FINANCIAL ARRANGEMENTS 
BETWEEN PHYSICIANS AND HEALTH 
CARE BUSINESSES: STATE LAWS 
AND REGULATIONS 
Management Advisory Report 
RICHARD P. KUSSEROW 
INSPECTOR GENERAL 
OAI. 12-88.01412  APRIL 1989  INTRODUCTION

PURPOSE 
(c) (3) of the 
section 203  Medicare Catastrophic Coverage Act of
1988 mandated the Office of Inspector General to study and 
report to Congress concerning: 
physician ownership of, or compensation from, an

entity providing items or services to which the

physician makes referrals and for which paYment may

be made under the Medicare program;

the range of such arrangements and the means by which

they are marketed to physicians;

the potential of such ownership or compensation to

influence the decision of a physician regarding

referrals and to lead to inappropriate utilization of

such items and services; and

the practical difficulties involved in enforcement

actions against such ownership and compensation

arrangements that violate current anti-kickback

provisions. 
In order to collect relevant background information and set the

context for this study, the Office of Inspector General

interviewed State officials regarding their perspectives and

experiences in the area of physician 
ownership. This

Management Advisory Report 
(MAR). reports on responses from
those interviews concerning state requirements and legal 
barriers affecting physicians who refer to health care 
businesses in which they are financially vested. 
BACKGROUND 
In the last ten years, increasing attention has been focused on

the financial arrangements that exist between physicians and

the health care businesses to which they refer patients. 

1980, an influential article in 
 The New Enaland Journal of
Medicine  by the journal' 
s editor, Dr. Arnold Relman, elicited
strong debate in the medical community concerning the 
appropriateness of such arrangements and the impact that they 
might have on medical judgments made by physicians in 
determining what services their patients require. Since then,
public scrutiny of those financial arrangements has increased. 
In 1982, the Subcommittee on Oversight and Investigations,
Coromi ttee on Energy and Commerce, U. S. House of  Representatives, expressed its concern regarding the emergence

of such arrangements. In 
1988, a bill that would generally 
prohibi t physicians from referring' to health care businesses in
which they hold financial interests was introduced in the 
u. S.
House of Representatives. That bill, "The Ethics in Patient
Referrals Act, 
" was reintroduced in 1989 and is now pending. 
The Subcommittees on Health and Oversight
, Committee on Ways

j oint hearing 
and Means held a  on the bill in March 1989.
Further hearings are anticipated. 
Currently the Federal anti-kickback law prohibits soliciting,
receiving, offering or paying anything of value in return for 
the referral of a health care item or service payable under the
Medicare or Medicaid program. 
(42 U.  C. Section 1320a-7b. 
Since the law could be interpreted to prohibit a wide range of 
conduct--including physician ownership and self-referral-
Congress directed the Secretary of HHS to promulgate
regulations specifying "  " that is 
safe harbors 
, conduct which
would not be subject to the anti-kickback 
statute. A Notice of
Proposed Rulemaking 
(NPRM) was issued on January 23
Fed. Reg.  , 1989 (54
3088) that proposes to establish certain such "safe
harbors. 
The NPRM proposes a safe harbor for physicians with 
investment interests in large publicly held corporations, but 
does not do so for any other types of investment or ownership

arrangements. 
Thus, if the NPRM were to take effect as 
proposed, such types of arrangements would continue to be 
subj ect to the scrutiny of Federal law enforcement officials on

a case by case basis. 
The only specific Federal prohibitions which currently exist

against physician ownership and self-referral concern home

intravenous (IV) drug 
therapy and home health agencies. 
Medicare  The
Catastrophic Coverage Act of 1988 prohibits a home IV
therapy provider from providing ..
services to a Medicare patient
when such services have been ordered by a physician with a

financial interest 
(including financial interest held through
an immediate family member) in the provider. 
Some exceptions,
such as for a sole rural provider or financial interest in a
publicly traded 
company, are made. Federal regulations also
prohibit physicians from certifying the home health plan of 
care for a beneficiary if they own more than 5 percent of the

home health agency which will provide the care.

Despite the intense debate over this 
issue, few studies have

been conducted to determine the extent of such arrangements

between physicians and the health care businesses to which they

refer patients, or the impact of such arrangements on

util ization of 
services, cost and pricing, competi ti veness, 
of care.  and
quali ty '  This MAR is the first in a series of reports
to be issued by the Office of Inspector General 
subject.  (OIG) on this
 METHODOLOGY 
The OIG conducted interviews with 143 individuals in 50 States.
In most cases, three individuals were interviewed in each
State. 
The individuals interviewed represented Medical 
Licensing Boards, State Medicaid agencies, Medicaid Fraud 
Control Units (MFCUs), and State Attorney General'
s offices. 
The interviews collected information on State laws or 
regulations that (1) prohibit referrals by physicians with
financial interests in certain health care businesses; 
(2)
require disclosure of such arrangements to the public; or 
(3)
forbid paYment for referrals. The OIG did not conduct a 
comprehensive review of State laws through independent legal

research, and state statutes cited by respondents may not

reflect the full range of State requirements in this area.
However, laws that were cited by state officials were 
documented and confirmed through reviewing State codes.  FINDINGS 
No resDondents indicated that their states have an 
outricrht ban 
on Dhvsicians ownina a health care entitv. However. 
respondents in Michiqan cited a law in their state which f rbid
physicians from referrincr ~atients to an enti 
tv in which they
interests. 
have financial 
Michigan law forbids "directing or requiring an individual to

purchase or secure a drug, device, treatment, procedure, or

service from another person, place, facility or business in

which the licensee has a financial interest. 
This statute was

challenged by two physicians in 1979 who contended that the

language of the law was unconstitutionally vague and therefore

void. 
Based on the challenge, the Circuit Court for the County 
of Oakland, state of Michigan, issued a preliminary injunction 
against enforcing the law in July 1979. In October 1982, the
Court upheld the constitutionality of the law and vacated the 
preliminary injunction. The law remains in effect at this

time. 
Two physicians have recently requested a declaratory rUling 
from the Michigan Board of Medicine on the meaning of the words 
law. 
"directing or requiring" under, the  The question for which
the physicians seek a declaratory ruling is whether "directing 
or requiring" is synonomous with "referring. 
The physicians
seeking a ruling have posted signs in their offices noting 
their financial relationships with other facilities and the
patient I s 
freedom in choosing another facility. They argue, in
the request for a ruling, that  ... the patient is fully
informed of the relationship anq can make a choice, and so is
not commanded, ordered or compelled to use the physician 
enti ty . Thus the physician is not  directing or requiring'
wi thin the meaning of (Michigan law), and does not violate 
(the) statute.  The Michigan Board of Medicine is currently

reviewing the petition.

Manv states have laws or reaulations prohibitina Dhvsicians 
from exoloi tina Datients for financial crain. 
While only Michigan forbids physicians from referring patients

to entities in which they have a financial 
interest, many

states forbid physicians from referring patients for goods and

services where such referral is unnecessary or is only made to

financi~lly benefit the physician. 
For example, California law
states that "it shall not be unlawful for any person.. . 
to refer 
a person to any laboratory, pharmacy, clinic or health care

facility solely because such licensee has a proprietary

interest or co-ownership in such laboratory, pharmacy, clinic

or health care facility; but such referral shall be unlawful
 if. . 
there was no valid medical need for the referral. 
Island law prohibits " Rhode
promotion by a physician.. . of the sale of
drugs, devices, appliances or goods or services provided for a 
patient in such a manner as to exploit the patient for the
financial gain of the physician.... 
Missouri law protects patients by ensuring freedom of 
choi~~,
as do several other States. 
Grounds for revocation of a
physician I s license in Missouri include " ... requiring, 
condi tion of the physician-patient relationship, that thaes a
patient receive prescribed drugs, devices, or other
professional services directly from facilities of that
physician I 
s office or other entities under that physician 
I s 
ownership or control. 
ResDondents from 11 states cited laws or reaulations which

sDecificallv reQUire a phvsician to disclose a financial

interest to Datients. or that forbid phvsicians from referring 
patients to entities in which they hold a financial interest 
unless disclosure to the patient is made. 
The strinaencv of
this reQUirement. however. varies from state to State.

