THE GENERAL ASSEMBLY OF PENNSYLVANIA

HOUSE BILL

INTRODUCED BY DeLUCA, BOYD, BRENNAN, BROWN, CALTAGIRONE, D. COSTA, CREIGHTON, FRANKEL, GEIST, GINGRICH, HENNESSEY, JOSEPHS, KORTZ, KOTIK, MELIO, MICOZZIE, MOUL, MUNDY, MURT, MYERS, PYLE, SIPTROTH, K. SMITH, SOLOBAY AND WHITE, MAY 4, 2009

REFERRED TO COMMITTEE ON HEALTH AND HUMAN SERVICES, MAY 4, 2009  

AN ACT

Prohibiting certain referrals of patients by health care

providers for health care services; providing for powers and

duties of the Department of Health; and imposing penalties.

TABLE OF CONTENTS

Chapter 1.  Preliminary Provisions

Section 101.  Short title.

Section 102.  Declaration of policy.

Section 103.  Definitions.

Chapter 3.  Referral Restrictions

Section 301.  Requirements for accepting outside referrals for

diagnostic imaging.

Section 302.  Prohibited referrals and claims for payment.

Chapter 11.  Miscellaneous Provisions

Section 1101.  Effective date.

The General Assembly of the Commonwealth of Pennsylvania

hereby enacts as follows:

CHAPTER 1

PRELIMINARY PROVISIONS

Section 101.  Short title.

This act shall be known and may be cited as the Patient Self-

Referral Act.

Section 102.  Declaration of policy.

The General Assembly finds and declares as follows:

(1)  The referral of a patient by a health care provider

to a provider of health care services in which the referring

health care provider has an investment interest represents a

potential conflict of interest.

(2)  These referral practices may limit or eliminate

competitive alternatives in the health care services market,

may result in overutilization of health care services, may

increase costs to the health care system and may adversely

affect the quality of health care.

(3)  This act is intended to prohibit patient referrals

between health care providers and entities providing health

care services in which health care providers have a financial

interest and to protect the residents of this Commonwealth

from unnecessary and costly health care expenditures.

Section 103.  Definitions.

The following words and phrases when used in this act shall

have the meanings given to them in this section unless the

context clearly indicates otherwise:

"Board."  Any of the following boards relating to the

respective professions:

(1)  The State Board of Medicine.

(2)  The State Board of Osteopathic Medicine.

(3)  The State Board of Dentistry.

(4)  The State Board of Podiatry.

(5)  The State Board of Chiropractic.

(6)  The State Board of Optometry.

(7)  The State Board of Pharmacy.

"Comprehensive rehabilitation services."  Services that are

provided by health care professionals licensed under the laws of

this Commonwealth to provide speech, occupational or physical

therapy services on an outpatient or ambulatory basis.

"Department."  The Department of Health of the Commonwealth.

"Designated health services."  Includes:

(1)  Clinical laboratory services.

(2)  Physical therapy services.

(3)  Comprehensive rehabilitative services.

(4)  Diagnostic imaging services.

(5)  Radiation therapy services.

"Diagnostic imaging services."  Includes:

(1)  Magnetic resonance imaging.

(2)  Nuclear medicine.

(3)  Angiography.

(4)  Arteriography.

(5)  Computed tomography.

(6)  Positron emission tomography.

(7)  Digital vascular imaging.

(8)  Bronchography.

(9)  Lymphangiography.

(10)  Splenography.

(11)  Ultrasound.

(12)  EEG.

(13)  EKG.

(14)  Nerve conduction studies.

(15)  Evoked potentials.

"Entity."  Any individual, partnership, firm, corporation or

other business entity.

"Fair market value."  Value in arm's-length transactions,

consistent with the general market value and, with respect to

rentals or leases, the value of rental property for general

commercial purposes, not taking into account its intended use,

and, in the case of a lease of space, not adjusted to reflect

the additional value the prospective lessee or lessor would

attribute to the proximity or convenience to the lessor where

the lessor is a potential source of patient referrals to the

lessee.

"Group practice."  A group of two or more health care

providers legally organized as a partnership, professional

corporation or similar association:

(1)  in which each health care provider who is a member

of the group provides substantially the full range of

services which the health care provider routinely provides,

including medical care, consultation, diagnosis or treatment,

through the joint use of shared office space, facilities,

equipment and personnel;

(2)  for which substantially all of the services of the

health care providers who are members of the group are

provided through the group and are billed in the name of the

group and amounts so received are treated as receipts of the

group; and

(3)  in which the overhead expenses of and the income

from the practice are distributed in accordance with methods

previously determined by members of the group.

