BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 1140
A
AUTHOR: Niello
B
AMENDED: April 14, 2009
HEARING DATE: July 15, 2009
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CONSULTANT:
1
Orr/
4
0
SUBJECT
Diagnostic imaging services
SUMMARY
Includes in the definition of responsible third-party payer
that may be billed for the technical component of
diagnostic imaging services, 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 CT,
PET, or MRI services provided to a patient covered by that
contract.
CHANGES TO EXISTING LAW
Existing law:
Requires a radiological facility or imaging center
performing the technical component of diagnostic imaging
services to directly bill either the patient or the
responsible third-party payer for the services, and
prohibits the radiological facility or imaging center from
billing the licensee who requested the services.
Provides that no person other than a licensed physician,
who is competent to evaluate the specific clinical issues
Continued---
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involved in medical treatment services when these services
are within the scope of the physician's practice, may
modify, delay, or deny requests for authorization of
medical treatment.
Prohibits, with certain exceptions, the payment or receipt
of rebates, refunds, commissions or other consideration,
whether monetary or in kind, for the referral of patients
by a healing arts practitioner, including a physician.
Provides that no one shall profit from referring or
recommending a person to a physician, hospital,
health-related facility, or dispensary for any form of
medical care or treatment of any ailment or physical
condition. The imposition of a fee or charge for any such
referral or recommendation creates a presumption that the
referral or recommendation is for profit.
This bill:
Includes in the definition of responsible third-party payer
that may be billed for the technical component of
diagnostic imaging services, 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 CT,
PET, or MRI services provided to a patient covered by that
contract.
FISCAL IMPACT
This bill is keyed non-fiscal.
BACKGROUND AND DISCUSSION
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 health and worker's compensation insurance
companies. Last year the Legislature passed AB 2794
(Blakeslee, Chapter 469, Statutes of 2008) which requires a
radiological facility or imaging center performing the
technical component of diagnostic imaging services to
directly bill either the patient or the responsible
third-party payer for the services. The author claims this
bill created ambiguity by not clearly identifying the
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universe of qualified third-party payers who should be
allowed to be billed for diagnostic imaging services.
The author explains that diagnostic imaging contracting
entities, or "networks" have been in business for over 30
years, and provide valuable services to the health and
workers compensation insurance community in California.
Insurers (including self-insured employers, unions, and
third-party administrators) often contract with networks to
arrange for and handle the diagnostic imaging needs of the
injured employees in their medical provider networks.
Utilizing networks allows insurers to outsource some
administrative and logistical functions, including tasks
like locating appropriate imaging services for patients and
scheduling appointments.
The networks essentially act as brokers who negotiate
contracts with various diagnostic imaging centers to secure
imaging services, often for discounted volume rates that
fall below the prescribed workers compensation fee
schedule. The network contracts separately with employers,
self-insured companies, or other third-party payers and
insurers to arrange for the provision of those imaging
services to the employees as a part of the employees'
workers compensation services. The network then serves as
the third-party payer for the purposes of appointment
scheduling, verification of credentialing of the facility,
and payment of professional fees. No formal definition of
these networks currently exist in statute.
Corporate practice of medicine concerns
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.
Diagnostic imaging services
Diagnostic imaging includes different types of tests and
equipment to non-invasively identify or examine injuries,
diseases and bodily functions, and includes computed
tomography (CT), magnetic resonance imaging (MRI),
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mammography, nuclear medicine, positron emission tomography
(PET), breast ultrasound, stereotactic breast biopsy, and
ultrasound. Imaging can be especially important in
personal injury and workers compensation claims. The costs
of CT, MRI, and PET scans are comprised of both technical
and professional components. The technical component is
made up of a variety of costs, including those relating to
the scanning equipment, materials, facility space, and the
services of technologists who are generally certified to
perform imaging services. The professional component is
made up of the physician interpretation of the imaging
results. According to the California Radiological Society
(CRS), typically, 80 to 85 percent of the total charge for
a CT, MRI, or PET scan are charges for the technical
component.