At least 11 States specifically require physicians to disclose 
their financial interest to patients when referring patients to 
health care providers in which they are financially vested.
These States include Arizona, California, Delaware
, Florida,
Massachusetts, Minnesota, Nevada, Pennsyl vania, Virginia,
Washington, and West Virginia.

Disclosure requirements vary greatly from State to State. 
Many
States do not specify what form the disclosure must take.
However, Minnesota' law 
specifies' that disclosure must be made 
in advance and in writing and must include a statement 
indicating that the patient is free to choose a different
health care provider. 
Washington law requires an affirmative
disclosure "to the patient in writing. 
Other States require disclosure only in certain circumstances 
or when certain specialties of practice are involved.
Florida I s disclosure requirement, ,
for example, applies when the
referring physician has an equity interest of 10 percent or
more. Virginia I 
s law applies to "any financial interest of or
ownership by the practitioners.... 
therapy servicMeasssach.us etts
  I s disclosure
requirement applies only to referral of patients for physical Resoondents from 36 states cited state laws which prohibit 
physicians from receivina or aivinq oaYments for patient
referrals. 
These laws are aenerall v 
similar to the Federal 
referrals. 
statute which prohibits paYment for 
section 
1128B(b) of the Social Security Act prohibits 
individuals from soliciting, receiving, offering or paying 
anything of value in return for the referral of a health care 
item or service which is payable under the Medicare or the 
Medicaid programs. Many States have laws which are similar to 
the Federal anti-kickback law. 
Most States consider the practice of receiving or giving 
payment for referrals unapcrotf.e ssional conduct and prohibit it in 
their medical practice  For example, the State of
Arizona I s medical practice act contains a section on defining
unprofessional 
conduct. It states that unprofessional conduct
includes " 
charging a fee for services not rendered or dividing
a professional fee for patient referrals.
Delaware I s medical practice act contains a similar provision.
It states that "paYment of a fee by a physician to another
physician who has referred the patient to 
him, unless the fee
is in proportion to work actually performed by the referring 
physician" is unethical. 
Grounds for medical disciplinary action in Idaho include 
"division of fees or gifts or agreement to split or divide fees 
or gifts received for professional services with any person,
insti tution or 
corporation in exchange for a referral. 
The overwhelmina maioritv of resoondents resoonsible for 
enforcina apolicable State statutes reported that they were 
unable to monitor for comoliance of existina laws. 
Only two State officials reported that their offices have 
enough resources to search out violations of existing laws.
The rest of the State officials which dealt with enforcement 
stated that they were only able to enforce the laws in a
reactive manner. 
This would include following up on tips and
compl~ints . For example, one State official stated that his
office "
gets cases primarily though complaints and ~econdarily
through utilization exception reports.  Another respondent
stated, "We don  t have a mechanism to monitor anything other
than complaints from individuals and information from follow
~up
investigations. 
Most respondents noted that a lack of resources prevent them
, from enforcing these 
laws in a more aggressive manner.
Addi tional impediments cited were vagueness in the law and
priori ties in other areas.  certain states are now reviewina the practice of ohvsician 
ownership and self-referral. 
Several states are now reviewing the practice of physician 
ownership and self-referral. The New York 
state Health 
Commissioner created an ad hoc committee to meet with the 
publ ic this year and gather comments on ethical or other
concerns the publ ic 
may have regarding the practice. Further
hearings are scheduled. 
The Health Care Committee of the 
Florida House of Representatives is currently collecting 
information on the practice and may conduct a study on such 
arrangements in Florida.  1'"U.K'J.' 1fJ!a(  REPORTS 
The OIG 'will produce additional reports on the 
subj ect
financial arrangements between referring physicians and other 
heal th care businesses. 
On May 1, 1989, the OIG will report to Congress on the areas 
outlined in section 203 (c) (3) of the Medicare Catastrophic
Coverage Act. This report will detail information obtained

from OIG surveys in regard to the nature, 
range, and prevalence

of ownership and compensation arrangements between physicians

and health care businesses. 
Information from the Medicare Part 
B Annual Data (BMAD)  files will be used to assess use of 
selected ancillary services by patients associated with

physician owners or investors, as compared to use of ancillary

services by Medicare beneficiaries in general. The report will

also detail the enforcement experiences of the OIG in 
connection with physician ownership or compensation 
arrangements which violate Federal anti-kickback laws. 
Reports focusing on physician ownership and other market forces 
in the independent clinical laboratory, independent 
physiological laboratory, and durable medical equipment 
industries will be issued in Fall 1989.  APPENDIX A 
STATE LAWS AND REGULATIONS CITED BY RESPONDENTS  APPENDIX A 
STATE LAWS AND REGULATIONS CITED BY RESPONDENTS  ALABAMA
ALA. CODE 
Makina false statement or representation of

~ 22-1-11. 
material fact in claim or apPlication for oayments on medical

benefi ts from medicaid agencv aenerall v: kickbacks. bribes
etc. 
: exceptions: multiple offenses.

(b) Any person who solicits or receives any 
remuneration
(including any kickback, bribe, or rebate) directly or

indirectly, overtly or 
covertly, in cash or in kind:
(1) In return for referring an individual to a person for

the furnishing or arranging for the furnishing of any item

or service for which paYment may be made in whole or in

part by the medicaid agency or its agents
, or

(2) In return for purchasing, leasing, ordering, or

arranging for or recommending purchasing, 
leasing, or

ordering any good, 
facility, service, or item for which

paYment may be made in whole or in part by the medicaid

agency, or its agents shall be guilty of a felony and upon

, or both. 
conviction thereof, shall be fined not more than $10,

or imprisoned for not less than one nor more than five000
years
ARIZONA
Medical Practice Act

ARIZ. REV. STAT. ANN. i 
 Definitions
32-1401. 
12. "Unprofessional conduct" includes the following acts

whether occurring in this state or 
elsewhere:
(u) Charging a fee for services not rendered or

dividing a professional fee for patient referrals.
(ff) Knowingly failing to disclose to a patient on

a form prescribed by the board which is dated and

signed by the patient or guardian acknowledging

that the patient or guardian has read and

understands that the doctor has a direct pecuniary

interest in a separate diagnostic or treatment

agency or in non-routine goods or services which

the patient is being prescribed and if the

prescribed treatment, goods or services are

available on a competitive basis. 
This subdivision

does not apply to a referral by one doctor of
 Page 2

medicine to another doctor of medicine wi thin a

group of doctors of medicine practicing together.

ARI Z. REV. STAT. ANN. i  Rebates. fee-spl i ttina and 
36-472. 
solicitation of referrals orohibited. 
A. The owner or director of a laboratory shall not personally 
or through an agent solicit the referral of specimens to his or 
any other laboratory in a manner which offers or implies an 
offer of rebates to persons submitting specimens or other fee-
splitting inducements or participate in any fee-splitting
arrangement. This applies to 
contents of fee schedules 
billing methods or personal solicitation. The. contractual
provision 
of laboratory services for a fixed fee independent of 
the number of specimens submitted for such services is 
section. 
declared to be a violation of this 
to' the patient shall 
B. The bill  specify the actual charge by 
the reference laboratory together with the reasonable specimen 
collection charge by the referring laboratory or physician. 
ARIZ. REV. STAT. ANNOT. 
 Consideration for referral of

S 13-3713. 
patient. client or customer: fraud: violation: classification.