"Health care provider."  A licensee of any of the following:

(1)  The State Board of Medicine.

(2)  The State Board of Osteopathic Medicine.

(3)  The State Board of Dentistry.

(4)  The State Board of Podiatry.

(5)  The State Board of Chiropractic.

(6)  The State Board of Optometry.

(7)  The State Board of Pharmacy.

"Immediate family member."  A health care provider's spouse,

child, child's spouse, grandchild, grandchild's spouse, parent,

parent-in-law or sibling.

"Investment interest."  An equity or debt security issued by

an entity, including, without limitation, shares of stock in a

corporation, units or other interests in a partnership, bonds,

debentures, notes or other equity interests or debt instruments.

"Investor."  A person or entity owning a legal or beneficial

ownership or investment interest, directly or indirectly,

including, without limitation, through an immediate family

member, trust or another entity related to the investor within

the meaning of 42 CFR § 413.17 (relating to cost to related

organizations), in an entity.

"Licensed hospital."  An institution licensed as a hospital

by the Department of Health pursuant to Chapter 8 of the act of

July 19, 1979 (P.L.130, No.48), known as the Health Care

Facilities Act.

"Outside referral for diagnostic imaging services."  A

referral of a patient to a group practice or sole provider for

diagnostic imaging services by a physician who is not a member

of the group practice or of the sole provider's practice and who

does not have an investment interest in the group practice or

sole provider's practice for which the group practice or sole

provider billed for both the technical and the professional fee

for the patient and the patient did not become a patient of the

group practice or sole provider's practice.

"Patient of a group practice."  A patient who receives a

physical examination, evaluation, diagnosis and development of a

treatment plan if medically necessary by a physician who is a

member of the group practice.

"Patient of a sole provider."  A patient who receives a

physical examination, evaluation, diagnosis and development of a

treatment plan if medically necessary by a physician who is a

member of the sole provider's practice.

"Referral."  Any referral of a patient by a health care

provider for health care services, including, without

limitation:

(1)  The forwarding of a patient by a health care

provider to another health care provider or to an entity

which provides or supplies designated health services or any

other health care item or service.

(2)  The request or establishment of a plan of care by a

health care provider, which includes the provision of

designated health services or other health care item or

service.

"Sole provider."  One health care provider who maintains a

separate medical office and a medical practice separate from any

other health care provider and who bills for services separately

from the services provided by any other health care provider and

does not share overhead expenses or professional income with any

other person or group practice.

CHAPTER 3

REFERRAL RESTRICTIONS

Section 301.  Requirements for accepting outside referrals for

diagnostic imaging.

(a)  Conditions.--A group practice or sole provider accepting

outside referrals for diagnostic imaging services must comply

with the following conditions:

(1)  Diagnostic imaging services must be provided

exclusively by a group practice physician or by a full-time

or part-time employee of the group practice or of the sole

provider's practice.

(2)  All equity in the group practice or sole provider's

practice accepting outside referrals for diagnostic imaging

must be held by the physicians comprising the group practice

or the sole provider's practice, each of whom must provide at

least 75% of the physician's professional services to the

group.

(3)  A group practice or sole provider may not enter

into, extend or renew any contract with a practice management

company that provides any financial incentives, directly or

indirectly, based on an increase in outside referrals for

diagnostic imaging services from any group or sole provider

managed by the same practice management company.

(4)  The group practice or sole provider accepting

outside referrals for diagnostic imaging services must bill

for both the professional and technical components of the

service on behalf of the patient, and no portion of the

payment, or any type of consideration, either directly or

indirectly, may be shared with the referring physician.

(5)  Group practices or sole providers that have a

Medicaid provider agreement with a State agency must furnish

diagnostic imaging services to their Medicaid patients and

may not refer a Medicaid recipient to a hospital for

outpatient diagnostic imaging services unless the physician

furnishes the hospital with documentation demonstrating the

medical necessity for the referral. If necessary, the

Commonwealth may apply for a Federal waiver to implement this

paragraph.

(6)  All group practices and sole providers accepting

outside referrals for diagnostic imaging services shall

report annually to the department providing the number of

outside referrals accepted for diagnostic imaging services

and the total number of all patients receiving diagnostic

imaging services.

