SB640: Bill Text

1995 - 1996 LEGISLATURE

1995 Senate BILL 640

March 21, 1996 - Introduced by Senators Burke and Moen, cosponsored by Representatives Boyle, R. Potter, L. Young and R. Young. Referred to Committee on Health, Human Services and Aging.

SB640,1,8 An Act to renumber and amend 448.01 (11); to amend 449.19; and to create subchapter V of chapter 150 [precedes 150.88], 441.07 (1) (f), 446.04 (4m), 447.07 (3) (km), 448.01 (11) (c), 448.57 (2) (gm), 448.90 (2) (gm), 449.07 (1) (fc), 450.10 (1) (a) 3m., 455.09 (1) (em), 457.26 (2) (gm), 459.34 (2) (fm) and 459.46 (5) (b) 6m. of the statutes; relating to: prohibiting certain health care providers from referring a patient to a health care entity in which the health care provider has a financial interest, granting rule-making authority and providing a penal ty.

Analysis by the Legislative Reference Bureau

Under current law, a person licensed by the medical examining board (board) as a physician or podiatrist, or a person certified by the board as an occupational ther apist, occupational therapy assistant or respiratory care practitioner, may not direct ly or indirectly give or receive any fee, commission or other form of compensation in exchange for referring a person to seek professional services from a person licensed by the board. A person licensed as a physical therapist by the physical therapists affiliated credentialing board may not directly or indirectly give or receive any fee, commission or other form of compensation in exchange for referring a person to seek professional services from a person licensed by the affiliated credentialing board. A chiropractor or an optometrist is also prohibited from splitting or dividing any fee for his or her professional services with any person except an associate licensed chiro practor or optometrist. In addition, current law, as contained in the administrative code, regulates fee splitting or referrals by other health care providers as follows: 1) dentists are prohibited from accepting rebates from or splitting fees with another health care provider unless the action is disclosed to the client; 2) pharmacists are prohibited from accepting rebates or splitting fees with any other health care provid er or health care facility; and 3) psychologists, social workers, family therapists and professional counselors are required to inform a client of any financial interest that is not obvious and that may accrue to the psychologist, social worker, family therapist or professional counselor for a referral to or use of a service, product or publication.

This bill explicitly prohibits a health care provider from referring a patient to a health care entity outside the health care provider's office practice or group practice if the health care provider has a financial interest in the health care entity. The bill defines "health care provider" as a nurse, chiropractor, dentist, dental hygienist, physician, podiatrist, physical therapist, occupational therapist, occupational thera py assistant, physician assistant, respiratory care practitioner, dietitian, optome trist, pharmacist, psychologist, social worker, marriage and family therapist, profes sional counselor, speech-language pathologist or audiologist. The bill defines "financial interest" as an ownership interest in, an equity or debt security from, or a compensation agreement with, a sole proprietorship, partnership, firm, corpora tion, limited liability company or other business.

The bill also provides for several exceptions to the general prohibition against a health care provider referring a patient to a health care entity in which the health care provider has a financial interest. Specifically, the bill allows such referrals in the following circumstances: 1) in the case of an emergency, when complying with the prohibition presents an immediate danger to the life of the client; 2) in a case for which medicaid or medicare reimbursement is sought and the referral is permitted by federal law governing such cases; 3) in a case in which the health care provider will be providing health care services personally and directly to the patient within the entity to which the patient is referred; 4) in a case in which the health care entity is a publicly traded entity that meets criteria specified in the bill and in which the health care provider's interest is less than 0.5% of the entity's total equity; 5) in a case in which the referral is to a health maintenance organization in which the patient is an enrolled participant and with which the health care provider has a referral agreement; and 6) in a case in which the referral is to certain joint ventures, an ambu latory surgery center or a hospital if the health care provider has an employment or service agreement with the joint venture, ambulatory surgery center or hospital and if the health care provider's compensation is not based on the number of referrals made to the joint venture, ambulatory surgery center or hospital.