A. A person who knowingly offers, delivers, receives or

accepts any rebate, refund, commission, preference or other

consideration as compensation for referring a patient, client

or customer to any individual, pharmacy, laboratory, clinic or

health care institution providing medical or health-related

services or items pursuant to title 11, chapter 2, article 7

(footnote omitted) or title 36, chapter 29, other than

specifically provided for in accordance with title 11, chapter

2, article 7 or title 36, chapter 29 (footnote omitted), is 
of: 
guil ty 
1. A class 3 felony if the consideration had a value

more. 
of one thousand dollars or 

2. A class 4 felony if the consideration had a value

of more than one ' hundred dollars but less than one 
thousand dollars. 
3. A class 6 felony if the consideration had a value 
less. 
of more than one hundred dollars or 
CALIFORNIA 
CAL. BUS. & PROF. CODE 
 Consideration for referral of 
tients. cl  i 650. 
pa  ients. or customers. 
Except as provided in Chapter 2. 3 (commencing with Section 
1400) of Division 2 of the Health and Safety Code the offer,
delivery, receipt or acceptance, by any person licensed under

this division of any rebate, refund, commission, preference,
 Page 3 
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 ~ny 
person, irrespective of any membership, proprietary interest or 
co-ownership in or with any person to whom such patients 
clients or customers are referred is unlawful. 
Except as provided in Chapter 2. 3 (commencing with Section 
1400) of Division 2 of the Health and Safety Code it shall not 
be unlawful for any person licensed under this division to 
refer a person to any laboratory, pharmacy, clinic, or health 
care facility solely because such licensee has a propriety 
clinic,
interest or co-ownership in such laboratory, pharmacy, 
or health care facility; but such referral shall be unlawful if 
the prosecutor proves that there was no valid medical need for
the referral.
CAL. BUS. & PROF. CODE  Prohibited arranaements between 
li~c 65e4.n  sees. 
opticians and medical 
No person licensed under Chapter 5 (commencing with Section 
2000) of this division may have any membership, proprietary 
interest or co-ownership in any form in or with any person 
licensed under Chapter 5. 5 (commencing with section 2550) of
this division to whom patients, clients or customers are 
referred or any profit-sharing arrangements. 
~ 654.  Prohibited referrals of patients: clients or customers to 
certain laboratories: exceotions: violations: penal 
Persons licensed under Chapter 4 (commencing with Section 
1600) of this division or licensed under Chapter 5 (commencing
with section 2000) of this division or licensed under any 
initiative act referred to in this division relating to 
osteopaths may not refer patients, clients, or customers to any 
clinical laboratory licensed under section 1265 in which the 
licensee has any membership, proprietary interest, or co 
ownership in any form, or has any profit-sharing arrangement,
unless the licensee at the time of make such referral discloses 
in writing such interest to the patient, client, or customer. 
The written disclosure shall indicate that the patient may 
choose any clinical laboratory for purposes of having any 
laboratory work or assignment performed. 
654.  Prohibited charges. billinas. solicitations. or 
referrals: written disclosure of beneficial interests to 
patients or third-Dartv pavers: definitions: apolication of
section.
(a) It is unlawful for any person licensed under this division 
or under any initiative act referred to in this division to 
charge, bill, or otherwise solicit payment from a patient on  Page 4

behalf of, or refer a patient to, an organization in which the 
licensee, or the licensee's immediate family, has a significant 
beneficial interest, unless the licensee first discloses in
wri ting to the patient, that there is such an interest and 
advises the patient that the patient may choose any 
organization for the purpose of obtaining the services ordered
or requested by the licensee. 
(b) The disclosure requirements of subdivision (a) may be met
by posting a conspicuous sign in an area which is likely to be 
seen by all patients who use the facility or by providing those 
patients with a written disclosure statement. Where referrals,
billings, or other solicitations are between licensees who

contract with multispecialty clinics pursuant to subdivision

(l) of section 1206 of Health and Safety Code or who conduct

their practice as members of the same professional corporation

or partnership, and the services are rendered on the same

physical premises, or under the same professional corporation

or partnership name, the requirements of subdivision 
(a) may be

met by posting a conspicuous disclosure statement at a single

location which is a common area or registration area or by 
providing those patients with a written disclosure statement. 
COLORADO 
Division of fees - indeoendent

COLO. REV. STAT. i 12-36-125. 
advertisina or marketina aaent.

(1) 
(a) If any person holding a license issued by the board or 
by the state board of medical examiners as constituted under 
any prior law of this state divides any fee or compensation

received or charged for services rendered by him as such

licensee or agrees to divide any such fee or compensation with

any person, firm, association or corporation as pay

compensation to such other person for sending or bringing any

patient or other person to such licensee, or for recommending

such licensee to any person, or for being instrumental in any

manner in causing any person to engage such licensee in his

professional capacity; or if any such licensee shall either

directly or indirectly pay or compensate or agree to pay

compensate any person, firm, association, or corporation for

sending or bringing any patient or other person to such

licensee for examination or treatment, or for recommending such

licensee to any person, or for being instrumental in causing

any person to engage such licensee in his professional

capacity; or if any such licensee, in his professional capacity

and in his own name or behalf, shall make or present a bill or

request a payment for services rendered by any person other

than the licensee, such licensee commits a class 3 misdemeanor

and shall be punished as provided in section 
18-1-106, C.
 .' .
page' 5 
DELAWARE 
DEL. CODE ANN. tit.  Kickback schemes and

solicitation.  31, ~ 1005. 

(a) It shall be unlawful for any person to solicit or receive
any remuneration (including 
kickback, bribe or rebate) directly
or indirectly, overtly or covertly, in cash or in kind: 
(1) In return for referring an individual to a provider

for the furnishing or arranging for furnishing of any

medical care or medical assistance for which payment may

be made in whole or in part under any public assistance

program; ,or 
(b) It shall be unlawful for any person to offer or pay any

remuneration (including 
any kickback, bribe or rebate)
directly or indirectly, in cash or in kind to induce to any

other person:

(1) To refer an individual to a provider for the

furnishing or arranging for the furnishing of any medical

care or medical assistance for which payment may be made

in whole or in part under any public assistance program;

(2) To purchase, lease, order or arrange for or recommend

purchasing, leasing or ordering any property, facility,
service, or item of medical care or medical assistance for

which paYment may be made in whole or in part under any

public assistance program.

Delaware Board of Medical Practice (Rules and Regulations) 
~ 15.  DISHONORABLE OR UNETHICAL CONDUCT  24 Del. C. Sec. 
(3) 
1731lb) 
The phrase "dishonorable or unethical conduct likely to 
deceive, defraud, or harm the public" as used in 24  Del. C. 
~ 1731(b) (3) shall include, but not be limited to, the 
acts: 
following specific 
(i) PaYment of a fee by a physician to another 
physician who has referred the patient to him,
unless the fee is in proportion to work actually 
performed by the referring physician. 
(k) Wilful failure to disclose to a patient 
that a

referring physician has the financial interest in an
 Page 6
ancillary testing or treatment facility outside of the
physician I s office. 
DISTRICT OF COLUMBIA
Health Occupations Revision Act Chapter 33 Subchapter V
Licensing of Health Professionals ~ 2-3305.  Revocation.
14. 
susoension. or denial of license or privileae: civil penalty:
repr imand 
(a) Each board, subject to the right of a hearing as provided
by this subchapter, on an affirmative vote of a majority of its
members then serving, may take 1 or more of the disciplinary
actions provided in subsection (c) of this section against any
applicant, licensee, or person permitted by this subchapter to
practice the health occupation regulated by the board in the
District who:
(14) Pays or agrees to pay anything of value to, or
to split or divide fees for professional services
with, any person for bringing or referring a patient.
FLORIDA
Medical Practice Act
FLA. STAT. ~ 458.  Penalty for Violations
327 
(2) Each of the following acts constitutes a misdemeanor of the
first degree, punishable as provided in s. 775. 082, s. 775. 083,
or s. 775. 084:
(c) Referring any patient, for health care goods or services,
to any partnership, firm, corporation, or other business entity 
I s 
in which the physician of the physician  employer has an 
equi ty interest of 10 percent or more unless, prior to such
referral, the physician notifies the patient of his financial
interest and of the patients right to obtain such goods or
services at the location of the patient I s choice. This section 
does not apply to the following types of equity interest:
1. The ownership of registered securities issued by
a publicly held corporation or the ownership of
securi ties issued by a publicly held corporation, Page 7

the shares of which are traded on a national

exchange or the over-the-counter market;

I s own 
2. A physician  practice, whether he is a sole
practi tioner 
or part of a group, when the health 
care good or service is prescribed or provided 
I s 
solely for the physician  own patients and is 
provided or performed by the physician or under his 
supervision; or 
3. An interest in real property resulting in a

landlord-tenant relationship between the physician

vand tahe enltituy in ewhic.h t he equity interest is

held, unless the rent is determined, in whole or in

part, by the business volume or profitability of

the tenant or is otherwise unrelated to fair market

FLA. STAT. ~ 458. 331.  Grounds for discipl inary action: bv the

board and department

(1) The following acts shall constitute grounds for which the

disciplinary actions specified in subsection (2) may be taken:

(i) Paying or receiving any commission, bonus, kickback,

or rebate, or engaging in any split-fee arrangement in any

form whatsoever with a physician, organization, agency, or

person, either directly or indirectly, for patients

referred to providers of health care goods and services

including, but not limited to, hospitals, nursing homes,
clinical laboratories, ambulatory surgical centers, or

pharmacies. The provisions of this paragraph shall not be

construed to prevent a physician from receiving a fee for

professional consultation services.
(0) Promoting or advertising on any prescription form of a

communi ty pharmacy unless the form shall also state "This

prescription may be filled at any pharmacy of your

choice. " 
(gg) Referring any patient 
, for health care goods or 
services, to a partnership, firm, corporation, or other 
business entity in which the physician or the physician' 
employer has an equity interest or 10 percent or more 
unless, prior to such referral, the physician notifies the 
patient of his financial interest and of the patient I s  Page 8
right to obtain such goods or services at the location of
the patient I s choice. 
This section does not apply to the
following types of equity interest:
1. The ownership of registered securities
issued by a publicly held corporation or the
ownership of securities issued by a publicly
held corporation, the shares of which are
traded on a national exchange or the over-the-
counter market;
I s own 
2. A physician  practice, whether he is a
sole practitioner or part of a group, when the 
health care good or service is prescribed or 
I s 
provided solely for the physician  own 
patients and is provided or performed by the
physician or under his supervision ;
3. An interest in real property resulting in a
landlord-tenant relationship between the
physician 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 is otherwise unrelated to fair market
value. 
FLA. STAT. 9 455. 25.  Disclosure of financial interest by
practitioners 
It shall be a misdemeanor of the first degree, punishable as 
provided in s. 775. 082, s. 75. 083, or s. 775. 084, for any health 
care practitioner licensed under chapter 458, chapter 459,
chapter 460, chapter 
461, or chapter 466 to make any professional 
referral for physical therapy services, as defined in s. 486. 021,
or to provide medicinal drugs from any source other than on a
complimentary basis when the practitioner has a financial
interest or for which the practitioner will receive some
financial remuneration, unless in advance of any such referral
the practitioner notifies the 
patient, in writing, of such
financial interest. 
Facilities. 
Nursing Homes and Related Health Care 
FLA. STAT. i 400.  Bribes. kickbacks. certain solicitations
prohibited.  17 
(2) Whoever furnishes items or services directly or indirectly
to a nursing home resident and solicits, offers, or receives any:  Page 9 
(b) Return of part of an amount given in payment for referring 
any such individual to another person for the furnishing of 
such items or services; is guilty of a misdemeanor of the first 
degree, punishable as provided in s. 775. 082 or by fine not
exceeding $5, 000, or both. 
GEORGIA 
Medical Practice Act 
GA. CODE ANN.  Authority to refuse license or 
~ 43-34-37. 
discipline ohysician: enforcement investiaations general 
(a) The board shall have the authority to refuse to grant a 
license to an applicant or to discipline a physician licensed 
under this chapter or any antecedent law upon a finding by the 
has: 
board that the licensee or applicant 
(9) . . . (DJ ivided fees or agreed to divide fees 
received for professional services with any person, 
firm, association, corporation, or other entity for 
bringing or referring a patient; 
IDAHO 
Medical Practice Act 
Grounds for medical discipline. 
IDAHO CODE ~ 54-1814 
Every person licensed to practice medicine or registered as an 
I s 
extern, intern, resident or physician  assistance in this 
state is subject to discipline by the board pursuant to the 
procedures and powers set forth in section 54-1806A, Idaho 
Code, upon any of the following grounds: 
(8) Division of fees or gifts or agreement to split or divide 
fees or gifts received for professional services with any 
referral. 
person, institution or corporation in exchange for a  Page 10

ILLINOIS 
MEDICAL PRACTICE ACT OF 1987 
111.  Disciolinarv action -
ILL. ANN. STAT. CH.  ~ 4400-22. 
Grounds 
~ 22 
(14) Dividing with anyone other than physicians with whom

the licensee practices in a partnership, Professional Association

or Medical or Professional Corporation and fee, commission, 
rebate or other form of compensation for any professional 
services not actually and personally rendered. Nothing contained 
in this subsection prohibits persons holding valid and current

licenses under this Act from practicing medicine in partnership

under a partnership agreement or in a corporation authorized by

"The Medical Corporation Act, " as now or hereafter amended, or as

an association authorized by "The Professional Association Act"

as now or hereafter amended, or under the "The Professional

Corporation Act" as now or hereafter amended, or from pooling,

sharing, dividing or apportioning the fees, and monies received by
them or by the partnership, corporation or association in

accordance with the partnership agreement or the policies of the

Board of Directors of the corporation or association. Nothing 
contained in this subsection prohibits 2 or more corporations 
authorized by "The Medical Corporation Act, " as now or hereafter

amended, from forming a partnership or joint venture of such

corporations, and providing medical, surgical and scientific

research and knowledge by employees of these corporations if such

employees are licensed under this Act, or from pooling, sharing,
dividing, or apportioning the fees and monies received by the
partnership or j oint 
venture in accordance with the partnership
or j oint venture agreement. 
Nothing contained in this subsection 
shall abrogate the right of 2 or more persons, holding valid and

current licenses under this Act, to each receive adequate

compensation for concurrently rendering professional services to

a patient and divide a fee~ provided, the patient has full

knowledge of the division, and, provided, that the division is

made in proportion to the services performed and responsibilities

assumed by each. 
INDIANA 
Medical Licensing Board of Indiana

Art. 
5: Standards of Professional Conduct and Competent Practice

of Medicine

Standards of professional conduct

844 IAC 5-1-2 

Sec. 2 (j) A practitioner shall not pay, demand, or receive

compensation, for referral of a patient, except for a patient
 Page 11 
referral program operated by a medical society or association 
board. 
which is approved by the medical licensing 
KANSAS 
Medical Practice Act 
KdANe. SfTAiT.n ANeN. d.  Professional incompetencv.
unprofessional  ~ 65-2837. 
conduct. false advertisement and advertisement
(b) "Unprofessional conduct" means: 
fee, 
(19) Directly or indirectly giving or receiving any 
commission, rebate or other compensation for professional 
services not actually or personally rendered, other than 
through the legal functioning of lawful professional 
partnerships, corporations or associations. 
KENTUCKY 
KY. REV. STAT. ~ 205.  Prohibited activities - Exce9tion -
850 
enforcement. 
Commencement of oroceedinas for 
(2) No person shall unlawfully make, offer or receive payment, 
rebate of a fee, or charge for referring an individual to 
benefits; 
another person for furnishing of 
KY. REV. STAT. ~ 205.  Penalties 
990 
(7) Any person who violates subsections (1) to (6) of KRS
205. 850 shall, in addition to any other penalties provided by 
law, forfeit and pay a civil penalty of payment to the cabinet 
in the amount of all benefits and paYments to which the person 
was not entitled. 
(8) Any provider who violates subsections (1) to (6) of KRS
205. 850 shall, in addition to any other penalties pr(o7vi)d ed by 
law, including the penalty set forth in subsection  of this 
of: 
section, forfeit and pay civil penalties 
(a) Payment to the state treasuryl s general revenue fund 
in an amount equal to three (3) times the amount of such  Page 12

benefits and paYments to which the person was not

entitled; and

(b) Payment of all reasonable expenses which the court 
determines have been necessarily incurred by the state in 
section. 
the enforcement of this 
201 KY. ADMIN. REGS. 9. 015 Professional and ethical conduct.

