States accelerate efforts to ban self-referral investment interests

March 10, 1993

After a brief respite, the campaign to prohibit physician self-referralhas resumed with a vengeance. State legislatures convening inCalifornia and Florida have taken up the cause with bills thatwould either enact new self-referral prohibitions or

After a brief respite, the campaign to prohibit physician self-referralhas resumed with a vengeance. State legislatures convening inCalifornia and Florida have taken up the cause with bills thatwould either enact new self-referral prohibitions or strengthenexisting ones. A federal ban also looms with the introductionof legislation by Rep. Fortney "Pete" Stark (D-CA).For self-referring physicians, it appears to be medicine's equivalentof Custer's Last Stand.

In California, legislators have introduced at least four billsthat contain provisions prohibiting physicians from sending patientsto facilities in which they have an investment interest.

Meanwhile, Florida legislators are considering a measure thatwould amend the state's existing self-referral law by forcingself-referring physicians to divest their interests a year earlierthan previously mandated. In addition, legislators are consideringan extension of the self-referral ban that would prohibit physiciansfrom referring to hospitals in which they have ownership interest.

The California drive to rein in self-referral is spearheadedby Assemblywoman Jackie Speier (D-San Mateo), who led a similarbut unsuccessful effort last year (SCAN 7/1/92). Speier's previousbill, AB 819, began as a blanket ban on self-referral. It waslater amended to apply only to workers' compensation cases andthen died when the Legislature adjourned without passing it.

Self-referral within California's workers' compensation systemhas been a lightning rod for criticism. A study released lastyear claimed that self-referral is the direct cause for $356 millionin unnecessary tests paid out annually by the system (SCAN 2/12/92).

Speier is drafting two bills on the issue for the current legislativesession. One bill would be a blanket self-referral ban, whilethe other would apply only to workers' comp cases, according toElise Thurau, an aide to Speier.

The workers' comp legislation, AB 458, is currently a skeletonbill that expresses only the Legislature's intent to regulateself-referral. Specific provisions will be introduced later, Thurausaid. AB 458 was introduced last month and will be heard in committeein March or April.

The bill banning self-referral throughout the state has notyet received a bill number, Thurau said.

Two other California legislators have included language banningworkers' comp self-referrals in legislation aiming to reform thatsystem. Those bills are SB 55, sponsored by Sen. Bill Leonard(R-San Bernadino), and AB 250, sponsored by Assemblyman Jim Costa(D-Hanford).

The fight over AB 819 last year set the stage for this year'sefforts, Thurau said.

"The Legislature was educated on the issue last year,"Thurau said. "People see the problem of self-referral asone in which there are identifiable and unnecessary costs thatwe should do something about."

Speier's efforts are being followed by the California MedicalAssociation. The CMA would support a self-referral ban if it wererestricted to workers' comp cases, but would oppose any attemptto mandate a blanket ban, according to CMA spokesperson DanielleWalters.

"We recognize that there have been identified areas whereself-referral has been a problem, primarily in areas of workers'compensation," Walters said. "There is no evidence that(self-referral) has been an issue outside workers' comp."

In Florida, legislators have proposed moving up the deadlinefor physicians to divest financial interests in facilities towhich they refer. Such a move would heat up an already sizzlingmarket for physician-owned imaging centers.

The current deadline of October 1995 was part of a last-minutecompromise reached in the passage of the Patient Self-ReferralAct last year (SCAN 4/8/92).

In exchange for an extra year to divest financial interests,opponents of the act agreed to a cap set at 115% of the Medicarefee schedule on charges for medical procedures in the four areassubject to restrictions: imaging centers, physical therapy facilities,clinical labs and radiation therapy centers. The price cap, however,was declared unconstitutional by a U.S. District Court judge andis in limbo while the case is being appealed by the state (SCAN7/29/92).

Because the cap will probably not go into effect, authors ofthe self-referral act have decided to push for the original deadlineof October 1994. HB 139, introduced by state Rep. Buzz Ritchie(D-Pensacola), has passed the state Legislature's lower houseand has been sent to the Senate.

Florida legislators are also considering a measure that wouldprevent physicians from referring to hospitals in which they havea financial interest. The bill, HB 681, is a response to a recenttrend in which hospitals have been purchasing imaging centersfor sale by divesting physicians, according to Rep. Elaine Bloom(D-Miami), sponsor of the legislation.

Efforts on the state level to curb self-referral, however,could be eclipsed by federal legislation introduced by Stark (SCAN2/24/93).

Stark's bill, HR 345, would prohibit self-referral regardlessof who pays for medical services. The current federal self-referralban applies only to procedures paid by Medicare.