S*466 Session 110 (1993-1994)
S*0466(Rat #0088, Act #0071) General Bill, By Thomas, Courson, T.W. Mitchell and
Passailaigue
Similar(H 3566)
A Bill to amend the Code of Laws of South Carolina, 1976, by adding Chapter
113 to Title 44 so as to enact the Provider Self-Referral Act; to prohibit
health care providers from referring patients to facilities and services in
which the provider has a financial interest unless certain conditions are met;
to provide penalties; to direct the Department of Health and Environmental
Control to gather data and to report to the General Assembly.
02/24/93 Senate Introduced and read first time SJ-7
02/24/93 Senate Referred to Committee on Medical Affairs SJ-7
04/01/93 Senate Committee report: Favorable with amendment
Medical Affairs SJ-12
04/07/93 Senate Amended SJ-35
04/07/93 Senate Read second time SJ-41
04/08/93 Senate Read third time and sent to House SJ-7
04/13/93 House Introduced and read first time HJ-22
04/13/93 House Referred to Committee on Medical, Military,
Public and Municipal Affairs HJ-23
04/21/93 House Committee report: Favorable with amendment
Medical, Military, Public and Municipal Affairs HJ-3
04/22/93 House Amended HJ-42
04/22/93 House Read second time HJ-48
04/22/93 House Unanimous consent for third reading on next
legislative day HJ-48
04/23/93 House Read third time and returned to Senate with
amendments HJ-5
04/27/93 Senate Concurred in House amendment and enrolled SJ-27
05/11/93 Ratified R 88
05/17/93 Signed By Governor
05/17/93 Effective date Act No. 71
05/17/93 See act for exception to or explanation of
effective date
05/25/93 Copies available
(A71, R88, S466)
AN ACT TO AMEND THE CODE OF LAWS OF SOUTH
CAROLINA, 1976, BY ADDING CHAPTER 113 TO TITLE 44 SO AS
TO ENACT THE PROVIDER SELF-REFERRAL ACT; TO PROHIBIT
HEALTH CARE PROVIDERS FROM REFERRING PATIENTS TO
FACILITIES AND SERVICES IN WHICH THE PROVIDER HAS A
FINANCIAL INTEREST UNLESS CERTAIN CONDITIONS ARE MET;
TO PROVIDE PENALTIES; TO DIRECT THE DEPARTMENT OF
HEALTH AND ENVIRONMENTAL CONTROL TO GATHER DATA
AND TO REPORT TO THE GENERAL ASSEMBLY.
Be it enacted by the General Assembly of the State of South Carolina:
Findings
SECTION 1. Whereas, it is recognized by the General Assembly that the
referral of a patient by a health care provider to a provider of health care
services in which the referring health care provider has an investment
interest represents a potential conflict of interest. The General Assembly
finds these referral practices may limit or eliminate competitive alternatives
in the health care services market, may result in over-utilization of health
care services, may increase costs to the health care system, and may
adversely affect the quality of health care. The General Assembly also
recognizes, however, that it may be appropriate for providers to own
entities providing health care services and to refer patients to these entities,
as long as certain safeguards are present in the arrangement. It is the intent
of the General Assembly to provide guidance to health care providers
regarding prohibited patient referrals between health care providers and
entities providing health care services and to protect the citizens of South
Carolina from unnecessary and costly health care expenditures.
Act citation
SECTION 2. This act may be cited as the "Provider Self-Referral
Act".
Provider self-referral, requirements, prohibitions, penalties
SECTION 3. Title 44 of the 1976 Code is amended by adding:
"CHAPTER 113
Provider Self-Referral
Section 44-113-10. This chapter may be cited as the `Provider
Self-Referral Act of 1993'.
Section 44-113-20. As used in this chapter:
(1) `Board' means any of the boards created pursuant to Title 40, as
amended, to license, certify, or register health care professionals.
(2) `Comprehensive rehabilitation services' means services that are
provided by health care professionals licensed under Chapter 36, Chapter
45, or Chapter 67 of Title 40 to provide speech, occupational, or physical
therapy services on an outpatient or ambulatory basis.
(3) `Department' means the South Carolina Department of Health and
Environmental Control.
(4) `Designated health services' means any health care procedure,
service, or item provided by a health care provider.
(5) `Entity' means an individual, partnership, firm, corporation, or other
business entity.
(6) `Fair market value' means value in arms length transactions,
consistent with the general market value, and, with respect to rentals or
leases, the value of rental property for general commercial purposes, not
taking into account its intended use, and in the case of a lease of space, not
adjusted to reflect the additional value the prospective lessee or lessor
would attribute to the proximity or convenience to the lessor where the
lessor is a potential source of patient referrals to the lessee.