Relates to: KRS 311. 530 to 311.620, 311-990 
Pursuant to: KRS 13. 082 
section 
19. Any fee charged by a physician shall be reasonable 
and shall compensate the physician for services actually
rendered. 
Section 
20. Division of any professional fees not based on 
actual services rendered is a violation which will not be 
tolerated wi 
thin the membership of this association. 
Section 
21. A physician shall not pay or receive compensation
for referral of patients. 
LOUISIANA 
LA. REV. STAT.  Causes for nonissuance: suspension:

~ 37. 1285. 
revocation: or the imoosition of restrictions: fines:

reinstatement: oublication of action

(A) The board may refuse to issue, or may suspend or revoke any

license or permit, or impose probationary or other restrictions

on any license or permit issued under this Part for the

following causes: 
(19) Soliciting, accepting, or receiving anything of economic

value in return for and based on the referral of patients to

another person, firm, or corporation or in return for the

prescription of medications or medical devices;

MAINE 
The Board accepts the ethical standards adopted, and interpreted
from time to time, by the AMA. 
The Board has previously
considered a breach of those standards as unprofessionalt icotn. duct,
a basis for discipline set forth in ME. REV. STAT. ANN.  32,
~ 3282-A(2) (F) .  Page 13

MARYLAND 
Annotated Code of Maryland, Art. 27 , Sec. 230B

(b) "Medicaid Fraud" means:

(5) Furnishing to a person items or services for which

payment of any part is or maybe made from federal or State

funds under a state medical assistance program; and

soliciting, offering, or receiving any (i) kickback or

bride in connection with the furnishing of those items or

services, or the making or receipt of any paYment; or (ii)
rebate of any fee or charge for referring a pers9n to

another person for the furnishing of those items or

services; 
MASSACHUSETTS 
MASS. GEN. LAWS ANN. Ch. 118E,  Bribes or Kickbacks for 
~ 21B.  ties 
Ordering or Recommendina Medicaid-Paid Services: Penal 
Whoever solicits or receives any remuneration, including any

bribe or rebate, directly or indirectly, overtly or covertly,

in cash or in kind in return for purchasing, leasing, ordering

or arranging for or recommending purchasing, leasing or

ordering any good, facility, service or item for which payment

may be made in whole or in part under this chapter, or whoever

offers or pays any remuneration including any bribe or rebate

directly or indirectly, overtly or covertly, in cash or in kind

to induce such person to purchase, lease, order, or arrange

for or recommend purchasing, leasing, or ordering any good,
facility, service or item for which payment may be made in

whole or in part under this chapter shall be punished by a fine

of not more than ten thousand dollars, or by imprisonment in

the state prison for not more than 'five years or in a jail

house of correction for not more than two and one-half years,
or by both such fine and imprisonment. 
This section shall not apply to a discount or other

reduction in price obtained by a provider of services or

other entity under this chapter if the reduction in price is

properly disclosed and appropriately reflected in the costs

claimed 'or charges made by the provider or entity under this 
chapter or to any amount paid by an employer to an employee

who has a bona fide emploYment relationship with such

employer, for employment in the provision of covered items or

services. 
MASS. GEN. LAWS ANN. Ch. 112,  Section 12AA  Dutv of 
~ 1, 
referrina physician to disclose financial interest in physical 
theraov corooration  Page 14

A physician who refers a patient for physical therapy services

to any partnership, corporation, firm or other legal entity in

which the physician has a financial ownership interest shall

disclose such interest to the patient and shall inform the

patient that such services may be available from other physical 
I s 
therapists in the patient  community. 
For the purposes of this section, the term "ownership
interest" shall mean any and all ownership interest including,
but not limited to, any membership, proprietary interest
, stock

interest, partnership interest, co-ownership in any form or any

profit-sharing arrangement.

The board of registration in medicine may prescribe by 
regulation that physicians report such ownership interest and
referrals to the said board. 
Violation of this section may
constitute grounds for disciplinary action by the board of
registration in 
medicine. 
MASS. GEN. LAWS ANN. Ch. 440,  Section 23P~  Disclosure of 
I s Ownershi~p/ 2 , 
Referrina Phvsician  Interest in Phvsical Therapy
Practice 
Any physical therapist who is involved in the
private' practice of 
physical therapy, to whom a patient is

referred by a physician who derives income directly' or

indirectly from the physical therapy service, shall disclose to

the patient that the referring physician derives income from

the provision of such service. 
For the purposes of this section, the term " ownership
interest" shall mean any and all ownership interest including,
but not limited to, any membership, proprietary 
interest, stock

interest, partnership interest, co-ownership in any form or any

profit-sharing arrangement.

The board of allied health professionals may prescribe by 
regulation that physical therapists report such ownership
interest and referrals to the said board. 
Violation of this 
section may constitute grounds for disciplinary action by the 
board of allied health professionals. 
MICHIGAN 
Public Health Code

MICH. COMPo LAWS ANN. ~ 333. 16221  Investiaation of licensee:
arounds 
(d) Unethical business practices 
, consisting of any or the
following:  Page 15 
(ii) Dividing fees for referral of patients or accepting 
kickbacks on medical or surgical services, appliances, or
medications purchased by or in behalf of patients. 
(e) Unprofessional conduct, consisting of any of the
following: 
(iii) Promotion for personal gain of an unnecessary drug,
device, treatment, procedure, or service from another 
person, place, facility, or service from another person, 
place, facility, or business in which the licensee has a
financial interest. 
( i v) Directing or requiring an individual to purchase or 
secure a drug, device, treatment, procedure or service
from another person, place, facility, or business in which
the licensee has a financial interest. 
MEDICAID FALSE CLAIM ACT 
MICH. STAT. ANN. ~ 16.  Kickbacks or bribes in connection 
614 (4) 
wi th furnishina of aoods or services: rebates of fees or charaes 
tv. 
for referrals: felonv. penal 
Sec. 4. A person who solicits, offers , or receives a kickback 
or bribe in connection with the furnishing of goods or services 
for which paYment is or may be made in whole or in part 
pursuant to a program establ ished under Act No.  2 8 0 of the 
Public Acts of 1939, as amended, who makes or receives the 
payment, or who receives a rebate of a fee or charge for 
referring an individual to another person for the furnishing of
the goods and services is quil 
ty of a felony, punishable by
imprisonment for not more than 4 years or by a fine of not more 
than $30, 000 or both. (MCL ~ 400. 604. 
MINNESOTA 
PHYSICIANS AND SURGEONS. OSTEOPATHS 
MINN. STAT. ANN. ~ 147.  Grounds for Disciplinarv Action. 
091. 
Grounds Listed . The board may refuse to grant a
Subdivision 1. 
license or may impose disciplinary action as described in  Page 
section 147. 141 against any physician. The following conduct

is prohibited and is grounds for disciplinary action:
(p) Fee splitting, including without limitation:

(1) paying, offering to pay, receiving, or agreeing 
to receive, a commission, rebate, or remuneration,
directly or 
indirectly, primarily for the referral of 
patients or the prescription of drugs or devices;

(2) dividing fees with another physician or a

professional corporation, unless the division is in

proportion to the services provided and the

responsibili ty assumed by each professional and the

physician has disclosed the terms of the division;

(3) referring a patient to any health care provider

as defined in section 144. 335 in which the referring

physician has a significant financial interest unless

tfihne aphnycsiicaila ni nhates rdeissclt;o saedn tdh e physician I s own
(4) dispensing for profit any drug or device
, unless
the physician has disclosed the physician I s  own 
profit interest. 
The physician must make the uisclosures required in this

clause in advance and in writing to the patient and must

include in the disclosure a statement that the patient is

free to choose a different health care provider. 
This
clause does not apply to the distribution of revenues from 
a partnership, group practice, non-profit corporation, or
professional corporation to its partners, shareholders,
members, or employees if the revenues consist only of fees 
for services performed by the physician or under a 
I s 
physician or under a physician  direct supervision, or to
the division or distribution of prepaid or capitated 
heal th care premiums, or fee-for-service withhold amounts

paid under contracts established under other state law.
Administrative Rules; Adopted Permanent Rules Related to the