(b)  Violation.--If a group practice or sole provider accepts

an outside referral for diagnostic imaging services in violation

of this section or if a group practice or sole provider accepts

outside referrals for diagnostic imaging services in excess of

the percentage limitation established in subsection (a)(2), the

group practice or the sole provider shall be subject to the

penalties in section 302.

(c)  Annual attestation.--Each managing physician member of a

group practice and each sole provider who accepts outside

referrals for diagnostic imaging services shall submit an annual

attestation signed under oath to the department which shall

include the annual report required under subsection (a)(6), and

which shall further confirm that each group practice or sole

provider is in compliance with the percentage limitations for

accepting outside referrals and the requirements for accepting

outside referrals listed in subsection (a). The department may

verify the report submitted by group practices and sole

providers.

Section 302.  Prohibited referrals and claims for payment.

(a)  Designated health services.--A health care provider may

not refer a patient for the provision of designated health

services to an entity in which the health care provider is an

investor or has an investment interest.

(b)  Other health care items or services.--A health care

provider may not refer a patient for the provision of any other

health care item or service to an entity in which the health

care provider is an investor unless any of the following

applies:

(1)  The provider's investment interest is in registered

securities purchased on a national exchange or over-the-

counter market and issued by a publicly held corporation:

(i)  whose shares are traded on a national exchange

or on the over-the-counter market; and

(ii)  whose total assets at the end of the

corporation's most recent fiscal quarter exceeded

$50,000,000.

(2)  With respect to an entity other than a publicly held

corporation described in paragraph (1), and a referring

provider's investment interest in the entity, each of the

following requirements are met:

(i)  No more than 50% of the value of the investment

interests are held by investors who are in a position to

make referrals to the entity.

(ii)  The terms under which an investment interest is

offered to an investor who is in a position to make

referrals to the entity are no different from the terms

offered to investors who are not in a position to make

referrals.

(iii)  The terms under which an investment interest

is offered to an investor who is in a position to make

referrals to the entity are not related to the previous

or expected volume of referrals from that investor to the

entity.

(iv)  There is no requirement that an investor make

referrals or be in a position to make referrals to the

entity as a condition for becoming or remaining an

investor.

(3)  With respect to either the entity or publicly held

corporation:

(i)  The entity or corporation does not lend funds to

or guarantee a loan for an investor who is in a position

to make referrals to the entity or corporation if the

investor uses any part of the loan to obtain the

investment interest.

(ii)  The amount distributed to an investor

representing a return on the investment interest is

directly proportional to the amount of the capital

investment, including the fair market value of any

preoperational services rendered, invested in the entity

or corporation by that investor.

(c)  Claim for payment.--No claim for payment may be

presented by an entity to any individual, third-party payor or

other entity for a service furnished pursuant to a referral

prohibited under this section.

(d)  Refund.--If an entity collects any amount that was

billed in violation of this section, the entity shall refund

that amount on a timely basis to the payor or individual,

whichever is applicable.

(e)  Civil penalty.--Any person that presents or causes to be

presented a bill or a claim for service that the person knows or

should know is for a service for which payment may not be made

under subsection (c) or for which a refund has not been made

under subsection (d) shall be subject to a civil penalty of not

more than $15,000 for each service to be imposed and collected

by the appropriate board.

(f)  Circumvention arrangement or scheme.--Any health care

provider or other entity that enters into an arrangement or

scheme, such as a cross-referral arrangement, which the

physician or entity knows or should know has a principal purpose

of assuring referrals by the physician to a particular entity

which, if the physician directly made referrals to the entity,

would be in violation of this section, shall be subject to a

civil penalty of not more than $100,000 for each circumvention

arrangement or scheme to be imposed and collected by the

appropriate board.

(g)  Violation.--A violation of this section by a health care

provider shall constitute grounds for disciplinary action to be

taken by the applicable board pursuant to the applicable

licensing statute. A violation of this section by a licensed

hospital shall be deemed a violation under the act of July 19,

1979 (P.L.130, No.48), known as the Health Care Facilities Act.

(h)  Other violation.--It is a violation of this act for a

licensed hospital to discriminate against or otherwise penalize

a health care provider for compliance with this act.

CHAPTER 11

MISCELLANEOUS PROVISIONS

Section 1101.  Effective date.

This act shall take effect in 60 days.