By: Moncrief S.B. No. 589
A BILL TO BE ENTITLED
AN ACT
1-1 relating to the Health Care Provider Referral Act; providing
1-2 penalties for offenses and violations.
1-3 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-4 SECTION 1. Chapter 161, Health and Safety Code, is amended
1-5 by adding Subchapter K to read as follows:
1-6 SUBCHAPTER K. HEALTH CARE PROVIDER REFERRAL ACT
1-7 Sec. 161.111. SHORT TITLE. This subchapter shall be known
1-8 and may be cited as the Health Care Provider Referral Act.
1-9 Sec. 161.112. LEGISLATIVE INTENT. It is recognized by the
1-10 legislature that a conflict of interest may exist when a patient is
1-11 referred by a health care provider to an entity which provides
1-12 health services in which the referring health care provider has an
1-13 investment or ownership interest. The legislature finds these
1-14 referral practices may limit or eliminate competitive alternatives
1-15 in the health care services market, may result in overutilization
1-16 of health care services, may increase costs to the health care
1-17 system, and may adversely affect the quality of health care. The
1-18 legislature also recognizes that it may be appropriate for
1-19 providers to own entities providing health care services and to
1-20 refer patients to such entities as long as certain safeguards are
1-21 present in the arrangement. It is the intent of the legislature to
1-22 provide guidance to health care providers regarding prohibited
1-23 patient referrals between health care providers and entities
2-1 providing health care services and to protect the citizens of Texas
2-2 from unnecessary and costly health care expenditures.
2-3 Sec. 161.113. DEFINITIONS. In this subchapter:
2-4 (1) "Board" means any board related to licensed health
2-5 care professions, including the Texas State Board of Medical
2-6 Examiners, the Texas Board of Chiropractic Examiners, the Texas
2-7 State Board of Podiatry Examiners, the Texas Optometry Board, the
2-8 State Board of Pharmacy, and the State Board of Dental Examiners.
2-9 (2) "Council" means the Texas Health Care Cost
2-10 Containment Council, unless that council is not created by an Act
2-11 of the 73rd Legislature, in which case "council" means the Texas
2-12 Department of Health.
2-13 (3) "Direct supervision" means that the referring
2-14 health care provider authorizes the services, establishes quality
2-15 standards for the health services rendered, and monitors
2-16 conformance with quality standards on a day-to-day basis.
2-17 (4) "Entity" means any individual, partnership, firm,
2-18 corporation, or other business entity.
2-19 (5) "Fair market value" means value in arms-length
2-20 transactions consistent with the general market value and, with
2-21 respect to rentals or leases, the value of rental property for
2-22 general commercial purposes not taking into account its intended
2-23 use and, in the case of a lease of space, not adjusted to reflect
2-24 the additional value the prospective lessee or lessor would
2-25 attribute to the proximity or convenience to the lessor where the
3-1 lessor is a potential source of patient referrals to the lessee.
3-2 (6) "Group practice" means a group of two or more
3-3 health care providers legally organized as a partnership,
3-4 professional corporation, or similar association:
3-5 (A) in which each health care provider who is a
3-6 member of the group provides substantially the full range of
3-7 services which the health care provider routinely provides,
3-8 including medical care, consultation, diagnosis, or treatment,
3-9 through the joint use of shared office space, facilities,
3-10 equipment, and personnel;
3-11 (B) for which substantially all of the services
3-12 of the health care providers who are members of the group are
3-13 provided through the group and are billed in the name of the group,
3-14 and amounts so received are treated as receipts of the group; and
3-15 (C) in which the overhead expenses of and the
3-16 income from the practice are distributed in accordance with methods
3-17 previously determined by members of the group.
3-18 (7) "Health care facility" means an ambulatory
3-19 surgical center, a hospice, a nursing home, a hospital, a
3-20 diagnostic imaging center, a freestanding radiation therapy center,
3-21 a clinical laboratory, a psychiatric treatment facility, a cardiac
3-22 catheterization laboratory, a medical equipment supplier, an
3-23 alcohol or chemical dependency treatment center, a physical
3-24 rehabilitation center, a lithotripsy center, a renal dialysis
3-25 facility, an ambulatory care center, a birth center, a subacute
4-1 care facility, a nursing home component licensed under Subchapter
4-2 B, Chapter 242, within a continuing care facility certified under
4-3 Chapter 246, or a mental health care center.