Medical Assistance PaYment, Department of Health and Human

Services
Part 9505.. PAYMENT LIMITATION: PARTIES AFFILIATED WITH A

0221 
PROVIDER.
Equipment, supplies, or services prescribed or ordered by a
 Page 17 
physician are not eligible for medical assistance payment if 
they are provided: 
A. by a person or entity that provides direct or indirect 
payment to the physician for the order or prescription for the 
equipment, supplies, or services; or 
B. upon or as a result of direct referral by the 
physician to an affiliate of the physician unless the 
affiliate is the only provider of the equipment, 
supplies, or services in the local trade area. 
Part 9505.  PROSTHETI C AND ORTHOTI C DEVI 
03 65  CES . 
Subp. 6. Excluded prosthetic and orthotic devices. The 
prosthetic and orthotic devices in items A to K are not 
eligible for medical assistance payment: 
I. a device that is supplied to the recipient by a 
physician who prescribed the device or by the consultant 
to the physician in subpart 3 or 
J. a device that is supplied to the recipient by a 
provider who is an affiliate of the physician who 
prescribes the device for the recipient or of th4e . 
consul tant to the physician as in subpart 3 or  For 
purposes of this item, " affiliate" means a person that
directly, or indirectly through one or more 
intermediaries, controls, or is controlled by, or is
under common control with the referring physician 
MISSOURI 
MO. REV. STAT. ~ 334.  Denial. revocation or suspension of
100. 
license. qrounds for - reinstatement provisions. 
(19) Any candidate for licensure or person licensed to 
practice, as physical therapist, paying or offering to pay a
referral fee or practicing or offering to practice 
professional physical therapy independent of the prescription 
and direction of a person licensed and registered as a 
physician and surgeon under this chapter, as a dentist under
chapter 
332, RSMO, or as a podiatrist under chapter 
330, RSMo
whose license is in good standing;  Page 18
(21) Any person licensed to practice as a physician or
surgeon, requiring, as a condition of the physician-patient
relationship, that the patient receive prescribed drugs
devices or other professional services directly from facilities
of that physician' s office or other entities under that
physician I s ownership or control. A physician shall provide 
the patient with a prescription which may be taken to the
facili ty selected by the patient; 
Mo. Chapter 198. 
Kickbacks. bribes and rebates 
145 (1986). 
prohibited. when.  - A person shall not purposely solicit or 
receive any payment, including, without limitation, any kickback,
bribe, or rebate, directly or indirectly, overtly or covertly, in
cash or in kind, from any vendor or health care provider: 
(1) In return for referring an individual to a person for the
furnishing or arranging for the furnishing of any item or
service for which payment may be made in whole or in part under
Medicaid; or
(2) In return for purchasing, leasing, ordering or arranging 
for or recommending purchasing, leasing or ordering any good
facili ty, 
service or item for which payment may be made in 
whole or in part under Medicaid. 
NEBRASKA
NEB. REV. STAT.  License or certificate to practice a
~ 71-147. 
profession: denied. revoked or other disciolinarv actions:
causes -
A license or certificate to practice a profession may be denied,
refused renewal, limited, revoked, suspended or have other
disciplinary measures taken against it in accordance with section
71-155 when the applicant, licensee, or certificate holder is
guil ty of any of the following acts or offenses  . (10)
unprofessional conduct, which term includes all acts specified in
section 71-148.... 
NEB. REV. STAT.  License or certificate: revocation or
~ 71-148. 
suspens ion: unorofess ional conduct. defined.
For the purpose of section 71-147 , unprofessional conduct
acts: 
shall include any of the following  (1) Solicitation of
professional patronage by agents or person, popularly known as 
capers or steerers, or profiting by the acts of those 
representing themselves to be agents' of the licensee or
certificate holders;... 
(3) division of fees, or agreeing to  Page 19 
split or divide the fees , received for professional services 
wi th any person for bringing or referring a patient.... 
NEVADA 
NEV. REV. STAT. ~ 630.  Grounds for initiatina disciolinary
305. 
action or denvina licensure 
The following acts, among others, constitute grounds for.
ini tiating disciplinary action or denying licensure: 
1. Directly or indirectly receiving from any person,
corporation or other business organization any fee,
commission, rebate or other form of compensation which is 
intended or tends to influence the physician I s objective
evaluation or treatment of a patient. 
2. Dividing a fee between licensees except where the patient is 
informed of the division of fees and the division of fees is 
made in proportion to the services personally performed and the 
responsibility assumed by each licensee. 
6. Failing to disclose to a patient any financial or other
conflict of interest. 
NEW JERSEY 
6. 
BOARD OF MEDICAL EXAMINERS REGULATIONS; SUBCHAPTER 
GENERAL 
RULES OF PRACTICE ~ 13: 35-6.  Prohibition of kickbacks. rebates 
or receivina paYment for services not rendered 
(a) It shall be unprofessional or unethical conduct for any 
licensee or registrant of the state Board of Medical Examiners
to: 
1. Receive directly or indirectly from any person firm or 
corporation any fee, commission, rebate, gift or other
form of compensation for prescribing, ordering or 
promoting the sale of a device, appliance or prescribed 
item or service when such device, appliance or prescribed 
item or service is provided by another; 
2. Directly or indirectly charge or bill the recipient of 
a device, appliance or prescribed item, directly or
indirectly charge or bill any third party when such
device 
, appliance or prescribed item is delivered by the 
licensee or registrant without disclosing to the recipient 
and third party, i~ any, the actual cost to the licensee
or registrant for such device , appliance or prescribed  Page 20 
item which the licensee or registrant paid or shall. pay
the provider of such device; appliance or prescribed item; 
3. Receive directly or indirectly from any person, firm or
corporation any fee, gift commission, rebate, free 
saleable products, anything of value or any form of 
compensation for prescribing or promoting the sale of any 
drug, commodity or product; 
5. Render any bill or invoice or receive any monies from 
any person, firm, corporation or governmental entity for 
not, in fact,
the performance of services which were 
performed; provided, however, that this shall not be 
construed to prohibit an agreed charge for appointment 
made or services ordered notwithstanding subsequent 
cancelation. 
patient or consumer 
Administrative charaes/service fees 
~ 10:49-6. 
(a) A provider shall not pay nor require payment of an 
administrative charge or service fee for the privilege of 
doing business with another provider or for service for which 
reimbursement is included as part of the Medicaid fee. 
1. An example of a prohibited activity is that a LTCF may 
not require a pharmacy to pay an administrative charge or 
service fee to the facility for handling of the LTCF
resident' 
s medications , drugs and/or related
pharmaceutical records.
J. STAT. ANN. 
~ 30:4D-17.  Penal tv 
(c) Any provider, or any person, firm, partnership,
corporation or entity who solicits, offers, or receives any 
kickback, rebate or bribe in connection with: 
(1) The furnishing of items or services for which paYment
is ':or may be made in whole or in part under this act; or 
(2) The furnishing of items or services whose cost is or 
may be reported in whole or in part in order to obtain 
benef its or paYments under this act; or 
(3) The receipt of any benefit or payment under this act,
is guilty of a high misdemeanor and , upon conviction
thereof, shall be liable to a penalty of not more than 
$10, 000. 00 or. to imprisonment for not more than 3 years or
both. ...
Page 21

This subsection shall not apply to (A) a discount or other

reduction in price under this act if the reduction in price is

properly disclosed and appropriately reflected in the costs

claimed or charges made under this act; and (B) any amount paid

by an employer to an employee who has a bona fide employment

relationship with such employer for employment in the provision

of covered items or services. 
NEW MEXICO 
N . M. STAT. ANN.  License may be refused. revoked or 
~ 61-6-14. 
susoended: orocedure: practice after suspension or revocation: 
penal tv: notice of claim. (Effective until July 1, 1992) 
A. 
The board shall refuse to license and shall revoke or 
suspend any license which has been issued by the board or any 
previous board upon satisfactory proof being made to the board 
that the applicant for or holder of the license has been guilty 
of unprofessional or dishonorable conduct. 
B. "Unprofessional or dishonorable conduct, " as used in this

section, means among other things but not limited to because of

enumera tion 

(16) fee splitting;

C. As used in this section, "fee splitting" includes offering,
delivering, receiving or accepting any unearned rebate, 
refunds, commission preference, patronage dividend, discount or 
other unearned consideration, whether in the form of money or 
otherwise, as compensation or inducement of referring patients,
cl ients or 
customers to any person irrespective of any 
membership, proprietary interest or co-ownership in or with any 
person to whom the patients, clients or customers are referred. 
NEW YORK

RELATIONSH~P BETWEEN CLINICAL LABORATORIES AND PURVEYORS OF

HEALTH SERVICES 
N. Y. GEN. BUS. LAW  Prohibited Practices. 
~ 801. 
1. No health services purveyor or his agent, employee or 
fiduciary shall solicit, receive, accept or agree to receive or 
accept any payment or other consideration in any form to the 
extent such payment or other consideration is given for the 
referral of services or participate in the division,  Page 22

transference
, assignment, rebate, splitting of fees, with any

clinical laboratory or its agent, employee or fiduciary, or

with another health services purveyor. Specifically prohibjted
practices shall include, without limiting thereto, the

following:
(a) Acceptance of rental payments for storage space for
any supplies provided by any clinical laboratory or its

agent, employee or fiduciary or for filling in proper

tests.
information on laboratory request forms for 
(d) Receipt or acceptance of any monies or other

consideration from any clinical laboratory or its agent,
employee or fiduciary as a bonus, commission or fee in the

form of a fixed or percentage return for the amount of

laboratory tests performed or to be performed by any

clinical laboratory tests performed or to be performed by

any clinical laboratory to which patients or specimens are

, referred or in any other form, including from funds of

governmental agencies paid directly to the clinical

laboratory .
2. 
No clinical laboratory or its agent, employee or fiduciary

shall make, offer, give, or agree to make, offer, or give any

payment or other consideration in any form to ,
the extent such

payment or other consideration is given for the referral of

services or participate in the division, transference,

assignment, rebate, splitting of fees, with any health services

purveyor or its agent, employee or fiduciary, or with another

clinical laboratory.

