Physician Investment and Self-Referral: Philosophical Analysis of a Contentious Debate

Abstract

A new economic phenomenon, in which physicians refer their patients to ancillary facilities of which they themselves are owners or substantial investors, presents a 'laboratory' for assessing philosophers' potential contributions to public policy issues. In this particular controversy, 'prohibitionists' who wish to ban all such self-referral focus on the dangers that patients and payers may receive or be billed for unnecessary or poor-quality care. 'Laissez-fairists', in contrast, argue that self-referral should be freely permitted, with a reliance on personal ethics and internal professional monitoring to guard against abuse. Undue government regulation, they argue, infringes providers' and patients' economic freedom, and stifles the competition that can yield better quality care at lower prices. As this debate features basic values and large amounts of money, it has been marked by rancorous rhetoric, shallow argument, and muddled reasoning. The philosopher's first contribution, therefore, is to expose simplistic and fallacious arguments, whether empirical, conceptual, moral, or legal. Beyond this the philosopher can help to identify the important values at stake and, perhaps, to identify resolutions that honor those values better than the more simplistic answers proffered previously. For abusive self-referral, as distinguished from kickbacks, the author recommends that civil remedies be favored over criminal prohibitions. She suggests that the doctrine of 'bad faith breach of contract' might appropriately be extended into this new area to provide a powerful means by which aggrieved patients and payers can hold physicians personally accountable for abusive self-referrals.