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.