1-1 By: Moncrief S.B. No. 589
1-2 (In the Senate - Filed March 3, 1993; March 4, 1993, read
1-3 first time and referred to Committee on Health and Human Services;
1-4 May 3, 1993, reported adversely, with favorable Committee
1-5 Substitute by the following vote: Yeas 5, Nays 0; May 3, 1993,
1-6 sent to printer.)
1-7 COMMITTEE VOTE
1-8 Yea Nay PNV Absent
1-9 Zaffirini x
1-10 Ellis x
1-11 Madla x
1-12 Moncrief x
1-13 Nelson x
1-14 Patterson x
1-15 Shelley x
1-16 Truan x
1-17 Wentworth x
1-18 COMMITTEE SUBSTITUTE FOR S.B. No. 589 By: Moncrief
1-19 A BILL TO BE ENTITLED
1-20 AN ACT
1-21 relating to the Health Care Provider Referral Act; creating
1-22 offenses and providing penalties.
1-23 BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF TEXAS:
1-24 SECTION 1. Chapter 161, Health and Safety Code, is amended
1-25 by adding Subchapter K to read as follows:
1-26 SUBCHAPTER K. HEALTH CARE PROVIDER
1-27 REFERRAL ACT
1-28 Sec. 161.111. SHORT TITLE. This subchapter shall be known
1-29 and may be cited as the Health Care Provider Referral Act.
1-30 Sec. 161.112. DEFINITIONS. In this subchapter:
1-31 (1) "Entity" means any individual, partnership, firm,
1-32 corporation or other business entity.
1-33 (2) "Family member" means a health care provider's
1-34 relationship to a person within the second degree of consanguinity
1-35 or affinity.
1-36 (3) "Group practice" means a group of two or more
1-37 licensed health care providers legally organized as a partnership,
1-38 professional corporation, or similar association for which:
1-39 (A) each member of the group provides a full
1-40 range of health care services, including medical care,
1-41 consultation, diagnosis, or treatment through the joint use of
1-42 shared office space, facilities, equipment, and personnel;
1-43 (B) substantially all of the services of the
1-44 members of the group are provided through the group and are billed
1-45 under a billing number assigned to the group, and payments received
1-46 are treated as receipts of the group; and
1-47 (C) the overhead expenses of and the income from
1-48 the practice are distributed in accordance with methods previously
1-49 determined.
1-50 (4) "Health care facility" means an ambulatory
1-51 surgical center, a hospice, a nursing home, a home health agency, a
1-52 diagnostic imaging center, a freestanding radiation therapy center,
1-53 an infusion center, a pharmacy, a clinical laboratory, a
1-54 psychiatric treatment facility, a cardiac catheterization
1-55 laboratory, a medical equipment supplier, an alcohol or chemical
1-56 dependency treatment center, a physical rehabilitation center, a
1-57 lithotripsy center, a renal dialysis facility, an ambulatory care
1-58 center, a birth center, a subacute care facility, a nursing home
1-59 component licensed under Subchapter B, Chapter 242, within a
1-60 continuing care facility certified under Chapter 246, or a mental
1-61 health care center, which health care facility provides or supplies
1-62 health care goods or services used in the treatment of patients.
1-63 (5) "Health care goods or services" means health care
1-64 procedures, including treatment, diagnosis, and medical care,
1-65 provided by or through a health care provider or health care
1-66 facility or medical equipment, supplies, drugs, or other items used
1-67 in the treatment of a patient. For the purposes of this
1-68 subchapter, "health care goods and services" may refer to either
2-1 health care goods or health care services or both health care goods
2-2 and services.
2-3 (6) "Health care provider" means a individual who
2-4 furnishes health care goods or services under a license,
2-5 certificate, regulation, or other similar evidence of regulation
2-6 issued by this state or another state of the United States.
2-7 (7) "Investor" means a person or entity owning,
2-8 directly or indirectly, a legal or beneficial ownership or
2-9 investment interest, including without limitation through a family
2-10 member, trust, or another entity related to the investor within the
2-11 meaning of 42 C.F.R. Section 413.17.
