PRINTER'S NO. 742
No. 674 Session of 1997
INTRODUCED BY DeLUCA, ITKIN, TIGUE, OLASZ, YOUNGBLOOD, BELARDI
AND KIRKLAND, MARCH 5, 1997
REFERRED TO COMMITTEE ON HEALTH AND HUMAN SERVICES,
MARCH 5, 1997
AN ACT
1 Regulating self-referrals by health care practitioners;
2 requiring disclosure of financial or ownership interests of
3 health care providers in health care facilities; imposing
4 civil penalties; conferring powers and duties on the
5 Department of Health, the State Health Facility Hearing
6 Board, various State licensing boards and the Department of
7 State; and making a repeal.
8 TABLE OF CONTENTS
9 Chapter 1. Preliminary Provisions
10 Section 101. Short title.
11 Section 102. Declaration of policy.
12 Section 103. Definitions.
13 Chapter 3. Prohibition on Health Care Practitioner
14 Self-Referrals
15 Section 301. General ban on self-referrals.
16 Section 302. Exceptions to ban on self-referrals.
17 Section 303. Prohibition on kickbacks.
18 Section 304. Waivers.
19 Section 305. Disclosure.
20 Chapter 5. Administration
1 Section 501. Civil penalties.
2 Section 502. Authority of department.
3 Section 503. Board.
4 Chapter 21. Miscellaneous Provisions
5 Section 2101. Severability.
6 Section 2102. Repeals.
7 Section 2103. Applicability.
8 Section 2104. Effective date.
9 The General Assembly of the Commonwealth of Pennsylvania
10 hereby enacts as follows:
11 CHAPTER 1
12 PRELIMINARY PROVISIONS
13 Section 101. Short title.
14 This act shall be known and may be cited as the Health Care
15 Practitioner Self-Referral Act.
16 Section 102. Declaration of policy.
17 The General Assembly finds and declares as follows:
18 (1) The purpose of this act is to reduce or eliminate
19 self-referrals.
20 (2) Self-referral practices often limit or eliminate
21 competitive alternatives in the health care services market,
22 result in overutilization of certain health care services,
23 increase costs generally in the health care system, and may,
24 in some instances, adversely affect the quality of health
25 care.
26 (3) While self-referrals may be appropriate in certain
27 instances, health care practitioners should be required to
28 fully disclose their financial arrangements when making self-
29 referrals.
30 (4) A self-referral arrangement should be allowed only
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1 where the Department of Health determines there is a
2 compelling need or that the referral relationship will not
3 impede the professional judgment of the referring health care
4 practitioner.
5 Section 103. Definitions.
6 The following words and phrases when used in this act shall
7 have the meanings given to them in this section unless the
8 context clearly indicates otherwise:
9 "Board." The State Health Facility Hearing Board.
10 "Department." The Department of Health of the Commonwealth.
11 "Facility" or "entity." A health care practitioner,
12 partnership, association, group practice, business corporation
13 or professional corporation which is not located on the premises
14 of another health care practitioner.
15 "Fair market value." The value in arms-length transactions,
16 consistent with the general market value. With respect to
17 rentals or leases, fair market value means the value of rental
18 property for general commercial purposes, not taking into
19 account its intended use and, in the case of lease of space, not
20 adjusted to reflect the additional value that a prospective
21 lessee or lessor would attribute to the proximity or convenience
22 to the lessor where the lessor is a potential source of patient
23 referrals to the lessee.
24 "Financial or ownership interest." A financial or ownership
25 interest to any extent or degree through equity, debt or other
26 means, held by the health care practitioner or an immediate
27 family member of the practitioner.
28 "Group practice."
29 (1) A group of two or more health care practitioners
30 legally organized as a partnership, professional corporation,
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1 health maintenance organization, managed care network, health
2 alliance or similar association which meets all of the
3 following:
4 (i) Each health care practitioner who is a member of
5 the group provides substantially the full range of
6 services which the health care practitioner routinely
7 provides, including medical care, consultation, diagnosis
8 or treatment, through the joint use of office space,
9 facilities, equipment and personnel.
