By McDonald                                           H.B. No. 2532
                                 A BILL TO BE ENTITLED
    1-1                                AN ACT
    1-2  relating to the Health Care Provider Referral Act; providing
    1-3  penalties.
    1-4        BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
    1-5        SECTION 1.  Chapter 161, Health and Safety Code, is amended
    1-6  by adding Subchapter K to read as follows:
    1-7           SUBCHAPTER K.  HEALTH CARE PROVIDER REFERRAL ACT
    1-8        Sec. 161.111.  SHORT TITLE.  This subchapter shall be known
    1-9  and may be cited as the Health Care Provider Act.
   1-10        Sec. 161.112.  LEGISLATIVE INTENT.  It is recognized by the
   1-11  legislature that a conflict of interest may exist when a patient is
   1-12  referred by a health care provider to an entity which provides
   1-13  health services in which the referring health care provider has an
   1-14  investment or ownership interest.  The legislature finds these
   1-15  referral practices may limit or eliminate competitive alternatives
   1-16  in the health care services market, may result in overutilization
   1-17  of health care services, may increase costs to the health care
   1-18  system, and may adversely affect the quality of health care.  The
   1-19  legislature also recognizes that it may be appropriate for
   1-20  providers to own entities providing health care services and to
   1-21  refer patients to such entities as long as certain safeguards are
   1-22  present in the arrangement.  It is the intent of the legislature to
   1-23  provide guidance to health care providers regarding prohibited
    2-1  patient referrals between health care providers and entities
    2-2  providing health care services and to protect the citizens of Texas
    2-3  from unnecessary and costly health care expenditures.
    2-4        Sec. 161.113.  DEFINITIONS.  In this subchapter:
    2-5              (1)  "Board" means any board related to licensed health
    2-6  care professions, including the Texas State Board of Medical
    2-7  Examiners, the Texas Board of Chiropractic Examiners, the Texas
    2-8  State Board of Podiatry Examiners, the Texas Optometry Board, the
    2-9  State Board of Pharmacy, and the State Board of Dental Examiners.
   2-10              (2)  "Commission" means the Health and Human Services
   2-11  Commission.
   2-12              (3)  "Direct supervision" means the referring health
   2-13  care provider authorizes the services, establishes quality
   2-14  standards for the health services rendered, and monitors
   2-15  conformance with quality standards on a day-to-day basis.
   2-16              (4)  "Entity" means any individual, partnership, firm,
   2-17  corporation, or other business entity.
   2-18              (5)  "Fair market value" means value in arms-length
   2-19  transactions, consistent with the general market value, and with
   2-20  respect to rentals or leases, the value of rental property for
   2-21  general commercial purposes, not taking into account its intended
   2-22  use, and, in the case of a lease of space not adjusted to reflect
   2-23  the additional value the prospective lessee or lessor would
   2-24  attribute to the proximity or convenience to the lessor where the
   2-25  lessor is a potential source of patient referrals to the lessee.
    3-1              (6)  "Group practice" means a group of two or more
    3-2  health care providers legally organized as a partnership,
    3-3  professional corporation, or similar association:
    3-4                    (A)  in which each health care provider who is a
    3-5  member of the group provides substantially the full range of
    3-6  services which the health care provider routinely provides,
    3-7  including medical care, consultation, diagnosis, or treatment,
    3-8  through the joint use of shared office space, facilities,
    3-9  equipment, and personnel;
   3-10                    (B)  for which substantially all of the services
   3-11  of the health care providers who are members of the group are
   3-12  provided through the group and are billed in the name of the group,
   3-13  and amounts so received are treated as receipts of the group; and
   3-14                    (C)  in which the overhead expenses of and the
   3-15  income from the practice are distributed in accordance with methods
   3-16  previously determined by members of the group.
   3-17              (7)  "Health care facility" means an ambulatory
   3-18  surgical center, a hospice, a nursing home, a hospital, a
   3-19  diagnostic imaging center, a freestanding radiation therapy center,
   3-20  a clinical laboratory, a psychiatric treatment facility, a cardiac
   3-21  catheterization laboratory, a medical equipment supplier, an
   3-22  alcohol or chemical dependency treatment center, a physical
   3-23  rehabilitation center, a lithotripsy center, an ambulatory care
   3-24  center, a birth center, a subacute care facility, a nursing home
   3-25  component licensed under Subchapter B, Chapter 242, within a
    4-1  continuing care facility certified under Chapter 246, or a mental
    4-2  health care center.
    4-3              (8)  "Health care provider" means a health care
    4-4  provider as defined in Subdivision (3), Section 1, Article 21.24-1,
    4-5  Insurance Code.
