Existing law prohibits a person or business from referring or recommending a person for any form of medical care or treatment for profit and creates a presumption that the referral or recommendation is for profit if a fee or charge is imposed. Existing law makes a violation of this provision a misdemeanor, punishable by imprisonment in county jail for not longer than one year, or of a fine not exceeding $5,000, or by both that fine and imprisonment.

This bill would reduce increase the maximum fine from $5,000 to $2,500. $10,000.

Existing law, the Employee Housing Act, defines the term resident-employment housing for purposes of the act to mean apartment houses, hotels, motels, or dwellings, where living quarters are provided for 5 or more employees employed in the management, maintenance, or operation of an apartment house, hotel, motel, or dwellings.

This bill would make a nonsubstantive change to those provisions.

Date of Hearing: April 25, 2023

ASSEMBLY COMMITTEE ON HEALTH

Jim Wood, Chair

ABPCA Bill Id:AB 1670

Author:((Gipson) – As Amended Ver:April 20, 2023

SUBJECT: Medical referral services: treatment referrals.

SUMMARY: Increases from $5,000 to $10,000 the penalty for referring or recommending, for profit, a person to a physician, hospital, health-related facility, or dispensary for any form of medical care or treatment of any ailment or physical condition.

EXISTING LAW:

1. Prohibits a person, firm, partnership, association or corporation, or agent or employee thereof, for profit to refer or recommend a person to a physician, hospital, health-related facility, or dispensary for any form of medical care or treatment of any ailment or physical condition. States that the imposition of a fee or charge for any such referral or recommendation creates a presumption that the referral or recommendation is for profit. [Health & Safety Code § 445]
2. Exempts from 1) above referrals or recommendations which are made under the crippled children services program or prepaid health plans. [Id.]
3. Prohibits a physician, hospital, health-related facility or dispensary from entering into a contract or other form of agreement to accept for medical care or treatment any person referred or recommended for such care or treatment by a medical referral service business located in or doing business in another state if the medical referral service business would be prohibited under 1) above if the business were located in or doing business in this state. [Id.]
4. States that a violation of the above provisions constitute a misdemeanor and upon conviction may be punished by imprisonment in the county jail for not longer than one year, or a fine of not more than five thousand dollars ($5,000), or by both such fine and imprisonment. [Id.]

FISCAL EFFECT: Unknown. This bill has not yet been analyzed by a fiscal committee.

COMMENTS:

1. PURPOSE OF THIS BILL. According to the author, this bill protects consumers who are impacted by any form of referral of medical care or treatment for profit by increasing the penalty for unlawful for-profit referrals.
2. BACKGROUND. This bill increases the penalty for medical referrals that are made for profit to specified healthcare practitioners and facilities. According to the U.S. Office of Inspector General, anti-kickback statutes protect patients and health care programs from fraud and abuse by curtailing the corrupting influence of money in health care decisions. Federal and California anti-kickback and anti-referral statutes reflect recognition by policymakers that payments made or accepted in return for the referral of patients could result in actual or threatened patient harm, over utilization and increased health care costs.
   
   Since 1972, Section 1128(B)(b) of the federal Social Security Act, commonly referred to as the anti-kickback statute, has made it a criminal offense to knowingly and willfully offer, pay, solicit, or receive any remuneration to induce referrals of items or services reimbursable by federal health care programs. Referrals under the Anti-Kickback Statute include “any item or service for which payment may be made in whole or in part under a Federal health care program.” The statute imposes liability to parties on both sides of an impermissible "kickback" transaction. Remuneration under the Act includes the transfer of anything of value, in cash or in-kind, directly or indirectly, covertly or overtly. Violation of this statute constitutes a felony punishable by a maximum fine of $25,000, imprisonment of up to five years, or both. Conviction also leads to automatic exclusion from federal health care programs, including Medicare and Medicaid.
   
   The Medicare and Medicaid Patient and Program Protection Act of 1987 specifically required the federal Office of Inspector General in the Department of Health and Human Services to develop so-called safe harbor provisions, and specify various payment and business practices that would not be treated as criminal offenses under the anti-kickback provisions.
   
   In 1989, the Stark Law/amendments, also referred to as the physician Self-Referral Law was enacted which prohibits physicians from referring patients to receive "designated health services" payable by Medicare or Medicaid from entities with which the physician or an immediate family member has a financial relationship, unless an exception applies. Financial relationships include both ownership/investment interests and compensation arrangements. For example, if you invest in an imaging center, the Stark law requires the resulting financial relationship to fit within an exception or you may not refer patients to the facility and the entity may not bill for the referred imaging services. The Stark Law defines designated health services to include clinical laboratory services, physical therapy, occupational therapy, and outpatient speech-language pathology services.
   
   The Stark Law, unlike the Anti-Kickback Statute, flatly prohibits a broad range of financial relationships, and does not require proof of an intent to induce referrals.
   
   In California, Business and Professions Code Section 650, also known as the Physician Ownership and Referral Act of 1993, makes it unlawful for a healing arts licensee, including physicians and surgeons, psychologists, acupuncturists, optometrists, dentists, podiatrists, and chiropractic practitioners, to refer a person for certain health care services if the licensee has a financial interest, as defined, with the person or entity that receives the referral. Existing law provides specified exemptions from this prohibition. A violation of PORA is a misdemeanor offense that may subject a physician to civil penalties and disciplinary action by the Medical Board of California prohibits the offer, delivery, receipt or acceptance of compensation to induce the referral of patients. A first conviction under this section is punishable by imprisonment or by a fine not to exceed $50,000, or both. California law as interpreted by the courts, does not require both parties to the transaction to be physicians.
   
   Welfare and Institutions Code Section 14107.2 prohibits the solicitation or receipt of any remuneration, including kickbacks, in return for the referral of any individual to a person for furnishing any service or merchandise which is paid for by Medi-Cal. A conviction of this law is punishable by imprisonment or by a fine not to exceed $10,000, or both.

REGISTERED SUPPORT / OPPOSITION:

Support

None on file.

Opposition

None on file.

Analysis Prepared by: Rosielyn Pulmano / HEALTH / (916) 319-2097