10 (ii) Substantially all of the services of the health
11 care practitioners who are members of the group are
12 provided through the group and are billed in the name of
13 the group.
14 (iii) Amounts received under subparagraph (ii) are
15 treated as receipts of the group.
16 (iv) The overhead expenses of and the income from
17 the practice are distributed in accordance with methods
18 previously determined by members of the group.
19 (2) For purposes of this act, a "group practice" may
20 also include a health care practitioner in solo practice,
21 who:
22 (i) meets the criteria under paragraph (1); or
23 (ii) has an active ownership interest in a facility
24 or entity and personally supervises the activities or
25 services provided at the facility or entity.
26 However, a health care practitioner in solo practice who does
27 not meet both of these criteria must comply with the
28 disclosure requirements of sections 304(f)(2) and 305.
29 (3) For purposes of this act, a "group practice" may
30 also include any health maintenance organization, preferred
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1 provider organization, coordinated care organization or other
2 health care service provider which meets the criteria under
3 paragraph (1) and is licensed or approved by the
4 Commonwealth.
5 "Health care practitioner." An individual who is authorized
6 to practice the healing arts or some component thereof by a
7 license, permit, certificate or registration issued by a
8 Commonwealth agency or licensing board.
9 "Immediate family member." A parent, spouse, child, sibling
10 or sibling's spouse.
11 "Practice-related services."
12 (1) Health care services that are furnished personally
13 by the referring health care practitioner, personally by a
14 health care practitioner or personally by individuals who are
15 employed by or under the supervision of the health care
16 practitioner or another health care practitioner in the group
17 practice to which the health care practitioner belongs.
18 Practice-related services may be provided in a building in
19 which the referring health care practitioner, or another
20 health care practitioner who is a member of the same group
21 practice, furnishes health care practitioners' services
22 unrelated to the furnishing of the items or services for
23 which a referral was made or, in the case of a referring
24 health care practitioner who is a member of a group practice,
25 may be provided in another building which is used by the
26 group practice for the centralized provision of such items or
27 services of the group.
28 (2) Health care services that are billed by the health
29 care practitioner performing or supervising the services or
30 by a group practice of which the health care practitioner is
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1 a member.
2 "Self-referral." Referral by a health care practitioner of a
3 patient for health care services to a facility or entity in
4 which the health care practitioner has a financial or ownership
5 interest. The term does not include in-office ancillary health
6 care services provided by a solo health care practitioner or a
7 member of the practitioner's group practice.
8 CHAPTER 3
9 PROHIBITION ON HEALTH CARE
10 PRACTITIONER SELF-REFERRALS
11 Section 301. General ban on self-referrals.
12 (a) General rule.--
13 (1) It is unlawful for a health care practitioner to
14 make a self-referral.
15 (2) It is unlawful for a facility, entity or health care
16 practitioner to accept a referral from a health care
17 practitioner who the facility, entity or health care
18 practitioner knows or has reason to know has a financial
19 interest in such facility, entity or health care
20 practitioner.
21 (b) Billing.--No invoice or claim for payment may be
22 presented by any entity or health care practitioner to any
23 individual, third-party payer or other entity for health care
24 services furnished pursuant to a referral prohibited under this
25 act.
26 (c) Agreements.--Any health care practitioner, facility or
27 entity that enters into an arrangement or a scheme, such as a
28 cross-referral arrangement, that the health care practitioner,
29 facility or entity knows or should know is intended to induce
30 referrals of patients for designated health care services to a
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1 particular entity and that, if the health care practitioner
2 directly made referrals to such entity, would constitute a
3 prohibited referral under this section, is in violation of this
4 act.
5 Section 302. Exceptions to ban on self-referrals.
6 The prohibitions on self-referrals under section 301 shall
7 not apply to any of the following situations:
8 (1) Emergency referrals or admissions in situations
9 where to delay or forego the required health care service
10 would pose a health risk to the patient.