    4-6              (9)  "Immediate family member" means a health care
    4-7  provider's spouse, child, child's spouse, grandchild, grandchild's
    4-8  spouse, parent, parent-in-law, or sibling.
    4-9              (10)  "Investment interest" means an equity or debt
   4-10  security issued by an entity including without limitation shares of
   4-11  stock in a corporation, units or other interest in a partnership,
   4-12  bonds, debentures, notes, or other equity interest or debt
   4-13  instruments.  "Investment interest" does not include:
   4-14                    (A)  an investment interest in an entity that is
   4-15  the sole provider of designated health services in a rural area or
   4-16  in an underserved urban area where the provider practices and has
   4-17  offices;
   4-18                    (B)  an investment interest in notes, bonds,
   4-19  debentures, or other debt instruments issued by an entity which
   4-20  provides designated health services as an integral part of a plan
   4-21  by such entity to acquire such investor's equity investment
   4-22  interest in the entity, provided that the interest rate is
   4-23  consistent with fair market value and that the maturity date of the
   4-24  notes, bonds, debentures, or other debt instruments issued by the
   4-25  entity to the investor is not later than October 1, 1993; or
    5-1                    (C)  an investment interest in real property
    5-2  resulting in a landlord-tenant relationship between the health care
    5-3  provider and the entity in which the equity interest is held,
    5-4  unless the rent is determined, in whole or in part, by the business
    5-5  volume or profitability of the tenant or exceeds fair market value.
    5-6              (11)  "Investor" means a person or entity owning a
    5-7  legal or beneficial ownership or investment interest, directly or
    5-8  indirectly, including without limitation through an immediate
    5-9  family member, trust, or another entity related to the investor
   5-10  within the meaning of 42 C.F.R. Section 413.17.
   5-11              (12)  "Referral" means any referral of a patient by a
   5-12  health care provider for health care services, including but not
   5-13  limited to:
   5-14                    (A)  the forwarding of a patient by a health care
   5-15  provider to another health care provider, health care facility as
   5-16  defined in Section 104.002 or to an entity which provides or
   5-17  supplies health services or any other health care item or service;
   5-18  or
   5-19                    (B)  the request or establishment of a plan of
   5-20  care by a health care provider, which includes the provision of
   5-21  health services or other health care items or services.
   5-22              (13)  "Rural area" means a county with a population
   5-23  density of no greater than 100 persons per square mile as defined
   5-24  by the United States Department of Commerce Bureau of the Census.
   5-25        Sec. 161.114.  PROHIBITED REFERRALS AND CLAIMS FOR PAYMENT.
    6-1  (a)  A health care provider may not refer a patient for the
    6-2  provision of any health care item or health service to an entity in
    6-3  which the health care provider is an investor or to any health care
    6-4  facility in which the health care provider is an investor unless:
    6-5              (1)(A)  the provider's ownership or investment interest
    6-6  is in registered securities purchased on a national exchange or
    6-7  over-the-counter and issued by a publicly held corporation:
    6-8                          (i)  whose shares are traded on a national
    6-9  exchange or on the over-the-counter market; and
   6-10                          (ii)  whose total assets at the end of the
   6-11  corporation's most recent fiscal quarter exceeded $50 million;
   6-12                    (B)  the entity or health care facility does not
   6-13  loan funds to or guarantee a loan for an investor who is a health
   6-14  care provider if the investor uses any part of such loan to obtain
   6-15  the investment interest; and
   6-16                    (C)  the amount distributed to an investor
   6-17  representing a return on the investment interest is directly
   6-18  proportional to the amount of the capital investment, including the
   6-19  fair market value of any preoperational services rendered, invested
   6-20  in the entity or health care facility by the investor; or
   6-21              (2)  the referral is made within a medical practice by
   6-22  a licensed health care provider who is the sole provider or member
   6-23  of a group practice for health services or other health care items
   6-24  or services that are prescribed or provided solely for such
   6-25  referring health care provider's own patients and that are provided
    7-1  or performed by or under the direct supervision of the referring
    7-2  licensed health care provider, and the group delivers health care
    7-3  services to patients solely on a prepaid basis or through a managed
    7-4  care plan.
    7-5        (b)  Each board and, in the case of hospitals, the department
    7-6  shall encourage its licensees to report all investment and
    7-7  ownership interests in entities or health care facilities held by
    7-8  health care providers to the commission.  The commission shall
    7-9  determine the applicability of this section or any rule adopted
   7-10  pursuant to this section as it applies to the licensee and approve
   7-11  those provider interests which are not in violation of this
   7-12  section.  A board shall submit to the department the name of any
   7-13  entity in which a provider investment interest has been approved
   7-14  pursuant to this section, and the department shall adopt rules
   7-15  providing for periodic quality assurance utilization review of such
   7-16  entities.