2-12 (8) "Ownership or investment interest" means an equity
2-13 or debt security issued by an entity, including without limitation,
2-14 shares of stock in a corporation, units or other interest in a
2-15 partnership, bonds, debentures, notes, or other equity interest or
2-16 debt instruments. "Ownership or investment interest" includes any
2-17 consideration paid as compensation or in any manner which is a
2-18 product of or incident to or in any way related to such equity or
2-19 debt security, shares of stock in a corporation, units or other
2-20 interest in a partnership, bonds, debentures, notes, or other
2-21 equity interest or debt instruments. "Ownership or investment
2-22 interest" does not include an investment interest in an entity that
2-23 is the sole provider of health goods or services in a rural area.
2-24 (9) "Referral" means any referral of a patient for
2-25 health care goods or services by a health care provider with the
2-26 authority to order such health care goods or services, including:
2-27 (A) the forwarding of a patient by a health care
2-28 provider to another health care provider, a health care facility,
2-29 or a health care supplier; or
2-30 (B) the request or establishment of a plan of
2-31 care by a health care provider, which includes the provision of
2-32 health care goods or services.
2-33 (10) "Rural area" means a county with a population
2-34 density of no more than 100 persons per square mile as defined by
2-35 the United State Department of Commerce Bureau of the Census.
2-36 Sec. 161.113. PROHIBITED AND MANDATORY ACTS AND PRACTICES.
2-37 (a) A health care provider shall not refer a patient for the
2-38 provision of any health care good or service to a health care
2-39 facility in which the health care provider or a family member of
2-40 the health care provider is an investor.
2-41 (b) A health care provider or health care facility shall not
2-42 present to any individual, third-party payor, or other person a
2-43 bill or claim for payment for a health care good or service
2-44 furnished pursuant to a referral prohibited by this subchapter.
2-45 (c) If a health care provider or health care facility
2-46 receives any amount billed or claimed in violation of this section,
2-47 the health care provider or health care facility shall refund
2-48 promptly to the applicable payor or individual the amount received.
2-49 (d) A hospital, licensed pursuant to Chapter 241, shall not
2-50 discriminate against or otherwise penalize a health care provider
2-51 for complying with this Act.
2-52 (e) A health care provider who is an investor in a health
2-53 care facility shall disclose any ownership or investment interest
2-54 in the health care facility to:
2-55 (1) a patient when making a referral to the health
2-56 care facility; and
2-57 (2) a third-party payor on request.
2-58 Sec. 161.114. EXEMPTIONS. Section 161.113 does not apply
2-59 to:
2-60 (1) a health care provider whose ownership or
2-61 investment interest in a health care facility is permitted by 42
2-62 U.S.C. Section 1320a-7b(b) or any regulations promulgated pursuant
2-63 thereto;
2-64 (2) a referral made for health care goods or services
2-65 within a group practice by one member of the group practice to
2-66 another member or bona fide employee of the group practice acting
2-67 within the member's or employee's area of training or scope of
2-68 practice;
2-69 (3) a health care provider or health care facility
2-70 which furnishes health care goods or services in a rural area;
3-1 (4) a health care provider who refers a patient for
3-2 the provision of a health care good or service at a health care
3-3 facility at which such health care good or service is furnished by
3-4 or under the personal supervision of the health care provider and
3-5 which health care good or service is within the health care
3-6 provider's licensure, area of competence, and recognized scope of
3-7 practice or specialty; or if the health care provider is a member
3-8 of a group practice, by or under the supervision of another member
3-9 or bona fide employee of the group practice acting within the
3-10 member's or employee's area of training or scope of practice; or
3-11 (5) a referral made pursuant to an arrangement between
3-12 the referring health care provider and a health maintenance
3-13 organization, competitive medical plan, prepaid health plan, or
3-14 another health plan permitted by 42 U.S.C. Section 1320a-7b(b) or
3-15 any regulation promulgated pursuant thereto.
3-16 Sec. 161.115. VIOLATIONS. (a) It is a violation of this
3-17 subchapter for a person to:
3-18 (1) make a referral prohibited by this subchapter;
3-19 (2) present or cause to be presented a bill or a claim
3-20 for a good or service which is prohibited by this subchapter; or
3-21 (3) fail to refund an amount received in violation of
3-22 this subchapter.
3-23 (b) It is a violation of this subchapter for a hospital,
3-24 licensed pursuant to Chapter 241, to discriminate against or
3-25 otherwise penalize a health care provider for complying with this
3-26 Act.
3-27 (c) It is a violation of this subchapter for a health care
3-28 provider to enter into an arrangement or scheme which the health
3-29 care provider knew or should have known has the principal purpose
3-30 of assuring referrals by the health care provider to a particular
3-31 health care facility which, if the health care provider made
3-32 referrals to such health care facility, would be a violation of
3-33 this subchapter.