11 (2) Ownership of publicly traded companies if the
12 financial or ownership interests of the health care
13 practitioner amounts to no more than 5% of the investment
14 securities, including shares or bonds, debentures, notes or
15 other debt instruments, of a corporation which were purchased
16 on terms generally available to the public and which are in a
17 corporation that:
18 (i) is listed for trading on the New York Stock
19 Exchange or on the American Stock Exchange, or is a
20 national market system security traded under an automated
21 interdealer quotation system operated by the National
22 Association of Securities Dealers; and
23 (ii) had, at the end of the corporation's most
24 recent fiscal year, total assets exceeding $100,000,000.
25 (3) Practice-related services if the health care-related
26 services are furnished personally by the referring health
27 care practitioner, personally by a health care practitioner
28 who is a member of the same group practice as the referring
29 health care practitioner, or personally by individuals who
30 are employed by such health care practitioner, group practice
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1 or who are supervised by the health care practitioner or by
2 another health care practitioner in the group practice.
3 (4) Leases and rental agreements if the health care
4 practitioner's only financial or ownership interest in a
5 referring facility or entity derives from a lease or rental
6 agreement obtained at a fair market value.
7 (5) Referrals under a contractual arrangement for the
8 provision of goods or services between or among a health care
9 practitioner and a health care practitioner, facility, entity
10 or group practice such as a managed care network or health
11 alliance, if:
12 (i) the arrangement is set forth in writing, signed
13 by the parties and specifies the goods or services
14 covered by the arrangement;
15 (ii) the arrangement covers all the goods or
16 services to be provided by the health care practitioner
17 to the health care practitioner, facility, entity or
18 group practice;
19 (iii) the aggregate goods or services contracted for
20 do not exceed those that are reasonable and necessary for
21 the legitimate business purposes of the arrangement;
22 (iv) the term of the arrangement is not less than
23 one year, provided, however, that customary and
24 reasonable termination provisions are permitted; and
25 (v) the compensation to be paid over the term of the
26 arrangement is determined in advance, is consistent with
27 fair market value and is not determined in a manner that
28 takes into account the volume or value of any referrals
29 between the parties.
30 This exception shall apply whether or not the health care
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1 practitioner is located on the premises of the contracting
2 health care practitioner, facility, entity or group practice.
3 (6) Referrals by a health care practitioner who is a
4 member of a group practice to another member of the same
5 group practice.
6 (7) Any referral or payment practice specified by the
7 Secretary of Health in regulations promulgated under section
8 502.
9 Section 303. Prohibition on kickbacks.
10 A health care practitioner may not knowingly and
11 intentionally solicit, accept, attempt to accept, offer to
12 provide, provide, or attempt to provide, directly or indirectly,
13 any money, fee, commission, credit, gift, gratuity, thing of
14 value or compensation of any kind in connection with making or
15 receiving a referral.
16 Section 304. Waivers.
17 (a) General rule.--Notwithstanding the provisions of section
18 301, the Department of Health has the authority to grant waivers
19 to the general prohibition on self-referrals upon application by
20 a health care practitioner with a financial or ownership
21 interest in a facility or entity. The department may grant a
22 waiver if it determines any of the following:
23 (1) There is a demonstrated health care need in the
24 community where the entity or facility is located or has been
25 proposed and alternative financing is not available on
26 reasonable terms from sources other than the health care
27 practitioner to develop such an entity or facility.
28 (2) The self-referral arrangement will not result in
29 unnecessary or excessive utilization of the entity or
30 facility.
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1 (3) A health care practitioner has demonstrated that he
2 has been unable to sell his financial or ownership interest
3 in a facility or entity after a good faith effort over the
4 course of one year.
5 (4) Any other conditions which shall be established in
6 regulations promulgated by the Secretary of Health.
7 (b) Good faith effort to sell interest.--A health care
8 practitioner may establish a good faith effort to sell a
9 financial or ownership interest by demonstrating all the
10 following:
11 (1) The health care practitioner has listed his
12 financial or ownership interest with a broker, realtor or
13 other agent whose services normally include sales of the type
14 of financial or ownership interest held by the health care
15 practitioner.