The bill also creates an exception for referrals to an entity in which the health care provider has a financial interest if there is a demonstrated need for the entity in the community. Under the bill, there is a demonstrated need for an entity in the community in any one of the following circumstances: 1) there is no other health care entity or facility of reasonable quality that provides medically adequate service; 2) requiring a patient to use another entity or facility creates a hardship for the patient; 3) the entity is formed to own or lease medical equipment that replaces obsolete or inadequate equipment in or under the control of a hospital located in a health man power shortage area; or 4) the community meets any other demonstrated need estab lished by rule by the cost containment commission. In addition, the structure of the entity must satisfy the following requirements: 1) a person who is not in a position to refer a patient to the entity is able to invest in the entity on the same terms as a health care provider; 2) a health care provider who invests is not required or encour aged to make referrals to the entity as a condition of becoming or remaining an inves tor; 3) the entity markets or furnishes its services to referring health care provider investors and other investors on equal terms; 4) the entity does not make loans to or guarantee loans for health care providers who are in a position to make referrals; 5) the income from the health care provider's investment is based on the health care provider's equity, not on the number of referrals; and 6) the entity does not prohibit the health care provider from investing in other entities.

Under the bill, before obtaining a financial interest in an entity, a health care provider may request a determination from the cost containment commission as to whether referrals to that entity will be proper under the community need exception. If a health care provider does not request such a determination before obtaining a financial interest in an entity, he or she must request a determination before making any referral to the entity under the community need exception unless it is not practi cal to seek a determination for a particular referral. Under the bill, the cost contain ment commission has 90 days to provide any determination, whether requested be fore or after the health care provider obtains a financial interest in the entity to which the referral is made. If the cost containment commission does not provide a determination in the 90-day period, the health care provider may make referrals to the entity, if he or she requested the determination before obtaining a financial inter est in the entity, or may make the particular referral on which the request was based, if he or she made the request after obtaining a financial interest in the entity.

The bill also provides that a health care provider may seek an advisory opinion from the cost containment commission as to whether a referral violates the bill's pro visions. The cost containment commission is required to promulgate rules that are necessary to administer and enforce the provisions of the bill. The bill also allows an examining board that regulates a health care provider to discipline the health care provider for violating the provisions of the bill. Finally, the bill provides that any person who violates the provisions of the bill shall forfeit $20,000.

For further information see the state fiscal estimate, which will be printed as an appendix to this bill.

The people of the state of Wisconsin, represented in senate and assembly, do enact as follows:

SB640, s. 1 Section 1. Subchapter V of chapter 150 [precedes 150.88] of the statutes is created to read:

SB640,3,3 Chapter 150

SB640,4,3 Subchapter V Referrals by health care providers

SB640,4,4 150.88 Definitions. In this subchapter:

SB640,4,9 (1) "Financial interest" means an ownership interest in, an equity or debt secu rity from, or a compensation agreement with, a sole proprietorship, partnership, firm, corporation, limited liability company or other business. "Financial interest" does not include a directorship that is uncompensated if the director has no owner ship interest in the entity for which he or she is a director.

SB640,4,13 (2) "Group practice" means 2 or more health care providers organized as a part nership, professional corporation, limited liability company, foundation, not-for- profit corporation, faculty practice plan, or similar association, in which all of the fol lowing apply:

SB640,4,16 (a) Each member, employe or independent contractor of the group provides the full range of health care services that the health care provider routinely provides through the use of the office space, facilities, equipment or personnel of the group.

SB640,4,18 (b) The services of the health care provider are provided through the group, and payments received for health care services are treated as receipts of the group.

SB640,4,21 (c) The expenses of, and the income from, the practice are shared or distributed by a method determined by the group either at the time the group is formed or by a later determination revising the method initially determined by the group.

SB640,4,24 (3) "Health care entity" means an individual or a sole proprietorship, partner ship, firm, corporation, limited liability company or other enterprise that provides health care services.

SB640,4,25 (4) "Health care provider" means any of the following:

SB640,5,1 (a) A nurse licensed under ch. 441.

SB640,5,2 (b) A chiropractor licensed under ch. 446.

SB640,5,3 (c) A dentist or dental hygienist licensed under ch. 447.

SB640,5,4 (d) A physician, podiatrist or physical therapist licensed under ch. 448.

SB640,5,6 (e) An occupational therapist, occupational therapy assistant, physician assis tant, respiratory care practitioner or dietitian certified under ch. 448.

SB640,5,7 (f) An optometrist licensed under ch. 449.

SB640,5,8 (g) A pharmacist licensed under ch. 450.