3-34 Sec. 161.116. DECEPTIVE TRADE PRACTICES. A violation of
3-35 this subchapter constitutes a false, misleading, or deceptive act
3-36 or practice within the meaning of Section 17.46(a), Subchapter E,
3-37 Chapter 17, Business & Commerce Code, and any remedy prescribed by
3-38 that subchapter may be used by the attorney general or a district
3-39 or county attorney to enforce this subchapter. Nothing in this
3-40 section shall be construed to permit a private cause of action
3-41 under Subchapter E, Chapter 17, Business & Commerce Code.
3-42 Sec. 161.117. CIVIL PENALTY AND INJUNCTION. (a) A person
3-43 is subject to a civil penalty of not more than $15,000 for each
3-44 violation of this subchapter. Each bill or claim submitted for a
3-45 health care good or service constitutes a separate violation. Each
3-46 referral of a patient constitutes a separate violation.
3-47 (b) A person is subject to a civil penalty of not more than
3-48 $100,000 for each violation of Section 161.115(c). Each agreement,
3-49 arrangement, or scheme constitutes a separate violation.
3-50 (c) In determining the amount of the civil penalty, the
3-51 court shall consider:
3-52 (1) the person's, facility's, or supplier's previous
3-53 violations;
3-54 (2) the seriousness of the violation, including the
3-55 nature, circumstances, extent, and gravity of the violation;
3-56 (3) whether the health and safety of the public was
3-57 threatened by the violation;
3-58 (4) the demonstrated good faith of the person,
3-59 facility, or supplier; and
3-60 (5) the amount necessary to deter future violations.
3-61 (d) The attorney general or a district or county attorney
3-62 may maintain an action for a violation of this subchapter in the
3-63 name of the state.
3-64 (e) Venue may be maintained in Travis County or in the
3-65 county in which the violation occurred.
3-66 (f) The district court may grant any prohibitory or
3-67 mandatory injunctive relief warranted by the facts, including a
3-68 temporary restraining order, temporary injunction, or permanent
3-69 injunction.
3-70 (g) The party bringing the suit may:
4-1 (1) combine a suit to assess and recover civil
4-2 penalties with a suit for injunctive relief; or
4-3 (2) file a suit to assess and recover civil penalties
4-4 independently of a suit for injunctive relief.
4-5 (h) The party bringing the suit may recover reasonable
4-6 expenses incurred in obtaining injunctive relief, civil penalties,
4-7 or both, including investigative costs, court costs, reasonable
4-8 attorney fees, witness fees, and deposition expenses. A penalty
4-9 collected under this section by the attorney general shall be
4-10 deposited to the credit of the general revenue fund. A penalty
4-11 collected under this section by a district or county attorney shall
4-12 be deposited to the credit of the general fund of the county which
4-13 has brought the suit.
4-14 (i) The injunctive relief and civil penalty authorized by
4-15 this subchapter are in addition to any other civil, administrative,
4-16 or criminal remedies provided by law.
4-17 Sec. 161.118. DISCIPLINARY ACTION. In addition to the
4-18 penalties prescribed by this subchapter, a violation of a provision
4-19 of this subchapter by an individual or facility that is licensed by
4-20 a state regulatory agency constitutes grounds for disciplinary
4-21 action by the appropriate regulatory agency.
4-22 Sec. 161.119. MARKUP ON CHARGES PROHIBITED. (a) A bill,
4-23 claim, or other request for payment presented by a health care
4-24 provider for health care goods or services that includes a charge
4-25 for an ancillary service that was not furnished by or under the
4-26 supervision of the health care provider, by or under the
4-27 supervision of another member or employee of the group practice
4-28 acting within the member's or employee's area of training or scope
4-29 of practice shall not exceed:
4-30 (1) the health care provider's actual acquisition
4-31 cost, after deducting any discounts; and
4-32 (2) a reasonable charge for billing expenses or
4-33 administrative expenses incurred in the collection, delivery,
4-34 receipt, or storage of any specimen, test material, or result
4-35 utilized by the health care provider.