16 (2) Upon listing the financial or ownership interest,
17 the broker, realtor or other agent has obtained an appraisal
18 of the financial or ownership interest performed by an
19 independent appraiser whose services normally include
20 appraisals of the type of financial or ownership interest
21 held by the health care practitioner. This appraisal shall be
22 used to evaluate offers as described in paragraph (4).
23 (3) The broker, realtor or other agent has advertised
24 the offer for sale of the financial or ownership interest in
25 a manner normally utilized for the type of financial or
26 ownership interest held by the health care practitioner.
27 (4) The broker, realtor or other agent has received no
28 offers within 10% of the appraised value of the financial or
29 ownership interest after a one-year period.
30 (5) The broker, realtor or other agent has obtained a
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1 second appraisal within 60 days immediately preceding the
2 application for waiver with the department. For purposes of
3 paragraph (4), the results of the second appraisal shall not
4 apply except to offers made after completion of the second
5 appraisal.
6 (6) In evaluating applications for a waiver under this
7 section, the department may require that the broker, realtor
8 or other agent certify by a written statement subject to the
9 provisions of 18 Pa.C.S. § 4904 (relating to unsworn
10 falsification to authorities) that they have advertised the
11 offer for sale of the financial or ownership interest for a
12 one-year period in a manner normally utilized for the type of
13 financial or ownership interest held by the health care
14 practitioner and they have received no offers in the past
15 year within 10% of the appraised value of the financial or
16 ownership interest.
17 (c) Self-referral disclosure.--During the pendency of the
18 waiver application, any self-referrals made by the health care
19 practitioner to the facility or entity in which he has a
20 financial or ownership interest shall not be a violation of this
21 act. However, during the pendency of the waiver applications,
22 practitioners shall be required to comply with the disclosure
23 requirements of subsection (f)(2).
24 (d) Continued listing required.--A health care practitioner
25 who has established a good faith effort and receives a waiver
26 from the department must continue to list the facility or entity
27 for sale and make reasonable efforts to advertise or market the
28 facility or entity.
29 (e) Burden of proof.--In applying for a waiver, the burden
30 of proof is on the health care practitioner to demonstrate that
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1 the waiver meets the criteria established in subsection (a).
2 (f) Procedures.--
3 (1) The department shall promulgate regulations
4 governing the form and content of applications for a waiver
5 under subsection (a). Any determination made by the
6 department under this section shall be applicable for a
7 period of five years from the date of issuance or until the
8 department can demonstrate that the circumstances which
9 necessitated the granting of a waiver have changed
10 significantly.
11 (2) In all cases in which a health care practitioner
12 receives a waiver from the department, the health care
13 practitioner shall disclose financial or ownership interest
14 in the facility or entity to the patient in writing. Patients
15 shall be given a list of alternative facilities and informed
16 in writing that they have the option to use one of the
17 alternative facilities and assured that they will not be
18 treated differently by the health care practitioner if they
19 do not choose the facility or entity in which the health care
20 practitioner has a financial or ownership interest.
21 (g) Confidentiality.--Information submitted by a health care
22 practitioner to the department to support an application for a
23 waiver shall remain confidential.
24 Section 305. Disclosure.
25 (a) General rule.--All health care practitioners shall
26 register with, and fully disclose to, the Department of Health
27 any financial or ownership interest held in a health care
28 facility or entity.
29 (b) Licensure.--The disclosure required under subsection (a)
30 is a condition of licensure or renewal of a license for health
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1 care practitioners in this Commonwealth.
2 (c) Information.--The Department of Health and the
3 Department of State have authority to promulgate regulations
4 regarding the collection, processing and retention of the health
5 care practitioner disclosure information. This authority shall
6 include the ability to assess fees for the collection and
7 analysis of ownership interests.
