Who really profits from Maryland’s 1993 restrictions on CT Scans and MRIs? Out-of-state Corporations

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By James York, M.D.

For the past four years, the debate over who should be permitted to own and operate advanced imaging equipment in Maryland has been portrayed as a disagreement between opposing groups of doctors.

It’s true that Maryland’s treating physicians, like orthopedists, urologists and emergency medicine physicians, want to continue to offer their patients diagnostic CT scans and MRIs – as their counterparts do in every other state. And local radiologists want to stick with a 1993 law that a court recently ruled gives them the exclusive ability to offer these services.

But what’s been missing in this discussion is that these two groups of Maryland doctors represent a relatively small piece of what is at stake. The big money for imaging goes to stockholders and executives of out-of-state corporations that operate over 50 stand-alone radiology centers across the state, providing tens of thousands of scans each year.

One company alone – RadNet, based in California – operates 37 imaging centers in Maryland, under the names Advanced Radiology and Community Radiology. Another company – American Radiology Services (ARS) – operates 18 centers, and is actually a subsidiary of CML HealthCare, an Ontario company that is the largest provider of imaging services in Canada. By comparison, all of our state’s treating physicians combined operate fewer than a dozen MRI and CT machines in their locally-owned medical practices.

RadNet and ARS have both admitted that they stand to benefit financially from reduced competition for MRI and CT scans. In a presentation given shortly after ARS was acquired by Canada-based CML, ARS boasted that “[r]ecent legislative and regulatory changes have provided ARS with a significant opportunity to take market share from smaller imaging practices.” And what “changes” led to this opportunity? ARS cited a recent interpretation of Maryland’s Patient Referral Law that gave radiologists an effective monopoly on CT and MRI services.

Similarly, RadNet, in its own 2009 report to the U.S. Securities and Exchange Commission (called a 10-K), acknowledged what it considered a significant threat to its business model:

“[S]ome physician practices have established their own diagnostic imaging facilities within their group practices to compete with us.” As a result, RadNet says it “experience[s] additional competition as a result of those activities” and if it is “unable to successfully compete, [its] business and financial condition would be adversely affected.”

In January, Maryland’s Court of Appeals interpreted a 1993 law to mean that treating physicians are not permitted to offer advanced imaging services in their offices for immediate, convenient, quality diagnosis and treatment and that only offices consisting solely of radiologists can offer these imaging services. The Court’s decision sided with a Board of Physicians ruling from 2006 that had been issued, conveniently, while a board-certified radiologist was serving as Chairman of the Board of Physicians.

Without legislative action, the court decision means that patients in need of MRI and CT scans – imaging studies that were cutting-edge back when the law was passed, but today are the standard of care for diagnosing illnesses and injuries for many medical specialties – will have to travel to hospitals or radiology centers for diagnosis.

For out-of-state radiology companies, the court ruling is a bonanza, bolstering the monopoly that they have fought to create and protect. And they’re lobbying hard to keep it in the Maryland General Assembly – by fighting to kill Senate Bill 808 and House Bill 782, which would bring Maryland back into the national mainstream on health care access and choice.

Maryland hospitals are lobbying right alongside RadNet and ARS because they share the same interest – limiting competition and exercising monopoly control over markets. Hospitals are buying up doctors’ groups at an accelerating rate for that very reason.

If a patient is given a choice between getting an MRI in her doctor’s office or traveling a longer distance to wait around in a hospital, who in their right mind would choose the hospital? And in many cases, treatment in hospitals is far more expensive than in private practices.

RadNet’s 10-K makes clear what its effort is driven by:

“[D]ecreased revenue as a result of lower scan volumes per system could result in lower margins, which could materially adversely affect our business.”

That, in RadNet’s own words, is what its opposition to Senate Bill 808 and House Bill 782 is all about – profit margins.

There are still a few weeks in this year’s legislative session to get this right. And there’s still an opportunity for the Maryland General Assembly to promote choice and competition for advanced imaging, rather than protecting the monopolies of profit-driven, out-of-state radiology companies. Maryland’s doctors and patients deserve their legislators’ support.

Dr. James York is an orthopaedic surgeon with Chesapeake Orthopaedic & Sports Medicine Center in Glen Burnie and president of the Maryland Patient Care and Access Coalition.

Editor's Note: Some founders of Center Maryland work for one member of the Coalition.
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