(7) `Health care facility' means a health care facility as defined in
Section 44-7-130(10).
(8) `Health care provider', `provider', or `health care professional'
means a person licensed, certified, or registered under the laws of this State
to provide health care services.
(9) `Immediate family member' means a health care provider's spouse,
child, child's spouse, grandchild, grandchild's spouse, parent, parent-in-law,
or sibling.
(10) `Investment interest' means an equity or debt security issued by an
entity including, except as provided below, but not limited to, shares of
stock in a corporation, units or other interests in a partnership, bonds,
debentures, notes, other equity interests, or debt instruments. The following
investment interests are excepted from this definition:
(a) an investment interest in an entity that is the sole provider of
designated health services in a rural area;
(b) an investment interest in real property resulting in a
landlord-tenant relationship between the health care provider and the entity
in which the equity interest is held, unless the rent is determined, in whole
or in part, by the business volume or profitability of the tenant or exceeds
fair market value;
(c) an investment interest in an entity which owns or leases and
operates a hospital or a nursing home facility licensed under Title 44,
Chapter 7;
(d) an investment interest acquired before June 15, 1993;
(e) an investment interest in an entity which provides health care
services pursuant to a health services network.
(11) `Investor' means a person or entity owning a legal or beneficial
ownership or investment interest, directly or indirectly including, but not
limited to, through an immediate family member, trust, or corporation, the
stock of which is owned in whole or in part by the investor or another
entity related to the investor.
(12) `Referral' means a referral of a patient by a health care provider for
health care services including, but not limited to:
(a) the forwarding of a patient by a health care provider to another
health care provider or to an entity outside the health care professional's
office or group practice which provides or supplies designated health
services or any other health care item or service; or
(b) the request or establishment of a plan of care by a health care
provider, which includes the provision of a designated health service or any
other health care item or service outside the health care professional's office
or group practice.
(13) `Rural area' means a county with a population of one hundred
thousand persons or less according to the latest United States census.
(14) `Group practice' means a group of two or more health care
professionals legally organized as a partnership, professional corporation,
not-for-profit corporation, faculty practice plan, or similar association in
which:
(a) each health care professional who is a member, employee, or
independent contractor of the group provides substantially the full range of
services which the professional routinely provides including consultation,
diagnosis, and treatment through the use of office space, facilities,
equipment, and personnel of the group;
(b) substantially all of the services of the health care professionals
who are members of the group are provided through the group and are
billed in the name of the group and amounts so received are treated as
receipts of the group; and
(c) the overhead expenses of and the income from the practice are
distributed by methods previously determined by the group.
(15) `Office practice' means the facility or facilities at which a health
care professional, on an ongoing basis, provides or supervises the provision
of health services to individuals.
Section 44-113-30. (A) Except as provided in this section and other
provisions of this chapter, a health care provider may not refer a patient for
the provision of designated health services to an entity in which the health
care provider is an investor or has an investment interest. However, this
prohibition does not apply to:
(1) an investment interest where the health care professional directly
provides the health care services within the entity or will be personally
involved in the provision, supervision, or direction of care to the referred
patient.
(2) the provider's investment interest is in registered securities
purchased on a national exchange or over-the-counter market and issued by
a publicly-held corporation:
(a) whose shares are traded on a national exchange or on the
over-the-counter market; and
(b) whose total assets at the end of the corporation's most recent
fiscal quarter exceeded fifty million dollars; or
(3) with respect to an entity other than a publicly-held corporation
described in subsection (A)(2) and a referring provider's investment interest
in the entity, each of the following requirements are met:
(a) no more than fifty percent of the value of the investment interests
are held by investors who are in a position to make referrals to the
entity;
(b) the terms under which an investment interest is offered to an
investor who is in a position to make referrals to the entity are no different
from the terms offered to investors who are not in a position to make
referrals;
(c) the terms under which an investment interest is offered to an
investor who is in a position to make referrals to the entity are not related to
the previous or expected volume of referrals from that investor to the
entity;
(d) there is no requirement that an investor make referrals or be in a
position to make referrals to the entity as a condition for becoming or
remaining an investor.
(B) With respect to an entity or to a publicly-held corporation in
subsection (A)(2):
(1) the entity or corporation does not lend funds to or guarantee a loan
for an investor who is in a position to make referrals to the entity or
corporation if the investor uses any part of the loan to obtain the investment
interest;
(2) the amount distributed to an investor representing a return on the
investment interest is directly proportional to the amount of the capital
investment, including the fair market value of preoperational services
rendered in the entity or corporation by that investor.
