical services already available under public health insurance has attracted attention. 1 However, there has been little discussion of the regulation of independent health facilities (IHFs). 2 IHFs are privately owned, for-profit entities that provide therapeutic and diagnostic services, such as physiotherapy and laboratory testing, and operate both within and outside the public system. There may be 1000 IHFs in Ontario alone. 2 IHFs depend on physician referrals for patients. This raises 2 important issues. First, IHFs can compensate physicians for patient referrals (a kickback), a practice that can potentially distort clinical judgement. Second, physicians can make referrals to IHFs that they themselves own, raising similar concerns. Both problems have occurred in the United States and have prompted regulation. 3,4 But, in spite of the US experience, kickbacks and self-referral were not mentioned in the Kirby 5 and Romanow 6 reports and have generated limited scholarly commentary in Canada. 7 Financial conflicts of interest involving physicians are regulated by common law, which imposes a fiduciary duty on physicians toward patients. 8,9 Canadian courts have stated that physicians fulfill this duty by disclosing conflicting interests to patients. 10,11 Unfortunately, in most clinical settings disclosure provides inadequate protection for patients. The courts acknowledge that the professional regulatory bodies such as the provincial colleges of physicians and surgeons may have the greatest expertise in governing conflict of interest. 12 Therefore, we review the rules governing financial relationships between physicians and IHFs as found in provincial codes of professional conduct for physicians. In some respects, these rules adequately protect patients; in others, they do not. We propose regulatory models to be implemented before the further proliferation of IHFs. The term kickback refers to the financial compensation of physicians for patient referrals. Compensation can flow from IHFs to referring physicians, or from specialists to primary care physicians (fee-splitting). Compensation can consist of cash payments for each referral, discounted office space or leases for medical equipment, or business loans at below-market rates. Compensation for referrals is unobjectionable in most markets, but is problematic in health care in view of the potential conflict between physicians' financial self-interest and their duty to advise patients solely on the basis of health needs. Kickbacks have the potential to entice physicians to make unnecessary referrals, or to refer patients …