4-4 (8) "Health care provider" means a health care
4-5 provider as defined in Subdivision (3), Section 1, Article 21.24-1,
4-6 Insurance Code.
4-7 (9) "Immediate family member" means a health care
4-8 provider's spouse, child, child's spouse, grandchild, grandchild's
4-9 spouse, parent, parent-in-law, or sibling.
4-10 (10) "Investment interest" means an equity or debt
4-11 security issued by an entity including without limitation shares of
4-12 stock in a corporation, units or other interest in a partnership,
4-13 bonds, debentures, notes, or other equity interest or debt
4-14 instruments. "Investment interest" does not include an investment
4-15 interest in an entity that is the sole provider of designated
4-16 health services in a rural area.
4-17 (11) "Investor" means a person or entity owning a
4-18 legal or beneficial ownership or investment interest, directly or
4-19 indirectly, including without limitation through an immediate
4-20 family member, trust, or another entity related to the investor
4-21 within the meaning of 42 C.F.R. Section 413.17.
4-22 (12) "Referral" means any referral of a patient by a
4-23 health care provider for health care services, including but not
4-24 limited to:
4-25 (A) the forwarding of a patient by a health care
5-1 provider to another health care provider, a health care facility as
5-2 defined in Section 104.002, or an entity which provides or
5-3 supplies health services or any other health care item or service;
5-4 or
5-5 (B) the request or establishment of a plan of
5-6 care by a health care provider, which includes the provision of
5-7 health services or other health care items or services.
5-8 (13) "Rural area" means a county with a population
5-9 density of no greater than 100 persons per square mile as defined
5-10 by the United States Department of Commerce Bureau of the Census.
5-11 Sec. 161.114. PROHIBITED REFERRALS AND CLAIMS FOR PAYMENT.
5-12 (a) A health care provider may not refer a patient for the
5-13 provision of any health care item or health service to an entity in
5-14 which the health care provider is an investor or to any health care
5-15 facility in which the health care provider is an investor unless:
5-16 (1)(A) the provider's ownership or investment interest
5-17 is in registered securities purchased on a national exchange or
5-18 over-the-counter and issued by a publicly held corporation:
5-19 (i) whose shares are traded on a national
5-20 exchange or on the over-the-counter market; and
5-21 (ii) whose total assets at the end of the
5-22 corporation's most recent fiscal quarter exceeded $50 million;
5-23 (B) the entity or health care facility does not
5-24 loan funds to or guarantee a loan for an investor who is a health
5-25 care provider if the investor uses any part of such loan to obtain
6-1 the investment interest; and
6-2 (C) the amount distributed to an investor
6-3 representing a return on the investment interest is directly
6-4 proportional to the amount of the capital investment, including the
6-5 fair market value of any preoperational services rendered, invested
6-6 in the entity or health care facility by the investor; or
6-7 (2) the referral is made within a medical practice by
6-8 a licensed health care provider who is the sole provider or member
6-9 of a group practice for health services or other health care items
6-10 or services that are prescribed or provided solely for such
6-11 referring health care provider's own patients and that are provided
6-12 or performed by or under the direct supervision of the referring
6-13 licensed health care provider, and the group delivers health care
6-14 services to patients solely on a prepaid basis or through a managed
6-15 care plan.
6-16 (b) Each board and, in the case of hospitals, the department
6-17 shall require its licensees to report all investment and ownership
6-18 interests in entities or health care facilities held by health care
6-19 providers to the council.
6-20 (c) No claim for payment may be presented by any entity to
6-21 any individual, third-party payor, or other entity for a service
6-22 furnished pursuant to a referral prohibited under this section.
6-23 (d) If an entity collects any amount that was billed in
6-24 violation of this section, the entity shall timely refund the
6-25 amount to the payor or individual, whichever is applicable.