4-36 SECTION 2. Section 161.091, Health and Safety Code, is
4-37 amended to read as follows:
4-38 Sec. 161.091. PROHIBITION ON ILLEGAL REMUNERATION. (a) A
4-39 person <licensed, certified, or registered by a health care
4-40 regulatory agency of this state> commits an offense if the person
4-41 intentionally or knowingly accepts <offers to pay> or agrees to
4-42 accept any remuneration directly or indirectly, overtly or
4-43 covertly, in cash or in kind, <to or> from any person, firm,
4-44 association of persons, partnership, or corporation for:
4-45 (1) securing or soliciting patients for a person
4-46 licensed, certified, or registered by a state health care
4-47 regulatory agency; or
4-48 (2) purchasing, leasing, ordering, or arranging for or
4-49 recommending any purchase, lease, or order of health care goods or
4-50 services <or patronage>.
4-51 (b) A person commits an offense if the person intentionally
4-52 or knowingly offers to pay, agrees to pay, or pays any remuneration
4-53 directly or indirectly, overtly or covertly, in cash or in kind, to
4-54 any person, firm, association of persons, partnership, or
4-55 corporation for:
4-56 (1) securing or soliciting patients for a person
4-57 licensed, certified, or registered by a state health care
4-58 regulatory agency; or
4-59 (2) purchasing, leasing, ordering, or arranging for or
4-60 recommending any purchase, lease, or order of health care goods or
4-61 services. <This section shall not be construed to prohibit
4-62 advertising except that which is false, misleading, or deceptive or
4-63 that which advertises professional superiority or the performance
4-64 of a professional service in a superior manner and that is not
4-65 readily subject to verification.>
4-66 (c) Except as provided by this section, an offense under
4-67 this section is a Class A misdemeanor. If it is shown on <in> the
4-68 trial of a person under <violation of> this section that the person
4-69 has previously been convicted of an offense under <a violation of>
4-70 this section or that the person was employed by a federal, state,
5-1 or local government at the time the offense occurred, the offense
5-2 is<, on conviction the person shall be punished for> a felony of
5-3 the third degree. In addition to any other penalties or remedies
5-4 provided, a violation of this section shall be grounds for
5-5 disciplinary action by a <the> regulatory agency that has issued a
5-6 license, certification, or registration to the person.
5-7 (d) <The appropriate health care regulatory agency may
5-8 institute an action to enjoin a violation or potential violation of
5-9 this section. The action for an injunction shall be in addition to
5-10 any other action, proceeding, or remedy authorized by law. The
5-11 regulatory agency shall be represented by the attorney general.>
5-12 <(e) This section shall not be construed to prohibit
5-13 remuneration for advertising, marketing, or other services that are
5-14 provided for the purpose of securing or soliciting patients
5-15 provided the remuneration is set in advance, is consistent with the
5-16 fair market value of the services, and is not based on the volume
5-17 or value of any patient referrals or business otherwise generated
5-18 between the parties.>
5-19 <(f)> This section shall <not> be construed to permit
5-20 <prohibit> any payment, business arrangements, or payments practice
5-21 permitted <not prohibited> by 42 U.S.C. Section 1320a-7b(b) or any
5-22 regulations promulgated pursuant thereto.
5-23 (e) <(g)> This section shall not apply to licensed insurers,
5-24 governmental entities, including intergovernmental risk pools
5-25 established under Chapter 172, Local Government Code, and
5-26 institutions as defined in the Texas State College and University
5-27 Employees Uniform Insurance Benefits Act (Article 3.50-3, Vernon's
5-28 Texas Insurance Code), group hospital service corporations, or
5-29 health maintenance organizations which reimburse, provide, offer to
5-30 provide, or administer hospital, medical, dental, or other
5-31 health-related benefits under a health benefits plan for which it
5-32 is the payor.
5-33 SECTION 3. (a) The change in law made by Section 2 of this
5-34 Act applies only to an offense or violation committed on or after
5-35 the effective date of this Act. For purposes of this section, an
5-36 offense or violation is committed before the effective date of this
5-37 Act if any element of the offense or violation occurs before that
5-38 date.
5-39 (b) An offense or violation committed before the effective
5-40 date of this Act is covered by the law in effect when the offense
5-41 or violation was committed, and the former law is continued in
5-42 effect for that purpose.
5-43 SECTION 4. This Act takes effect September 1, 1993, except
5-44 that for a health care provider who acquires an ownership or
5-45 investment interest in a health care facility or health care
5-46 supplier prior to May 1, 1993, Subchapter K, Chapter 161, Health
5-47 and Safety Code, as added by this Act, does not apply to a referral
5-48 for health care goods or services which occurs before September 1,
5-49 1996.