8 CHAPTER 5
9 ADMINISTRATION
10 Section 501. Civil penalties.
11 (a) Authority of department.--The Department of Health has
12 the authority to assess the following civil penalties and to
13 carry out the enforcement provisions of this act:
14 (1) Any health care practitioner that enters into a
15 kickback arrangement or scheme or a cross-referral
16 arrangement in violation of section 303 shall be subject to a
17 civil penalty of not more than $100,000 for each
18 circumvention arrangement or scheme.
19 (2) Any health care practitioner that presents or causes
20 to be presented a bill or a claim for a health care service
21 in violation of section 301 shall be subject to a civil
22 penalty of not more than $15,000 for each bill or claim and
23 shall be obligated to refund any amounts paid to the health
24 care practitioner by an individual third-party payer or other
25 entity for health care services on an invoice or bill
26 presented in violation of section 301.
27 (3) Any health care practitioner that makes a referral
28 in violation of section 301(a)(1) shall be subject to a
29 penalty of $15,000 for each referral.
30 (4) Any health care practitioner that fails to disclose
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1 a financial or ownership interest under section 305 shall be
2 subject to a civil penalty of not more than $15,000 for each
3 instance in which the financial or ownership interest has not
4 been disclosed.
5 (5) A health care practitioner found to be in violation
6 of this act on more than one occasion within a two-year
7 period shall be subject to disciplinary action by the
8 department or the Department of State, including, but not
9 limited to, a suspension of professional licensure for a
10 period not to exceed two years.
11 (b) Other remedies.--Nothing in this act shall be construed
12 to abrogate or limit the contractual rights and remedies
13 available to individuals and third parties at common law.
14 Section 502. Authority of department.
15 The Department of Health has the authority to promulgate
16 regulations:
17 (1) to specify those referral and payment practices
18 that, although potentially involving or inducing referrals,
19 will not be treated as violating section 301, 303, 305 or
20 501; and
21 (2) to administer implementation of this act, including
22 waiver applications.
23 This authority shall include the ability to impose fees.
24 Section 503. Board.
25 (a) Authority.--All decisions of the Department of Health
26 with respect to civil penalties under section 501 or the
27 qualification of health care practitioners for a waiver shall be
28 deemed final and appealable to the State Health Hearing Facility
29 Board. The board has the authority and duty to hear appeals by
30 applicants or interested persons under this act.
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1 (b) Regulations.--The board shall promulgate regulations
2 establishing the procedures for appeals from department actions
3 and decisions on civil penalties and waivers.
4 CHAPTER 21
5 MISCELLANEOUS PROVISIONS
6 Section 2101. Severability.
7 The provisions of this act are severable. If any provision of
8 this act or its application to any person or circumstance is
9 held invalid, the invalidity shall not affect other provisions
10 or applications of this act which can be given effect without
11 the invalid provision or application.
12 Section 2102. Repeals.
13 (a) Absolute.--The act of May 26, 1988 (P.L.403, No.66),
14 entitled "An act providing for certain disclosures by
15 practitioners of the healing arts when making patient referrals;
16 providing penalties; and conferring powers and duties on the
17 several licensing boards in the Bureau of Professional and
18 Occupational Affairs," is repealed.
19 (b) General.--All other acts and parts of acts are repealed
20 insofar as they are inconsistent with this act. However nothing
21 in this act shall be construed to repeal, diminish or modify the
22 prohibitions on referrals set forth in section 306(f.1)(3)(iii)
23 of the act of June 2, 1915 (P.L.736, No.338), known as the
24 Workers' Compensation Act.
25 Section 2103. Applicability.
26 This act shall apply as follows:
27 (1) Except as provided in paragraph (2), this act shall
28 apply to referrals for health care services made on or after
29 the effective date of this act.
30 (2) With respect to a financial or ownership interest
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1 obtained by a health care practitioner prior to the effective
2 date of this act, the ban on self-referrals described in
3 section 301 shall not apply until three years after the
4 effective date of this act.
5 Section 2104. Effective date.
6 This act shall take effect in 60 days.
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