BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                    AB 2744


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          Date of Hearing:   April 19, 2016


                   ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS


                                  Rudy Salas, Chair


          AB 2744  
          (Gordon) - As Amended April 11, 2016


          SUBJECT:  Healing arts:  referrals.


          SUMMARY:  Provides that payment or receipt of consideration for  
          advertising for prepaid services, offered by a licensed healing  
          arts practitioner, does not constitute a referral of those  
          services and specifies that if the prepaid service is not  
          appropriate for the purchaser, the licensee must provide a full  
          price refund to the purchaser, as specified. 


          EXISTING LAW:


          1)States that the offer, delivery, receipt, or acceptance by any  
            licensed healing arts practitioner, as specified, of any  
            rebate, refund, commission, preference, patronage dividend,  
            discount, or other consideration, whether in the form of money  
            or otherwise, as compensation or inducement for referring  
            patients, clients, or customers to any person, irrespective of  
            any membership, proprietary interest, or coownership in or  
            with any person to whom these patients, clients, or customers  
            are referred is unlawful.  (Business and Professions Code  
            (BPC) Section 650(a))

          2)States that the payment or receipt of consideration for  








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            services other than the referral of patients which is based on  
            a percentage of gross revenue or similar type of contractual  
            arrangement is not unlawful if the consideration is  
            commensurate with the value of any premises or equipment  
            leased or provided by the recipient to the payer.  (BPC  
            Section 650(b))

          3)States that it is unlawful for a licensee to refer a person  
            for laboratory, diagnostic nuclear medicine, radiation  
            oncology, physical therapy, physical rehabilitation,  
            psychometric testing, home infusion therapy, or diagnostic  
            imaging goods or services if the licensee or his or her  
            immediate family has a financial interest with the person or  
            in the entity that receives the referral.  (BPC Section  
            650.01(a))

          THIS BILL:


          1)Specifies that the payment or receipt of consideration for  
            advertising, wherein a licensee offers or sells services on an  
            internet platform does not constitute a referral of patients.


          2)Specifies that to the extent that the licensee determines,  
            after consultation with the purchaser of the service, that the  
            service is not appropriate for the purchaser, the purchaser  
            will receive a full refund of the purchase price.


          3)Specifies that 1 and 2 above do not apply to basic health care  
            services under a health care service plan or essential health  
            benefits under the Patient Protection and Affordable Care Act  
            (PPACA), as specified.  


          4)Requires the entity providing the advertising to be able to  
            demonstrate that the licensee consented in writing to the  
            provisions of this bill.








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          FISCAL EFFECT:  Unknown.  This bill is keyed fiscal by the  
          Legislative Counsel.  


          COMMENTS:


          Purpose.  This bill seeks to clarify that the purchase of  
          professional services from licensed healing arts professionals  
          through an online advertising website does not constitute a  
          referral for those services from the online advertisement  
          originator.  This bill is sponsored by the  Internet Association  .  
           According to the author, "in the past, if a healthcare  
          professional wanted to advertise for his or her services, [he or  
          she] could take out an advertisement in the yellow pages or a  
          newspaper, purchase space on a billboard, or run a commercial on  
          radio or television.  


          In each of these instances, the advertisement could also include  
          a coupon or special offer for readers/ listeners.  Technology  
          has now made it possible for a healthcare professional to  
          advertise online and provide opportunities to purchase vouchers  
          for services in online marketplaces such as Groupon, Living  
          Social, and others.  


          [This bill] would recognize that online advertising involving  
          the purchase of vouchers for services offered by a healthcare  
          professional is just another form of advertising and clarify  
          that it is not an impermissible referral."


          Background.  Under existing law, BPC Section 650(a), specifies  
          that a licensed healing arts professional may not accept any  
          type of compensation for referring an individual to any other  
          person for services.  This prohibition on the payment of a  








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          healthcare provider for a referral of services was intended to  
          protect patients and consumers from providers receiving payments  
          or "kickbacks" for sending patients to certain providers.   
          Anti-kickback laws were enacted to help ensure that healthcare  
          decisions are made in the best interest of the consumer.  In  
          California, a violation of the no-referral laws by a licensee is  
          unprofessional conduct and cause for disciplinary action. 


          Internet Platform Services.  There are a variety of advertised  
          healthcare-related services that individuals may purchase  
          through an Internet platform including, laser toenail fungus  
          removal, nonsurgical facelifts, spider vein treatments,  
          counseling, and integrative manual therapy sessions.  A great  
          number of healthcare related services offered through an  
          Internet platform include elective procedures.  As currently  
          drafted, this bill clarifies that only specified healthcare  
          services that are purchased through an internet platform will  
          not be considered as a referral of those services.  This bill  
          specifies that "basic health care services" as defined under HSC  
          Section 1345 and "essential health benefits" as defined in HSC  
          Section 1367.005 and INS Section 10112.27 that are purchased  
          through an internet platform will still be subject to current  
          BPC Section 650(a), which prohibits payment or any other  
          consideration for a referral of services. 