The American College of Radiology (ACR) awards
accreditation to imaging facilities for the achievement of
high practice standards after a peer-review evaluation of
its practice. Image quality and procedure evaluations are
conducted by board-certified radiologists and medical
physicists who are experts in the field. The accreditation
program also evaluates personnel qualifications, adequacy
of facility equipment, quality control procedures and
quality assurance programs. All findings are reported to
the practice via a comprehensive report that includes
recommendations for improvement. The ACR accredits
facilities in breast ultrasound, computed tomography (CT),
magnetic resonance imaging (MRI), mammography, nuclear
medicine, positron emission tomography (PET), stereotactic
breast biopsy, ultrasound, and radiation oncology. The ACR
accredits each of these imaging services separately, so one
particular imaging center with several imaging services
could have a separate accreditation level for each of their
services.
Utilization rates
According to research on utilization trends for advanced
imaging procedures, published in a Medical Care article in
May 2008, utilization rates in California for CT, MRI, and
PET scans increased rapidly between 2000 and 2004. PET
scan utilization increased by 400 percent, and MRI and CT
scan utilization increased by over 50 percent. During the
same years, there were relatively small increases in
hospital utilization of these imaging procedures. The
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article stated that research findings suggested that
physician self-referral arrangements and independent
diagnostic testing facilities appeared to contribute to the
increased use of advanced imaging procedures.
Medicare rules
In 2007, the Centers for Medicare and Medicaid Services
(CMS) issued the final 2008 Medicare physician fee schedule
(MPFS) rule, which was published in the Federal Register on
November 27, 2007. Included in the MPFS was an
anti-mark-up rule change that restricts a physician's
ability to mark up the technical component of a diagnostic
test, if the test is performed offsite. This rule change
means that, in order to mark up the charge for the
technical component of a diagnostic test, a physician must
locate a technologist and diagnostic testing equipment in
the physician's office suite where he or she regularly
conducts patient office visits.
Related legislation
AB 2794 (Blakeslee), Chapter 469, Statutes of 2008,
prohibits a healing arts practitioner from charging,
billing, or soliciting payment from any patient, client, or
third-party payer for performance of the technical
component of specified diagnostic imaging services not
rendered by the licensees or persons under their
supervision. Requires a radiological facility or imaging
center performing the technical component of those
diagnostic imaging services to directly bill either the
patient or the responsible third-party payer for the
services, and would prohibit the radiological facility or
imaging center from billing the licensee who requested the
services. The intent of the bill was to close a
problematic loophole in the state physician self-referral
prohibition that was resulting in fraud and increased
medical costs.
AB 1039 (Parra) of 2007 would have made technical changes
to provisions in the Health and Safety Code that prohibit a
person, firm partnership, association or corporation, or
agent or employee thereof, from referring or recommending
for profit a person to a physician, hospital,
health-related facility, or dispensary for any form of
medical care or treatment of any ailment or physical
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condition. No action was taken on this bill.
AB 2855 (Parra) of 2006 would have specified exemptions to
those provisions that make it a crime for person to receive
money or other consideration for the referral of patients,
clients, or customers to any physician, hospital,
health-related facility, or dispensary for any form of
medical care or treatment of any ailment or physical
condition. No action was taken on this bill.
AB 2354 (Levine) of 2004 would have expanded the
prohibition of referrals of patients for monetary gain to
include referrals and recommendations of persons to
dentists, but would have exempted certain authorized
referral services, health care service plans, life and
disability insurers, any entity owned or controlled by, or
under common control with, a health care service plan or
life or disability insurer that provides certain discounts
for services, and Medicare-approved drug discount card
programs from application of the prohibition. Failed
passage on the Assembly floor.