7-1 (e) Any person that in violation of this section presents or
7-2 causes to be presented a bill or a claim for service which may not
7-3 be presented or that fails to refund an amount required to be
7-4 refunded is subject to a civil penalty of not more than $15,000 for
7-5 each such bill or claim or refund, to be imposed and collected by
7-6 the appropriate board.
7-7 (f)(1) Any health care provider or other entity that enters
7-8 into an arrangement or scheme, such as a cross-referral
7-9 arrangement, which the health care provider or entity knows or
7-10 should know has a principal purpose of assuring referrals by the
7-11 health care provider to a particular entity which, if the health
7-12 care provider directly made referrals to such entity, would be in
7-13 violation of this section, is subject to a civil penalty of not
7-14 more than $100,000 for each such arrangement or scheme, to be
7-15 imposed and collected by the appropriate board.
7-16 (2) For the purpose of the penalty provided by this
7-17 subsection, each agreement to refer patients through an
7-18 intermediary to a provider or entity is a separate arrangement or
7-19 scheme. An agreement between two health care providers to exchange
7-20 referrals constitutes one arrangement or scheme.
7-21 (g) A violation of this section by a health care provider
7-22 shall constitute grounds for disciplinary action to be taken by the
7-23 department or applicable board. Any hospital licensed under
7-24 Chapter 241 found in violation of this section shall be subject to
7-25 the rules adopted by the department pursuant to Section 241.053.
8-1 (h) Any hospital licensed under Chapter 241 that
8-2 discriminates against or otherwise penalizes a health care provider
8-3 for compliance with this Act is in violation of this section.
8-4 Sec. 161.115. COUNCIL STUDIES. (a) The council is
8-5 empowered to conduct data-based studies and evaluations and to make
8-6 recommendations to the legislature and the governor concerning
8-7 exemptions, the effectiveness of limitations of referrals,
8-8 restrictions on investment interests and compensation arrangements,
8-9 and the effectiveness of public disclosure. Such analysis may
8-10 include utilization of services, cost of care, quality of care, and
8-11 access to care.
8-12 (b) The council may require the submission by health care
8-13 facilities, health care providers, and health insurers of data
8-14 necessary to carry out the council's duties.
8-15 (c) Such data may include data related to ownership,
8-16 Medicare and Medicaid, charity care, types of services offered to
8-17 patients, revenues and expenses, and patient encounters and such
8-18 other data that are reasonably necessary to study utilization
8-19 patterns and to study the impact of health care provider ownership
8-20 interests in health-care-related entities on the cost, quality, and
8-21 accessibility of health care.
8-22 (d)(1) The council may collect such data from any health
8-23 care facility or other health-care-related entity as a special
8-24 study.
8-25 (2) Each facility identified in Subsection (b) shall
9-1 submit an accounting report to the council on a form prescribed in
9-2 a rule and furnished by the council. The report shall include:
9-3 (A) an audited balance sheet detailing the
9-4 assets, liabilities, and net worth of the facility;
9-5 (B) a statement of income and expenses;
9-6 (C) a statement of cash flows; and
9-7 (D) utilization and staffing and standard units
9-8 of measure as prescribed by rules.
9-9 (e) The council shall report its findings to the governor,
9-10 the lieutenant governor, and the speaker of the house of
9-11 representatives by January 1, 1995. Such report shall include
9-12 recommendations by the council regarding the need for additional
9-13 legislation relating to health care provider self-referral
9-14 practices.
9-15 Sec. 161.116. MARKUP ON CHARGES PROHIBITED. A health care
9-16 provider commits an offense if the health care provider charges a
9-17 markup or commission for ancillary services rendered by others. An
9-18 offense under this section is an offense under Section 161.091.
9-19 SECTION 2. This Act takes effect September 1, 1993.
9-20 SECTION 3. The importance of this legislation and the
9-21 crowded condition of the calendars in both houses create an
9-22 emergency and an imperative public necessity that the
9-23 constitutional rule requiring bills to be read on three several
9-24 days in each house be suspended, and this rule is hereby suspended.