   7-17        (c)  No claim for payment may be presented by any entity to
   7-18  any individual, third-party payor, or other entity for a service
   7-19  furnished pursuant to a referral prohibited under this section.
   7-20        (d)  If an entity collects any amount that was billed in
   7-21  violation of this section, the entity shall timely refund the
   7-22  amount to the payor or individual, whichever is applicable.
   7-23        (e)  Any person that in violation of this section presents or
   7-24  causes to be presented a bill or a claim for service which may not
   7-25  be presented or that fails to refund an amount required to be
    8-1  refunded is subject to a civil penalty of not more than $15,000 for
    8-2  each such bill or claim or refund, to be imposed and collected by
    8-3  the appropriate board.
    8-4        (f)  Any health care provider or other entity that enters
    8-5  into an arrangement or scheme, such as a cross-referral
    8-6  arrangement, which the health care provider or entity knows or
    8-7  should know has a principal purpose of assuring referrals by the
    8-8  health care provider to a particular entity which, if the health
    8-9  care provider directly made referrals to such entity, would be in
   8-10  violation of this section, is subject to a civil penalty of not
   8-11  more than $100,000 for each such arrangement or scheme, to be
   8-12  imposed and collected by the appropriate board.
   8-13        (g)  A violation of this section by a health care provider
   8-14  shall constitute grounds for disciplinary action to be taken by the
   8-15  department or applicable board.  Any hospital licensed under
   8-16  Chapter 241 found in violation of this section shall be subject to
   8-17  the rules adopted by the department pursuant to Section 241.053.
   8-18        (h)  Any hospital licensed under Chapter 241 that
   8-19  discriminates against or otherwise penalizes a health care provider
   8-20  for compliance with this Act is in violation of this section.
   8-21        Sec. 161.115.  DEPARTMENT STUDIES.  (a)  The department is
   8-22  empowered to conduct data-based studies and evaluations and to make
   8-23  recommendations to the legislature and the governor concerning
   8-24  exemptions, the effectiveness of limitations of referrals,
   8-25  restrictions on investment interests and compensation arrangements,
    9-1  and the effectiveness of public disclosure.  Such analysis may
    9-2  include utilization of services, cost of care, quality of care, and
    9-3  access to care.
    9-4        (b)  The department may require the submission by the
    9-5  commission, health care facilities, health care providers, and
    9-6  health insurers of data necessary to carry out the department's
    9-7  duties.
    9-8        (c)  Such data may include data related to ownership,
    9-9  Medicare and Medicaid, charity care, types of services offered to
   9-10  patients, revenues and expenses, and patient encounters and such
   9-11  other data that are reasonably necessary to study utilization
   9-12  patterns and to study the impact of health care provider ownership
   9-13  interests in health-care-related entities on the cost, quality, and
   9-14  accessibility of health care.
   9-15        (d)(1)  The department may collect such data from any health
   9-16  care facility or other health-care-related entity as a special
   9-17  study.
   9-18              (2)  Each facility identified in Subsection (b) shall
   9-19  submit an accounting report to the department on a form prescribed
   9-20  in a rule and furnished by the department.  The report shall
   9-21  include:
   9-22                    (A)  an audited balance sheet detailing the
   9-23  assets, liabilities, and net worth of the facility;
   9-24                    (B)  a statement of income and expenses;
   9-25                    (C)  a statement of cash flows; and
   10-1                    (D)  utilization and staffing and standard units
   10-2  of measure as prescribed by rules.
   10-3        (e)  The department shall report its findings to the
   10-4  governor, the lieutenant governor, and the speaker of the house of
   10-5  representatives by January 1, 1995.  Such report shall include
   10-6  recommendations by the department regarding the need for additional
   10-7  legislation relating to health care provider self-referral
   10-8  practices.
   10-9        Sec. 161.116.  MARKUP ON CHARGES PROHIBITED.  A health care
  10-10  provider shall not charge a markup or commission for ancillary
  10-11  services rendered by others.
  10-12        SECTION 2.  This Act takes effect September 1, 1993.
  10-13        SECTION 3.  The importance of this legislation and the
  10-14  crowded condition of the calendars in both houses create an
  10-15  emergency and an imperative public necessity that the
  10-16  constitutional rule requiring bills to be read on three several
  10-17  days in each house be suspended, and this rule is hereby suspended.