SB640,5,9 (h) A psychologist licensed under ch. 455.

SB640,5,11 (i) A social worker, marriage and family therapist or professional counselor cer tified under ch. 457.

SB640,5,13 (j) A speech-language pathologist or audiologist licensed or registered under ch. 459.

SB640,5,15 (5) "Health care services" means services provided to a person by a health care provider.

SB640,5,16 (6) "Health maintenance organization" has the meaning given in s. 609.01 (2).

SB640,5,19 (7) "Health manpower shortage area" means an area in this state that is in a health manpower shortage area as determined by the federal department of health and human services under 42 USC 254e.

SB640,5,21 (8) "Office practice" means the primary facility at which a health care provider provides health care services.

SB640,5,23 (9) "Publicly traded health care entity" means a health care entity that satisfies all of the following requirements:

SB640,6,3 (a) The entity is listed for trading on the New York stock exchange, the Ameri can stock exchange or the national association of securities dealers automated quota tion system.

SB640,6,5 (b) The entity had, at the end of its most recent fiscal year, total net assets of $30,000,000 or more that were related to providing health care services.

SB640,6,8 (c) The entity provides its services, products or facilities on equal terms to health care providers who are investors and health care providers who are not inves tors.

SB640,6,10 (d) The entity issues one class of common stock only, without preferential treat ment among shareholders as to status, voting rights or remuneration.

SB640,6,12 (e) The entity does not loan funds to, or guarantee any loans for, health care providers who are able to refer patients to the entity.

SB640,6,14 (f) The income from a health care provider's investment is not related to the volume or type of referrals a health care provider makes to the entity.

SB640,6,19 (10) "Refer" means requesting, suggesting, sending or inducing a person to seek or obtain professional services from a health care entity. "Refer" includes a health care provider requesting or establishing a plan of care that includes the provi sion of health care services outside the health care provider's practice or group prac tice.

SB640,6,23 150.882 Prohibited conduct. Except as provided in ss. 150.884 and 150.886, no health care provider may refer a patient to a health care entity outside the health care provider's office practice or group practice if the health care provider has a finan cial interest in that entity.

SB640,7,3 150.884 Exceptions. A health care provider may refer a patient to a health care entity that is outside his or her office practice or group practice and in which he or she has a financial interest in any of the following circumstances:

SB640,7,5 (1) The referral is made during an emergency and compliance with s. 150.882 presents an immediate danger to the life of the patient.

SB640,7,7 (2) (a) The referral is one to which 42 USC 1395nn applies and is permitted under 42 USC 1395nn.

SB640,7,9 (b) The referral is one to which 42 USC 1396b (s) applies and is permitted under 42 USC 1396b (s).

SB640,7,11 (3) The health care provider provides health care services personally and di rectly to the patient within the entity to which the patient is referred.

SB640,7,14 (4) The health care entity to which the patient is referred is a publicly traded health care entity and the health care provider's financial interest does not exceed 0.5% of the entity's total equity.

SB640,7,18 (5) The health care entity to which the patient is referred is part of a health maintenance organization, if the patient is an enrolled participant of the health maintenance organization and the referral is made under an agreement between the health care provider and the health maintenance organization.

SB640,7,22 (6) The health care entity to which the referral is made is a joint venture in which the health care provider's group practice has invested for the purpose of pro viding health care services, an ambulatory surgery center or a hospital, if all of the following conditions are met:

SB640,7,24 (a) The health care provider has an employment or service agreement with the entity for specified services.

SB640,8,4 (b) The compensation the health care provider receives from the entity is con sistent with the fair market value of the services provided, is not determined on the basis of the value or volume of referrals, and is reasonable even if no referrals are made to the entity.

SB640,8,8 150.886 Community need referrals. (1) A health care provider may refer a patient to a health care entity that is outside his or her office practice or group prac tice and in which he or she has a financial interest if all of the following conditions are met:

SB640,8,11 (a) The community in which the entity is located has a demonstrated need for the entity. A community has a demonstrated need for an entity in any one of the fol lowing situations:

SB640,8,13 1. There is no other health care entity or facility of reasonable quality that pro vides medically appropriate service.

SB640,8,15 2. Requiring a patient to use another entity or facility creates a hardship for the patient.