SB 899 (Poochigian), Chapter 34, Statutes of 2004, made
broad changes to California workers compensation laws,
including authorizing insurers or employers, as defined, on
or after January 1, 2005, to establish a medical provider
network for the provision of medical treatment to injured
employees.
AB 1147 (Friedman) of 1995 would have specifically
prohibited the for profit referral of
a person for diagnostic imaging services, as defined, and
would have created the presumption of a for-profit referral
when the person or organization making the referral imposes
a fee or charge for the referral, including the making of
any additional or mark-up charges to charges made by
licensed health care professionals. Hearing canceled at the
request of the author in Assembly Appropriations Committee.
AB 919 (Speier) Chapter 1237, Statutes of 1993, provides
that it is a misdemeanor for a licensee, including a
physician and surgeon, psychologist, optometrist, dentist,
podiatrist, or chiropractor, to refer a person for
laboratory, diagnostic nuclear medicine, radiation
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oncology, physical therapy, physical rehabilitation,
psychometric testing, home infusion therapy, or diagnostic
imaging, as defined, goods or services if the licensee has
a financial interest, as defined, with the person, or in
the entity, that receives the referral. Requires a licensee
who makes a nonprohibited referral to, or seeks
consultation from, an organization in which the licensee
has a financial interest to disclose the financial
interest, in writing, at the time of the referral or
request for consultation, with certain exceptions.
Arguments in support
The Association of California Insurance Companies believes
this bill provides clarity for the legitimacy of business
arrangements that benefit injured workers, employers, and
insurers. They compare these entities to pharmacy benefit
management firms and medical provider networks, in terms of
their ability to achieve efficiencies and economies, and
claim that the imaging management entities help to control
workers compensation costs. One Call Medical, Inc. claims
the networks have proven to reduce costs of the employers,
insurers, labor unions with carve-out programs, and
third-party administrators, and has provided better
communication with the treating physician. They claim the
networks facilitate a faster and safer return to work for
the injured worker, and provide higher quality care to the
patient, by ensuring usage of a licensed and certified
imaging center.
Arguments in opposition
The California Radiological Society sponsored AB 2794
(Blakeslee) which was the predecessor to AB 1140, and
opposes this measure because they believe these networks
violate the corporate practice of medicine bar and
prohibition on profiting from the referral of patients.
They claim that third-party payer typically means that the
entity has accepted risk for the payment of medical
services based on acceptance of a premium, e.g. a health
plan, or processes claims for medical services, yet they
believe these brokers fit neither model. CRS states that
there are entities that act as middlemen between
self-insured employers or insurers and promise to obtain
imaging services at less than the amount payable under the
workers compensation fee schedule. This allows them to
pocket the difference, which could be $100 to $300 per
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procedure. They believe this practice is illegal and
violates both the corporate practice of medicine bar and
the prohibition on profiting from the referral of patients.
CRS claims they have no desire to discourage contracting,
discounting of charges, or the use of provider networks by
insurers or employers to control healthcare or workers
compensation medical costs, but they do object to the
ability of lay entities to charge for a medical services
and in turn determine what the actual provider should be
paid. Such a practice would encourage these entities to
refer patients to those providers who agree to charge them
the least, irrespective of the quality of their services.
PRIOR ACTIONS
Assembly Floor: 80-0
Assembly Business and Professions:11-0
COMMENTS
1. Additional consumer protections should be referenced.
Staff recommend amendments to ensure networks that
qualify for the exemption under the bill comply with
applicable state and federal laws and regulations
pertaining to physician self-referral, referral for
profit, and corporate practice of medicine, and
to require plans, insurers, and administrators to ensure,
through their contracts with persons or entities to
provide CT, PET, or MRI services, that the provision of
services complies with applicable requirements of the
plan, insurer, or administrator's license.
POSITIONS
Support: Association of California Insurance Companies
California Self Insurers Association
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California Nevada Conference of Operating
Engineers
One Call Medical, Inc.
Oppose: California Radiological Society (unless amended)
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