BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2744|
|Office of Senate Floor Analyses | |
|(916) 651-1520 Fax: (916) | |
|327-4478 | |
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THIRD READING
Bill No: AB 2744
Author: Gordon (D), et al.
Amended: 8/8/16 in Senate
Vote: 21
SENATE BUS., PROF. & ECON. DEV. COMMITTEE: 6-0, 6/13/16
AYES: Hill, Block, Gaines, Galgiani, Mendoza, Wieckowski
NO VOTE RECORDED: Bates, Hernandez, Jackson
SENATE APPROPRIATIONS COMMITTEE: Senate Rule 28.8
ASSEMBLY FLOOR: 78-0, 5/12/16 (Consent) - See last page for
vote
SUBJECT: Healing arts: referrals
SOURCE: The Internet Association
DIGEST: This bill 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.
Senate Floor Amendments of 8/8/16 clarify the conditions under
which a licensee may advertise services through a third party
advertiser and not have the solicitation be considered a
referral.
ANALYSIS:
AB 2744
Page 2
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
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) Defines basic health care services as physician services,
including consultation and referral; hospital inpatient
services and ambulatory care services; diagnostic laboratory
AB 2744
Page 3
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, notwithstanding any other law, the payment or
receipt of consideration for advertising in which 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 fee paid to the third-party advertiser be
commensurate with the service provided by the third-party
advertiser.
3)Requires the purchaser to receive a refund of the full
purchase price, as determined by the terms of the advertising
service agreement between the third-party advertiser and the
licensee, if the licensee determines after consultation with
the purchaser that:
a) the service is not appropriate for the purchaser, or
b) if the purchaser elects not to receive the service for
any reason and requests a refund.
4)Requires the licensee to disclose in the advertisement that a
consultation is required and that the purchaser will receive a
refund if not eligible to receive the service.
5)States that this bill shall not apply to basic health care
services, as specified, or essential health benefits, as
specified.
6)Requires the entity providing the advertising to be able to
demonstrate that the licensee consented in writing to the
requirements of this bill.
AB 2744
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7)Requires a third party advertiser to make available to
prospective purchasers advertisements for services of all
licensees then advertising through the third-party advertiser
in the applicable geographic region.
8)Requires the licensee to disclose the regular, nondiscounted
price for the service in any advertisement offering a discount
price for a service.
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.
Advertising vs. Referral. Critical to the inquiry as to the
legality of voucher advertising services is the issue of
"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
AB 2744
Page 5
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
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.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:YesLocal: No
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SUPPORT: (Verified8/9/16)
The Internet Association (source)
Groupon
OPPOSITION: (Verified8/10/16)
California Society of Plastic Surgeons
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."
ARGUMENTS IN OPPOSITION: 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."
ASSEMBLY FLOOR: 78-0, 5/12/16
AYES: Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,
Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Calderon,
Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley, Cooper,
Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines,
Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,
Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger
Hernández, Holden, Irwin, Jones, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Quirk, Ridley-Thomas, Rodriguez, Salas, Santiago,
Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber,
Wilk, Williams, Wood, Rendon
AB 2744
Page 7
NO VOTE RECORDED: Burke, Jones-Sawyer
Prepared by:Sarah Huchel / B., P. & E.D. / (916) 651-4104
8/10/16 15:55:03
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