BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 2744 Hearing Date: June 13,
2016
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|Author: |Gordon |
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|Version: |June 6, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Sarah Huchel |
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Subject: Healing arts: referrals
SUMMARY: Clarifies that certain types of advertising do not constitute
a referral when the third party advertiser does not recommend,
endorse, or otherwise select a healing arts licensee, as
specified.
Existing law:
1) Declares it unlawful for any person, association, or
corporation to establish, conduct or maintain a referral
agency or to refer any person for remuneration to any
extended care, skilled nursing home or intermediate care
facility or a distinct part of a facility providing extended
care, skilled nursing home care, or intermediate care,
without first having obtained a written license from the
State Director of Health Services or from an inspection
service as specified. (Health and Safety Code (HSC) Section
1400)
2) Defines "referral agency" for purposes of the HSC to mean a
private, profit or nonprofit agency engaged in the business
of referring persons for remuneration to any extended care,
skilled nursing home or intermediate care facility or a
distinct part of a facility providing extended care, skilled
nursing home care, or intermediate care. (HSC § 1401)
3) Declares unlawful, except as allowed for referral agencies
AB 2744 (Gordon) Page 2
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licensed under HSC, the offer, delivery, receipt, or
acceptance by any healing arts licensee 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. (Business and Professions Code (BPC) § 650
(a))
4) States 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 arrangement shall not be unlawful if the
consideration is commensurate with the value of the services
furnished or with the fair rental value of any premises or
equipment leased or provided by the recipient to the payer.
(BPC § 650 (b))
5) Establishes parameters for group advertising and referral
services for dentists, chiropractors, and marriage and family
therapists, as specified. (BPC §§ 650.2, 650.3, 650.4)
6) Declares it unlawful for any healing arts licensee
disseminate or cause to be disseminated any form of public
communication containing a false, fraudulent, misleading, or
deceptive statement, claim, or image for the purpose of or
likely to induce, directly or indirectly, the rendering of
professional services or furnishing of products in connection
with the professional practice or business for which he or
she is licensed. A "public communication" as used in this
section includes, but is not limited to, communication by
means of mail, television, radio, motion picture, newspaper,
book, list or directory of healing arts practitioners,
Internet, or other electronic communication. (BPC § 651(a))
7) Requires any price advertisement to be exact, without the use
of phrases, including, but not limited to, "as low as," "and
up," "lowest prices," or words or phrases of similar import.
Any advertisement that refers to services, or costs for
services, and that uses words of comparison shall be based on
verifiable data substantiating the comparison. Any person so
advertising shall be prepared to provide information
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sufficient to establish the accuracy of that comparison.
Price advertising shall not be fraudulent, deceitful, or
misleading, including statements or advertisements of bait,
discount, premiums, gifts, or any statements of a similar
nature. In connection with price advertising, the price for
each product or service shall be clearly identifiable. The
price advertised for products shall include charges for any
related professional services, including dispensing and
fitting services, unless the advertisement specifically and
clearly indicates otherwise. (BPC § 651 (c))
8) Defines basic health care services as physician services,
including consultation and referral; hospital inpatient
services and ambulatory care services; diagnostic laboratory
and diagnostic and therapeutic radiologic services; home
health services; preventive health services; emergency health
care services, including ambulance and ambulance transport
services and out-of-area coverage; and hospice care. (HSC §
1345 (b))
This bill:
1)Clarifies that the payment or receipt of consideration for
advertising, wherein a licensee offers or sells services
through a third party advertiser, shall not constitute a
referral of patients when the third party advertiser does not
itself recommend, endorse, or otherwise select a licensee.
2) Requires the purchaser to receive a refund of the full
purchase price to the extent that the licensee determines,
after consultation with the purchaser of the service, that
the service is not appropriate for the purchaser.
3) States that this bill shall not apply to basic health care
services, as specified, or essential health benefits,
specified.
4) Requires the entity providing the advertising to be able to
demonstrate that the licensee consented in writing to the
requirements of this bill.
5) Requires a third party advertiser to make available to
prospective purchasers advertisements for services of all
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licensees advertising through the third party advertiser in
the applicable geographic region.
FISCAL
EFFECT: This bill is keyed "fiscal" by Legislative Counsel.
According to the Assembly Committee on Appropriations analysis
dated May 4, 2016, any costs to healing arts boards within the
Department of Consumer Affairs are expected to be minor and
absorbable.
COMMENTS:
1. Purpose. This bill is sponsored by The Internet Association .
According to the Author's office, "AB 2744 would recognize
that online advertising involving the purchase of vouchers
for services offered by a healthcare professional is just
another form of advertising. Specifically, this bill would
expressly provide that payment or receipt of consideration
for advertising, wherein a healthcare professional offers or
sells a voucher for services, is not a referral of patients."
2. Background. Current law authorizes and establishes parameters
for healing arts professionals to advertise their services
and, in a separate provision of law, prohibits rebates for
patient referrals. Current law does not appear to anticipate
new forms of advertising which offer prepaid services in the
form of vouchers. In this model, a healing arts licensee
contracts with a third party advertiser to establish a
voucher for the licensee's services at a certain price and
for a certain time period, which is then marketed by the
advertiser. For each voucher sold, the third party
advertiser takes a portion of the cost of the voucher as its
advertising and marketing fee. The third party advertiser is
not paid upon redemption, nor does it recommend, endorse, or
otherwise select a licensee. Once a consumer purchases a
voucher, the consumer contacts the licensee to set an
appointment, just as they would if responding to any other
form of advertisement.
