Broad self-referral ban passes in California

September 16, 1993

The California Legislature this month passed a bill banning physicianself-referral throughout the state. If signed by Gov. Pete Wilson,the Physician Ownership and Referral Act of 1993 (AB 919) wouldextend to all payers a state ban on workers'

The California Legislature this month passed a bill banning physicianself-referral throughout the state. If signed by Gov. Pete Wilson,the Physician Ownership and Referral Act of 1993 (AB 919) wouldextend to all payers a state ban on workers' compensation self-referralpassed earlier this year (SCAN 7/28/93).

AB 919 was sponsored by Assemblywoman Jackie Speier (D-SanMateo), a longtime foe of physician referrals to facilities inwhich they have investment interests. Speier followed a piecemealstrategy in securing the bill's passage, first winning the workers'comp prohibition and then proceeding with broader legislation.

The bill was passed by wide margins in both the state Senateand Assembly. The votes were in sharp contrast to last year, whensimilar legislation failed to win approval.

Legislators this year are more educated about self-referral,according to Speier aide Elise Thurau. In addition, lawmakersconcerned about rising health-care costs are more enthusiasticabout eliminating practices believed to contribute to escalatingcosts.

"Lawmakers know that there are so many inefficienciesin our health-care system that it is in their best interest tofind abuses and reduce those costs," Thurau said.

Penalties for violating the law include fines of up to $5000for each offense and disciplinary action by the state medicalboard. Entering cross-referral schemes or other arrangements tocircumvent the law would be punishable by fines of up to $15,000as well as possible revocation of state licenses.

AB 919 contains many of the same exemptions found in otherself-referral bans passed recently. Exemptions would include:

  • referrals in rural areas;

  • in-office and group practice referrals; and

  • referrals to large publicly held companies.

Providers who own stock in such companies could refer if thefirm has total gross assets exceeding $100 million.

AB 919's large-entity exemption would be easier for most imagingservices companies to meet than the threshold set by federal legislationpassed in August, according to Larry Atkins of American HealthServices of Newport Beach, CA.

The federal law, which was sponsored by Rep. Pete Stark (D-CA),bans self-referral in the Medicare and Medicaid systems but containsan exemption for referrals to publicly held companies with stockholderequity in excess of $75 million (SCAN 8/25/93).

That threshold has vexed imaging center companies who wouldlike to use stock to buy out physician investors, he said.

The California bill would take effect January 1995. It containsa provision stating that if an all-payer federal ban is passedbefore then, the California legislation will take effect on whicheverdate is later. Stark is attempting to pass an all-payer ban withHR 345.

THE CALIFORNIA LEGISLATURE ALSO PASSED AB 2259 this month. Thebill would require mobile imaging centers to receive state licensesbefore they can begin operation (SCAN 8/25/93).

California mobile imaging companies were initially wary ofthe legislation, which they felt could impose onerous inspectionrequirements on mobile providers. Negotiations with the sponsorof the bill, the state department of health, helped clean up itslanguage and clarified the bill's legislative intent, accordingto Richard Magary, senior vice president of administration ofAmerican Shared Hospital Services of San Francisco.

The bill would put the burden for acquiring mobile licenseson hospitals rather than mobile companies. In addition, new mobileunits would only have to be inspected once before they begin operation.

"The department has indicated a willingness to work ona reasonable physical inspection process," Magary said. "Thedepartment has agreed to work with the industry to make (the legislation)as effective and focused as possible."

AB 2259 is also awaiting the governor's signature.