          Essential health benefits and basic health care services.    
          Basic health care services are specified under the Knox-Keene  
          Health Care Service Plan Act of 1975 (BPC § 1340), and EHBs are  
          specified under the federal PPACA.  This bill seeks to clarify  
          that those services considered essential health benefits and  
          basic health care services are not applicable to the  
          authorization provided by this bill.

          BPC Section 650(b) specifies that the payment or receipt of  
          consideration for services other than the referral of patients  
          which is based on a percentage of gross revenue or similar type  
          of contractual is not unlawful, unless specified conditions are  
          met.  It is the intent of the author that services offered  








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          through an Internet platform would permit those services. 

          Online Advertising and Sales of Service.  This bill clarifies  
          that a licensed healing arts professional, who utilizes an  
          online service provider to offer prepaid services to the general  
          public, does not constitute a "referral" of those services.   
          Online sales and advertising forums will charge a fee to the  
          service provider to display the sale of services, where an  
          individual interested in those services will purchase those  
          services directly from the online service provider.  According  
          to the author, "the following describes how online voucher  
          advertising operates, the healthcare professional decides  
          whether to advertise and what service to make available for  
          purchase, the cost for the service, how many vouchers to offer,  
          and for how long.  The healthcare professional pays the online  
          advertising network for making the offer available, generally a  
          percentage of the price of the purchased service.  Once a  
          consumer purchases a voucher through this form of online  
          advertising, the consumer contacts the healthcare professional  
          to set an appointment, just as they would if responding to any  
          other form of advertisement.  

          After purchasing, the consumer decides whether a particular  
          service is right for him or herself only after consulting with  
          the healthcare professional.  If the consumer decides not to  
          receive the service, or if the professional decides the service  
          is not warranted, the consumer receives a full refund and incurs  
          no financial penalty."

          Pending Attorney General Opinion. Currently, the Attorney  
          General's Opinion Unit is in the process of researching and  
          drafting a formal opinion on the question of whether a  
          healthcare professional may offer online discounts for their  
          services through a third-party internet marketer.  The opinion  
          request, 13-1203, is currently pending completion in the AG's  
          office.  At this time, the completion date is unknown.  This  
          bill aims to clarify that those services offered via and  
          internet platform, does not constitute a referral of services in  
          violation of BPC Section 650(a).  This bill does not change the  








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          existing prohibition against licensed healthcare professionals  
          receiving a payment or any other consideration, monetary or  
          otherwise for referring an individual to another person for  
          professional services.  

          ARGUMENTS IN SUPPORT: 


           The Internet Association  writes in support, "The bill would  
          clarify existing law to confirm that healing arts professionals  
          may use Internet-based advertising platforms to market their  
          services without running afoul of statutes designed to prohibit  
          paid patient referrals.  Current law generally prohibits a  
          licensed healing arts professional from paying or receiving  
          compensation for the referral of a patient.  This law was  
          designed to prevent patients referral based on financial  
          motives-which were frequently undisclosed-rather than the  
          patient's best interests.  Internet advertising is not a patient  
          referral, any more than traditional advertising, such as an ad  
          in the Yellow Pages or Penny Save.  Nor does internet  
          advertising implicate the policy concerns underlying  
          California's prohibition on paid patient referrals.  


          Nonetheless, questions have been raised about whether  
          California's patient referral statute [BPC] Section 650, sweeps  
          in Internet advertising.  This potential ambiguity raises  
          concerns for healing arts professionals, who may fear that  
          online advertising platforms could subject them to professional  
          discipline.  [This bill] would remove this potential ambiguity  
          and resulting uncertainty by clarifying that licensed health  
          arts professionals may use Internet advertising services."  


          ARGUMENTS IN OPPOSITION:


          None on file.









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          POLICY ISSUES FOR CONSIDERATION: 


          This bill specifies that after a consultation with the purchaser  
          of the service, if it is determined that the service is not  
          appropriate, the purchaser will receive a full refund of the  
          purchase price.  As currently drafted, this bill does not  
          specify who would be responsible for reimbursing the purchaser.


          REGISTERED SUPPORT:  


          The Internet Association (sponsor)


          Groupon


          REGISTERED OPPOSITION:  


          None on file. 




          Analysis Prepared by:Elissa Silva / B. & P. / (916) 319-3301


















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