5-50 SECTION 5. The importance of this legislation and the
5-51 crowded condition of the calendars in both houses create an
5-52 emergency and an imperative public necessity that the
5-53 constitutional rule requiring bills to be read on three several
5-54 days in each house be suspended, and this rule is hereby suspended.
5-55 * * * * *
5-56 Austin,
5-57 Texas
5-58 May 3, 1993
5-59 Hon. Bob Bullock
5-60 President of the Senate
5-61 Sir:
5-62 We, your Committee on Health and Human Services to which was
5-63 referred S.B. No. 589, have had the same under consideration, and I
5-64 am instructed to report it back to the Senate with the
5-65 recommendation that it do not pass, but that the Committee
5-66 Substitute adopted in lieu thereof do pass and be printed.
5-67 Zaffirini,
5-68 Chair
5-69 * * * * *
5-70 WITNESSES
6-1 FOR AGAINST ON
6-2 ___________________________________________________________________
6-3 FOR AGAINST ON
6-4 ___________________________________________________________________
6-5 Name: Ted B. Roberts x
6-6 Representing: Tx Asso. of Business
6-7 City: Austin
6-8 -------------------------------------------------------------------
6-9 Name: Ruben A. Perez x
6-10 Representing: Am Health Enterprises, Inc.
6-11 City: San Antonio
6-12 -------------------------------------------------------------------
6-13 Name: Harry W. Wallingford x
6-14 Representing: Tx Business Group on Health
6-15 City: Austin
6-16 -------------------------------------------------------------------
6-17 Name: Lisa McGiffert x
6-18 Representing: Consumers Union
6-19 City: Austin
6-20 -------------------------------------------------------------------
6-21 Name: Mary Ann Raesener x x
6-22 Representing: Tx HMO Asso.
6-23 City: Austin
6-24 -------------------------------------------------------------------
6-25 Name: J. B. Tolan x
6-26 Representing: Tx Business Group on Health
6-27 City: San Antonio
6-28 -------------------------------------------------------------------
6-29 Name: Ralph Smith x
6-30 Representing: Tx Business Group on Health
6-31 City: The Woodlands
6-32 -------------------------------------------------------------------
6-33 Name: Stephen E. Campbell x
6-34 Representing: Tx Physical Therapy Asso.
6-35 City: Dallas
6-36 -------------------------------------------------------------------
6-37 Name: Anita Bradberry x
6-38 Representing: Tx Asso. for Home Care, Inc.
6-39 City: Austin
6-40 -------------------------------------------------------------------
6-41 Name: George R. Miller x
6-42 Representing: Tx Pharmaceutical Asso.
6-43 City: San Antonio
6-44 -------------------------------------------------------------------
6-45 Name: Hugh Lamensdorf, M.D. x
6-46 Representing: Self
6-47 City: Fort Worth
6-48 -------------------------------------------------------------------
6-49 Name: Teri Flack x
6-50 Representing: Attorney General's Office
6-51 City: Austin
6-52 -------------------------------------------------------------------
6-53 Name: Nancy Sims x
6-54 Representing: Tx Business Group on Health
6-55 City: Houston
6-56 -------------------------------------------------------------------
6-57 Name: Ruthann Geer x
6-58 Representing: Tx League of Women Voters
6-59 City: Austin
6-60 -------------------------------------------------------------------
6-61 Name: Richard King x
6-62 Representing: A A R P
6-63 City: Round Rock
6-64 -------------------------------------------------------------------
6-65 Name: Frank Santos x
6-66 Representing: TMA
6-67 City: Austin
6-68 -------------------------------------------------------------------
6-69 Name: Tom Smith x
6-70 Representing: Self
7-1 City: Austin
7-2 -------------------------------------------------------------------
7-3 FOR AGAINST ON
7-4 ___________________________________________________________________
7-5 Name: Roger Miller x
7-6 Representing: Cardiovascular Ventures Inc.
7-7 City: Austin
7-8 -------------------------------------------------------------------
7-9 Name: Galt Graydon x
7-10 Representing: Tx Radiological Society
7-11 City: Austin
7-12 -------------------------------------------------------------------
7-13 Name: Sara Speights x
7-14 Representing: Tx Health Care Asso.
7-15 City: Austin
7-16 -------------------------------------------------------------------