BILL ANALYSIS
AB 1140
Page 1
Date of Hearing: May 12, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 1140 (Niello) - As Amended: April 14, 2009
SUBJECT : Diagnostic imaging services.
SUMMARY : Revises the definition of "responsible third-party
payer" to include a person or entity who contracts with
insurance carriers, self-insured employers, third-party
administrators, or any other person or entity who, pursuant to a
contract, is responsible to pay for Computerized Tomography
(CT), Positron Emission Tomography (PET), or Magnetic Resonance
Imaging (MRI) diagnostic imaging services provided to a patient
covered by that contract.
EXISTING LAW :
1)Prohibits a healing arts practitioner from charging, billing,
or otherwise soliciting payment for anatomic pathology
services, as defined, if those services were not actually
rendered by the practitioner or under his or her direct
supervision, except as specified.
2)Requires a clinical laboratory and a physician and surgeon
performing anatomic pathology services to directly bill the
patient, the responsible third-party payer, the clinical
laboratory that sent the sample for specialized testing, if
certain requirements are met, the requesting hospital or
clinic, or the governmental agency or its specified public or
private agent, agency, or organization responsible for payment
for those services, except as specified.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of this bill . According to the author's office, "The
intent of AB 1140 is to clarify the definition of 'responsible
third-party payer' to ensure that legitimate contracting
entities are not prohibited from providing services to the
Health and Workers' Compensation insurance communities. A vague
definition of 'responsible third-party payer' was included in
last year's AB 2794 (Blakeslee), Chapter 469, Statutes of 2008,
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which led some to believe that AB 2794 actually barred
contracting entities from entering into contracts with their
networks for their diagnostic imaging needs."
Background . AB 2794's primary purpose, as evidenced by the
author's intent statement, was to eliminate the practice of
physicians over-referring for imaging services due to financial
incentives created by lease arrangements with radiological
vendors. The bill explicitly prohibited healthcare licensees
from billing for services that were not actually provided by the
licensee. The bill also required radiological facilities to
directly bill either the patient or a responsible third-party
payer for diagnostic imaging services rendered by those
facilities. The bill defined "responsible third-party payer" as
"any person or entity who is responsible to pay for CT, PET, or
MRI services provided to a patient."
AB 2794 specifically exempted radiological facilities that
contract with health care service plans, and thus did not intend
for the "responsible third-party payer" to be traditional health
insurers. The bill also exempted health care programs operated
by public entities, private educational institutions, and any
person or clinic that contracts with an employer to provide
diagnostic imaging services.
This bill's sponsors seek to explicitly include in the
definition of "responsible third-party payer" a person or entity
who contracts with insurance carriers, self-insured employers,
and third-party administrators (TPAs) for the management and
payment of diagnostic imaging services. This category of payer
is not specifically exempted under current law, and may not be
covered under the present definition of "third-party payer."
The sponsor's concern with current law is that although such
entities are responsible for paying for diagnostic imaging
services provided to a patient, in certain situations, they are
effectively "fourth-party payers." This is because some
networks are effectively subcontracting from an employer's third
party-payer.
This bill would explicitly permit such entities ("networks") to
continue their services under state law. These networks
assemble diagnostic imaging facilities and contract their
services to insurance companies, self-insured employers, union
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trusts, TPAs, business coalitions and associations at a reduced
price. The network pays the imaging facilities directly and
provides administrative functions related to scheduling and
logistical support services. These entities do not cause a
referral to be made, but instead react to a physician's referral
for diagnostic imaging and direct the patient to a provider of
those services.
There are conflicting opinions at the state level regarding
these contractual arrangements; a 2000 Attorney General
opinion determined that such network services were
effectively violating the prohibition against the corporate
practice of medicine (CPM), while a 2003 letter from the
Medical Board of California concluded the opposite, based
on a 1991 counsel opinion from the Department of Consumer
Affairs.
Arguments in support . One Call Medical writes in support,
"Most self-insured employers, insurance carriers, labor
unions with carve-out programs and TPAs contract with a
network for their diagnostic imaging needs. The network
enters into an agreement with the employer, insurance
carrier or TPA to schedule MRI, CT or PET imaging
procedures with a quality network imaging provider
(licensed and certified), communicates appointment time and
medical report back to the employer, insurance carrier or
TPA, and the treating physician, pays the MRI Center at the
pre-negotiated rate and bills the employer, insurance
carrier or TPA at a rate at or below the fee schedule.
"This practice has proven to reduce employer, insurer,
labor unions with carve-out programs and TPA costs and
provide better communication with the treating physician,
faster and safer return-to-work for the injured worker and
better quality care to the patient who uses a licensed and
certified imaging center."
Arguments in opposition . The California Radiological
Society writes, "We were the sponsors of AB 2794
(Blakeslee) that was signed into law and took effect on
1/1/09. ? The change would eliminate the ability of the
referring physician to mark up the charge from the actual
provider or to enter into lease arrangements for blocks of
scanner time at a discount and again mark up the charge of
the actual provider of the imaging service. The California
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self referral law was designed to eliminate the economic
incentive of a physician to order imaging based upon the
opportunity to profit from over utilization or to choose
the actual provider of service based upon their ability to
profit.
"We are aware of entities that act as middlemen between the
self insured employer or the insurer and promise to obtain
imaging services at less than the amount payable under the
Workers' Compensation medical fee schedule. They in turn
contract with imaging centers for these medical services at
a lower cost and don't allow the imaging facility to bill
the employer or insurer directly. It allows them to pocket
the difference and could be $100 to $300 per procedure. We
believe that such practice is illegal under California law
since it violates both the CPM bar and prohibition on
profiting from the referral of patients."
REGISTERED SUPPORT / OPPOSITION :
Support
Acclamation Insurance Management Services
Association of California Insurance Companies
One Call Medical, Inc.
California Self-Insurers Association
Opposition
California Radiological Society
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301