(C) No claim for payment may be presented by an entity to an
individual, third party payor, or other entity for a service furnished pursuant
to a referral prohibited under this section.
(D) If an entity collects any amount that was billed in violation of this
section, the entity shall refund the amount on a timely basis to the payor or
individual, whichever is applicable.
(E) A health care provider who makes a referral prohibited by this
section or who fails to disclose information required by Section
44-113-40(A) or presents or causes to be presented a bill or a claim for
services that the health care provider knows or should know is for a service
for which payment may not be made under subsection (C) or for which a
refund has not been made under subsection (D) is subject to a civil penalty
of not more than five thousand dollars for each such service to be imposed
and collected by the appropriate board.
(F) A health care provider or other entity that enters into an
arrangement or scheme which the health care provider or entity knows or
should know has a principal purpose of assuring referrals by the health care
provider to a particular entity which, if the health care provider directly
made referrals to the entity would be in violation of this section, is subject
to a civil penalty of not more than twenty-five thousand dollars for each
circumvention arrangement or scheme to be imposed and collected by the
appropriate board.
(G) A violation of this section by a health care provider constitutes
grounds for disciplinary action to be taken by the applicable board. A
hospital licensed under Title 44, Chapter 7 found in violation of this section
is subject to the regulations promulgated by the department.
(H) A hospital licensed under Title 44, Chapter 7 that discriminates
against or otherwise penalizes a health care provider for compliance with
this chapter is subject to a civil penalty of not more than one hundred
thousand dollars to be imposed and collected by the department.
(I) Each board, and in the case of hospitals, the department, shall
encourage the use by licensees of an advisory opinion procedure to
determine the applicability of this section or any regulation promulgated
pursuant to this section as it applies solely to the licensee.
Section 44-113-40. (A) A health care provider may refer a patient to
an entity in which the health care provider is an investor if the referral is
permitted under Section 44-113-20(10)(d) or Section 44-113-30(A)(3) if
before the referral the provider furnishes the patient with a written
disclosure form informing the patient of:
(1) the existence of the investment interest;
(2) the name and address of each applicable entity to which a referral is
made in which the referring health care provider is an investor;
(3) the patient's right to obtain the item or services for which the
patient has been referred at the location or from the provider or supplier of
the patient's choice, including the entity in which the referring provider is
an investor;
(4) the names and addresses of at least two alternative sources of these
items or services available to the patient;
(5) a schedule of typical fees for items or services usually provided by
the entity or, if impracticable because of the nature of the treatment, a
written estimate specific to the patient.
(B) The referring provider must obtain the patient's signature that the
information required under subsection (A) has been provided to the
patient.
Section 44-113-50. The results of an action taken by the respective
boards pursuant to this chapter must be reported promptly to the department
with a full description of the proceedings.
Section 44-113-60. (A) As used in this section, the term `kickback'
means a remuneration or payment back pursuant to an investment interest,
compensation arrangement, or otherwise by a provider of health care
services or items of a portion of the charges for services rendered to a
referring health care provider as an incentive or inducement to refer
patients for future services or items when the payment is not tax deductible
as an ordinary and necessary expense.
(B) It is unlawful for a health care provider or a provider of health care
services to offer, pay, solicit, or receive a kickback, directly or indirectly,
overtly or covertly, in cash or in kind, for referring or soliciting
patients.
(C) A person who violates this section is guilty of a misdemeanor and,
upon conviction, must be fined not more than one thousand dollars or
imprisoned for not more than thirty days.
Section 44-113-70. Any employer providing health insurance benefits
to its employees may report instances of alleged over-utilization of services
to the South Carolina Department of Insurance pursuant to Section
38-55-170.
Section 44-113-80. A health care professional permitted under Section
44-113-20(10)(d) to make referrals to an entity in which the health care
professional has an investment interest must submit information to the
department, including the professional's name, name of the entity, and the
percentage of the health care professional's ownership."
Time effective
SECTION 4. This act takes effect upon approval by the Governor and
applies to referrals for designated health services or any other health care
item or service made on or after this act's effective date. However, the
written disclosure requirements in Section 44-113-40 take effect thirty days
after approval by the Governor. With respect to an investment interest
acquired before June 15, 1993, this act does not apply except the disclosure
requirements of Sections 44-113-40 and 44-113-80, as added by Section 3
of this act, apply.
Approved the 17th day of May, 1993. |