3. Advertising vs. Referral. Critical to the inquiry as to the
legality of voucher advertising services is the issue of
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"referral." A 1994 Attorney General opinion (93-807) stated
the following about the nature of referrals, in regards to a
question about whether a for-profit podiatry telephone
referral service may direct callers to podiatrists based on
the amount a participating podiatrist pays:
The referral plan about which inquiry is made [a dental
referral plan] fits squarely within the section's broad
prohibition. The verb `refer' is defined as `to send or
direct for treatment, aid, information, decision'
(Webster's Third New Internat. Dict. (1971 ed.) at p. 1907,
def. (2a)) and a `referral' as `the process of directing .
. . a patient . . . to an appropriate specialist or agency
for definitive treatment' (id., at p. 1908, def. (1b)). The
phrase `referral of patients' used in section 650 may thus
be thought of as the process whereby a third party
independent entity who initially has contact with a person
in need of health care first selects a professional to
render the same and then in turn places the prospective
patient in contact with that professional for the receipt
of treatment. In other words it is the selection of a
dentist to provide professional services for a patient by
someone other than the patient or dentist (or their
employees or agents on their behalf) that constitutes the
`referring of patients' under section 650. ? As we have
seen section 650 was designed to ensure that that selection
and subsequent reference would not be tainted by the
receipt of a fee and that the patient would not pay more
for the ultimate services he receives because of it. . . .
Inasmuch as in the process described herein consideration
is paid to obtain the advantage of being selected by the
referral service to be the treating professional, a
violation of section 650 occurs.
This bill specifies that a referral does not occur if a third
party advertiser does not itself recommend, endorse, or
otherwise select a licensee, and that the third party
advertiser makes available all licensees advertising within
an applicable geographic region.
Also significant to the distinction between referral services
and advertising is the notion that consumers were being
intentionally or unintentionally misled about the nature of
referral services - that they were screening licensees and
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endorsing those recommended, or selected only certain
practitioners over others for quality reasons, rather than
because a licensee paid the service. To the extent that it
is obvious that the voucher is a solicitation and the third
party advertiser does not discriminate between licensees
based on advertising fees paid within a reasonable geographic
region, these forms of advertising should not trigger
referral concerns.
4. Prior Legislation. SB 994 (Kelle, Chapter 648, Statutes of
1993) required dental referral services to disclose in
advertisements that dentists have paid for referrals by the
service.
5. Arguments in Support. The Internet Association writes,
"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
patient referrals 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 is traditional advertising, such as an ad in
the Yellow Pages or Penny Saver. Nor does Internet
advertising implicate the policy concerns underlying
California's prohibition on paid patient referrals."
Groupon writes, "This legislation is important to the many
California healing arts professionals who use Internet
platforms such as Groupon to advertise their services and
expand their businesses. It is also important for California
consumers for whom the Internet has become a valuable
resource to comparison shop for elective/non-reimbursable
health care services. On Groupon, for example, consumers can
compare prices and services from dozens of providers in their
communities for teeth whitening, braces, or laser skin
resurfacing, to name a few. This offers consumers greater
transparency about pricing for these types of healthcare
services, which has historically been difficult to find."
6. Arguments in Opposition. The California Medical Association
writes, "In the last decade, new companies often referred to
as 'daily deal sites' have been created that advertise
discounted services on behalf of another. The arrangement is
simply [that] a provider offers their services and a company
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like Groupon or LivingSocial handles the advertising and
selling of those services. While this model is completely
appropriate for the vast amounts of market activity, it is
not appropriate to sell medical services in this manner.
Physicians are prohibited from providing any form of
consideration in return for the referral of patients.
Because Groupon bases it business model by tying its
advertising fee to the total number of services sold, CMA
fears this model runs afoul of current fraud and abuse
protections centered around self-referral and anti-kickback
schemes."
The California Society of Plastic Surgeons (CSPS) writes, "CSPS
is opposed to the proliferation of medical offerings online
which are touting significant discounts as a means to obtain
patients via online websites."
7. Recommended Amendments. The Author may wish to consider
clarifying how and under what circumstances a customer gets a
refund. The bill states that "To the extent the licensee
determines ? that the service is not appropriate for the
purchaser, the purchaser shall receive a refund of the full
purchase price." This language confuses whether a purchaser
may only get a refund "to the extent that the licensee
determines the service was inappropriate" or the actual,
complete purchase price. The following would clarify that
the consumer would get a full refund if the licensee
determines the service is inappropriate:
On page 3, line 38, delete "To the extent" and add " If "
This bill language is also unclear who the purchaser receives
the refund from, be it the licensee or the third party
advertiser. The following will clarify how the terms of
reimbursement will be determined:
On page 4, line 1, after "price" insert " as determined by
the terms of the advertising service agreement between the
third-party advertiser and the licensee "
The following restatement will clarify that the third party
advertiser is required to offer advertising from all licensees
who want to advertise with the third party advertiser in a
certain geographic area:
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On page 4, delete " for purchase services advertised by all
licensees" and delete line 10. Insert "to prospective
purchasers advertisements for services of all licensees
then advertising through the third party advertiser in the
applicable geographic region. "
SUPPORT AND OPPOSITION:
Support:
The Internet Association (Sponsor)
Groupon
Opposition:
California Medical Association
California Society of Plastic Surgeons
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