BILL ANALYSIS Ó AB 2744 Page 1 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 AB 2744 Page 2 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. AB 2744 Page 3 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 AB 2744 Page 4 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 AB 2744 Page 5 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 AB 2744 Page 6 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. AB 2744 Page 7 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 AB 2744 Page 8