SB640,8,18 3. The entity has been formed to own or lease medical equipment that replaces obsolete or inadequate equipment in or under the control of a hospital located in a health manpower shortage area.

SB640,8,20 4. The community meets any other demonstrated need established by rule by the commission.

SB640,8,21 (b) The structure of the entity meets all of the following requirements:

SB640,8,23 1. A person who is not in a position to refer a patient to the entity is able to in vest in the entity on the same terms as those offered to a health care provider.

SB640,9,3 2. No health care provider who invests is required or encouraged to make refer rals to the entity or otherwise generate business for the entity as a condition of be coming or remaining an investor.

SB640,9,6 3. The entity markets or furnishes its services on equal terms to referring health care provider investors, other investors and health care providers who are not investors.

SB640,9,8 4. The entity does not loan funds or guarantee any loans for health care provid ers who are in a position to refer patients to an entity.

SB640,9,11 5. The income on the health care provider's investment is based on the health care provider's equity in the entity rather than on the volume of the referrals the health care provider makes to the entity.

SB640,9,13 6. The investment contract between the entity and the health care provider does not prohibit a health care provider from investing in other entities.

SB640,9,24 (2) Before obtaining a financial interest in a health care entity, a health care provider may request the commission to determine whether the entity satisfies the requirements under sub. (1). A request by a health care provider under this subsec tion shall be in writing and shall contain sufficient information for the commission to make a determination. The commission shall provide the determination in writ ing, stating the reasons for its determination, no later than 90 days after receiving the health care provider's written request. If the commission does not provide a de termination in the 90-day period, the entity shall be considered to satisfy the re quirements under sub. (1) based on the information contained in the health care pro vider's written request and the health care provider may make referrals to the entity under this section.

SB640,10,13 (3) If a health care provider has not received a determination under sub. (2) that permits the health care provider to make referrals to an entity in which the health care provider has a financial interest, the health care provider shall, before making a referral under this section, request the commission to determine whether the entity satisfies the requirements under sub. (1). A request by a health care pro vider under this subsection shall be in writing and shall contain sufficient informa tion for the commission to make a determination. The commission shall provide the determination in writing, stating the reasons for its determination, no later than 90 days after receiving the health care provider's written request. If the commission does not provide a determination in the 90-day period, the entity shall be considered to satisfy the requirements under sub. (1) based on the information contained in the health care provider's written request and the health care provider may make the referral to the entity under this section.

SB640,10,22 (4) When making a referral under this section, a health care provider shall dis close his or her financial interest in the entity to which the patient is being referred to the patient and, if it requests information regarding the health care provider's fi nancial interest, to a 3rd-party payor. If alternative facilities are reasonably avail able, the health care provider shall provide the patient with a list of the alternative facilities and shall inform the patient that he or she may use the alternative facility other than the one in which the health care worker has a financial interest. A health care provider may not treat a patient differently if the patient chooses to use an alter native facility.

SB640,10,25 (5) No entity may receive referrals under this section unless the entity esta blishes a referral review program to ensure that referrals from health care providers who have a financial interest in the entity are appropriate or necessary referrals.

SB640,11,6 (6) If compliance with the provisions of this section are not practical, as defined by rule by the commission, the health care provider may refer the patient to an entity in which he or she has a financial interest without submitting a written request un der sub. (3). A health care provider making a referral under this subsection shall pro vide the patient with information concerning all reasonably available alternative fa cilities.

SB640,11,9 150.888 Evasion. No health care provider may enter into an agreement or ar rangement with another person that provides for the other person to make a referral that the health care provider is prohibited by this subchapter to make directly.

SB640,11,16 150.89 Advisory opinions. A health care provider may request in writing that the commission provide an advisory opinion concerning whether a referral to an entity violates this subchapter. The opinion of the commission requested under this section shall be presumptively correct. If the commission does not provide the opin ion within 90 days after receiving the written request the health care provider may make the referral and the referral shall not be considered to be a violation of this sub chapter.

SB640,11,18 150.892 Rule-making authority. The commission shall promulgate rules that it determines are necessary to administer this subchapter.

SB640,11,20 150.894 Penalties. Any person violating this subchapter or a rule promul gated under this subchapter shall forfeit $20,000 for each violation.