Specifically prohibited practices shall include, without

limiting thereto, the following:

(a) To offer or agree to give or give rental payments for

storage space for any supplies provided to any hea~th

services purveyor or his agent, employee or fiduciary, or

for filling in proper information on laboratory request

forms for tests.

(b) ' To supply technical employees or other agents,
employees or fiduciaries '
of a clinical laboratory to

perform any duties in the facility of any health

services purveyor or his agent, employee or fiduciary

provided, however, that nothing in this subdivision shall

health services purveyor and a cl inical 
prohibi t a 
laboratory from contracting for laboratory management

services, including the provision of technical services

and employees in the facility of the health services
 Page 23 
purveyor for the performance of functions directly related 
operations. 
to clinical laboratory 
(d) To offer or agree to give or give any monies or other 
consideration to any health services purveyor or his 
agent, employee or fiduciary as a bonus, commission or fee 
in the form of a fixed or percentage return for the amount 
of laboratory referrals of patients or specimens of 
patients, including patients in any governmental medical 
assistance program in which partial or full reimbursement 
is due the patient or in which payment is made directly to 
any clinical laboratory. 
RULES OF THE BOARD OF REGENTS ON UNPROFESSIONAL CONDUCT Section 
29. 1 GENERAL PROVISIONS FOR ALL PROFESSIONS 
29. 1 (b) Unprofessional conduct in the practice of any profession 
licensed or certified pursuant to title VIII of the Education law 
shall include: 
(3) direct or indirectly offering, giving, soliciting, or 
receiving or agreeing to receive, any fee or other 
consideration to or from a third party for the referral of a 
patient or client or in connection with the performance of
professional services; 
OHIO 
OHIO REV. CODE ANN. i 4731.  Grounds for Discipline 
21 
(B) The board, pursuant to an adjudicatory hearing under 
Chapter 119. of the Revised Code and by a vote of not less 
than six members, shall, to the extent permitted by law,
limit, revoke, or suspend a certificate, refuse to register or 
refuse to reinstate an applicant, or reprimand or place on 
following reasons: 
probation the holder of a certificate for one or more of the
(17) Any division of fees or charges, or any agreement or 
arrangement to share fees or charges, made by any person 
licensed to practice medicine and surgery, osteopathic 
medicine and surgery, or podiatric medicine and surgery  Page 24

with any other person so licensed, or with any other

person; 
PENNSYLVANIA 
22 
35 PA. CONS. STAT. ~ 449.  (1988-66-Public Law 403 , Section 2).
referral facilities. 
Disclosure of interest in 
(a) General rule. -- Any practitioner of the healing arts

shall, prior to referral of a patient to any facility or

entity engaged in providing health-related services, tests

pharmaceutical, appliances or devices, disclose to the patient

any financial interest of the practitioner or ownership by the

poractirtio neer in nthe ftaciilitty yor en.ti ty. In making any

referral, the practitioner of the healing arts may render any

recommendations he considers appropriate, but shall advise the

patient of his freedom of choice in the selection of a facility

000. 
(b) Penalty. -- A person who violates this section shall be

liable to the Commonwealth for a civil penalty not to exceed

$1,
(c) Enforcement. - The Licensing Boards in the bureau shall

enforce this section.

PA. STAT. ANN.  Provider prohibited acts.  Criminal 
~ 1407. 
penal ties and civil remedies

(a) It shall be unlawful for any person to:

2. Solicit or receive or to offer or pay any remuneration, 
including any kickback, bribe or rebate, directly or 
indirectly, in cash or in kind from or to any person in

connection with the furnishing of services or merchandise for

which paYment may be in whole or in part under the medical

assistance program or in connection with referring an

individual to a person for the furnishing or arranging for the

f~rnishing of any services or merchandise for which payment may

be made in whole or in part under the medical assistance

program: 
RHODE ISLAND 
I. GEN. LAWS i 5-37-5.  Unprofessional conduct.  The term 
1. 
unprofessional conduct" as used in this chapter shall include 
but not be limited to the following items or any combination 
thereof and may be further defined by regulations established by 
director: 
the board with the prior approval of the  Page 25
(6) Promotion by a physician or limited registrant of the sale
of drugs, devices, appliances, or goods or services provided
for a patient in such a manner as to exploit the patient for
the financial gain of the physician or limited registrant;
(12) Division of fees or agreeing to split or divide the fees
received for professional services for any person for bringing
to or referring a patient;
(13) Agreeing with clinical or bioanalytical laboratories to
accept payments form such laboratories for individuals tests or
test series for patients.
I. GEN. LAWS  Fee Splittina.  No physician shall 
~ 5-37-21. 
directly or indirectly receive payment, reimbursement, 
laboratory. 
compensation or fee for a referral to any clinical 
violation of the provisions of this section shall constitute a
misdemeanor and upon conviction thereof may be punished by
imprisonment for not longer than one (1) year or a fine of not
more than five hundred dollars ($500) or by both such fine and
imprisonment. 
SOUTH CAROLINA
~ 81-60 rprincioles of Medical Ethicsl
C. CODE ANN. 
G. In the practice of medicine a physician should limit the 
source of his professional income to medical services actually 
rendered by him, or under his supervision, to his patients. 
His fee should be commensurate with the services rendered and
the patient' s ability to pay. 
He should neither pay nor 
patients. 
receive a commission for referral of  Drugs, remedies 
or appliances may be dispensed or supplied by the physician 
patient. 
provided it is in the best interests of the 
SOUTH DAKOTA
D. CODIFIED LAWS ANN.  Acts considered unprofessional
~ 36-4-30 
conduct. 
The phrase "unprofessional or dishonorable conduct" as used in 
include: 
this chapter shall be construed to  .... 
Page 26

(10) 'Splitting fees or giving to any person furnishing a

patient any portion of the fees received from such patient c-

paying or giving to any person any consideration whatsoever for

furnishing any patient;

S. D. CODIFIED LAWS ANN.  Action of person aidinq 
i 22-45-4. 
provider with aoods or services or referrina individuals to 
provider for which additional value received an offense --
A person commits an offense if he: 
violation a felony. 
(3) Refers an individual to a provider for the provision of a 
good or a service for which payment may be made, in whole or in
part, '
under the program, and solicits or accepts anything of 
referral. 
value in connection with such 
TENNESSEE 
GENERAL RULES AND REGULATIONS GOVERNING THE PRACTICE OF MEDICINE

AND SURGERY

~ 63-6-214 Grounds for license denial. susoension

TENN. CODE ANN. 
or revocation -- Reoortinq misconduct. -- The grounds upon

which the board shall exercise such power includes, but is not

limited to, the following:

(16) Giving or receiving, or aiding or abetting the giving or 
or indirectly;... 
receiving of rebates, either directly 
TEXAS 
TEX. STAT. ANN. art. 4495b ~ 3.  Unlawful and prohibited 
ties.  07 
practices: penal 
(c) A physician or surgeon may not employ or agree to employ,
pay  or promise to pay, or reward or promise to reward any 
person, firm, association of persons, partnership or

corporation for securing, soliciting, or drumming patients or

patronage. A physician or surgeon may not accept or agree to

accept any payment, fee, reward, or anything of value for

securing, soliciting, or drumming for patients or patronage for

surgeon. 
any physician or  Whoever violates any provision of  Page 27 
this section commits a Class A misdemeanor. Each payment, 
reward, or fee or agreement to pay or accept a reward or fee is
a separate offense. ... 
VERMONT 
PROFESSIONS AND OCCUPATIONS 
VT. STAT. ANN. tit.  Unorofessional Conduct.  The term 
26, ~ 1354. 
unprofessional conduct" as used in this chapter shall mean the 
following items or any one of combination thereof: 
(6) promotion by a physician of the sale of drugs, devices, 
appliances or goods provided for a patient in such a manner as 
to exploit the patient for financial gain of the physician or 
selling, prescribing, giving away or administering drugs for 
other than legal and legitimate therapeutic purposes; 
(12) division of fees or agreeing to split or divide the fees 
received for professional services for any person for bringing 
to or referring a patient; 
VT. STAT. ANN. tit. 18, i 1852  Patients I bill of riahts: 
Adoption 
(9) The patient has the right to know the identity and 
professional status of individuals providing service to him or 
her, and to know which physician or other practitioner is 
care. 
primarily responsible for his or her  This includes the
patient I s right to know of the existence of any professional 
relationship among individuals who are treating him or her, as 
well as the relationship to any other health care or 
educational institutions involved in his or her care. 
VIRGINIA 
Virginia Medicine and Other Healing Arts 
VA. CODE  Division of fees between phvsicians and 
i 54-278. 
suraeons prohibited . -- No surgeon or physician shall directly or 
indirectly share any fee charged for a surgical operation or 
medical services with a physician who brings, sends or recommends 
a patient to such surgeon for operation or such physician for 
such medical services; and no physician who brings, sends or 
recommends any patient to a surgeon for a surgical operation or 
medical services shall accept from such surgeon or physician any  . .
' .
Page 
portion of a fee charged for such 
operation; provided, however

that nothing in this chapter shall be construed as prohibiting

the members of any regularly organized partnership of such

surgeons or physicians from making any division of their total

frees among themselves as they may determine or a group of duly

licensed practitioners of any branch or branches of the healing

arts from using their joint fees to defray their joint operating

costs. Any 
person violating the provisions of this section shall

be guilty of a misdemeanor.

VA. CODE 
facilities~.  54-278.  Disclosure of interest in referral

3. 
Any practitioner of the healing arts 
a patient to any facility or entity engsahgaeldl ,i np rtihoer  ,to referral of
health- provision of
related services
, appliances or devices
limited to physical therapy, hearing testing, o, r isnaclleud oinrg f ibtutti nngot

of hearing aids or eyeglasses, disclose to the patient any

financial interest of or ownership by the practitioner in such

facility or entity. 
practi tioner of  In making any such referral
the healing arts may render such ,r etchoemmendations
as he considers appropriate, but shall advise the patient of his 
freedom of choice in the selection of such facility or 
Nothing in this section shall be construed to permit anye notfi tyth.e 
practices prohibited in subdivision 
person violating the provisions of th(1is2 s) eocft iSoenc s. h5a4ll- 3b1e7 q. uil
Any
of a Class 3 misdemeanor.

VA. CODE  What constitutes unprofessional conduct

~ 54-317. 
A. Any practitioner of medicine
, osteopathy, chiropractic

podiatry, physical therapy or clinical psychology or any

physical therapist assistant shall be considered guilty of

unprofessional conduct if he:
(7) Violates any of the provisions of j 54-278 or

practices any branch of the healing arts in

violation of the provisions of this chapter; or

D. A practitioner of the healing arts shall not engage in

selling or promoting the sale of eyeglasses from wi 

office unless a dispenser of such items is not locattehdi nw ihtihsi
 n

fifteen miles of the practitioner'
practi tioner  s office. However
may own, in whole or in  , a

part, an optical

dispensary located adjacent to or at a distance from his

office 
and may dispense contact lenses to his patients from

within' his office. 
Further, practitioners shall not employ
unlicensed persons to fill prescriptions for 
eyeglasses.  Page 29

E. Any practitioner of the healing arts engaging in the

examination of eyes and prescribing of eyeglasses shall give

the patient a copy of any prescription for eyeglasses and

inform the patient of his right to have the prescription filled

at the establishment of his choice. No practitioner who owns

in whole or in part, an establishment dispensing eyeglasses

shall make any statement' or take any action, directly or

indirectly, that infringes on the patient's right to have a

prescription filled at an establishment other than the one in

which the practitioner has an ownership interest. In addition

no practitioner shall offer any inducement, take any action or

make any statement to encourage the patient to have a

prescription filled at the establishment in which the
practi tioner has 
an ownership interest unless such inducement 
action or statement is offered on the same terms to the general

public. 
Disclosure of ownership interest by a practitioner as required
by 
~ 54-278. 3 or participation by the practitioner in 
contractual arrangements with third-party payors or purchasers 
of vision care services shall not constitute a violation of

this subsection.

WASHINGTON 
, WASH. REV. CODE ~ 19. 68.  Rebatina orohibited -- Penalty 
010 
It. shall 
be unlawful for any person, firm, corporation or 
association, whether organized as a cooperative, or for profit or 
nonprofi t, to pay, or offer to pay or allow, directly or

indirectly, to any person licensed by the state of Washington to

engage in the practice of medicine and surgery, drugless

treatment in any form, dentistry, or pharmacy, and it shall be

unlawful for such person to request, receive or allow, directly

or indirectly, a rebate, refund, commission, unearned discount or 
profi t by means of a credit or other valuable consideration in 
connection with the referral of patients to any per~on, firm,
corporation or association, or in connection with the furnishings

of medical, surgical, or dental care, diagnosis, treatment or

service, on the sale, rental, furnishing or supplying of clinical

laboratory supplies or services of any kind, drugs, medication,

or medical supplies, or any other goods, services or supplies

prescribed' : for 
Provided 
medical diagnosis, care or treatment: 
that ownership of a financial interest in any firm, corporation
or assocIation which furnishes any kind of clinical laboratory or
other services prescribed for 
medical, surgical, or dental 
diagnosis shall not be prohibited under this section where the

referring practitioner affirmatively discloses to the patient in

writing, the fact that such practitioner has a financial interest

in such firm, corporation, or association.
 Page 30
Any person violating the provisions of this section is guilty of
a misdemeanor.
WASH. REV. CODE ~ 19. 68.  Deemed unorofessional conduct 
020 
The acceptance directly or indirectly by any person so licensed 
of any rebate, refund, commission, unearned discount, or profit 
by means of a credit or other valuable consideration whether in 
the form of money or otherwise, as compensation for referring 
patients to any person, firm, corporation or association as set 
forth in RCW 19. 68. 030 constitutes unprofessional conduct. 
WASH. REV. CODE ~ 18. 130. 180.  Unprofessional conduct 
The following conduct, acts, or conditions constitute 
unprofessional conduct for any license holder or applicant under 
chapter: 
the jurisdiction of this 
(21) Violation of chapter 19. 68 RCW;
WEST VIRGINIA
VA. CODE  Bribery: false claims: consoiracv: criminal
~ 9-7-5. 
oenal ties.
(a) A person shall not solicit, offer or receive any
remuneration, including any kickback, rebate or bribe,
directly or indirectly, wi th the intent of causing an
expendi ture of moneys from the medical services fund
established pursuant to section two (~ 9-4-2), article four of
this chapter which expenditure is not authorized by applicable
laws or rules and regulations governing said medical services
fund. 
(d) Any person found to be in violation of subsection (a), (b)
or 
(c) of this section shall be guilty of a felony and, upon
conviction, shall be confined in the penitentiary not less than 
one nor more than ten years or shall be fined not to exceed ten 
thousand: dollars, or both fined and imprisoned as 
provided. (1981, c. 216) 
West Virginia Medical Practice Act
W. VA.  Professional Discipline of phvsicians and
podiatCOrDEi ~s 3t0-s3- 14 
(c) The board may deny an application for
license or other authorization to practice medicine and surgery Page 31 
or podiatry in this state and may discipline a physician or 
podiatrist licensed or otherwise lawfully practicing in this 
state who, after a hearing, has been adjudged by the board a~ 
unqualified due to any of the following 
reasons: 
(6) Requesting, receiving or paying 
payment, rebate  directly or indirectly a
, refund commission, credit or other form of
profit or valuable consideration for the referral of patients 
to any person or entity in connection with providing medical or 
other health care services or clinical laboratory services 
supplies of any kind, drugs 
, medication or any other medical
goods 
, services or devices used in connection with medical or
other health care services. 
(7) Unprofessional conduct by any physician or podiatrist in 
referring a patient to any clinical laboratory or pharmacy in 
which the physician or podiatrist has a proprietary interest 
unless such physician or podiatrist discloses in writing such
interest to the patient. 
Such written disclosure shall
indicate that the patient may choose any clinical laboratory 
for pUrposes of having any laboratory work or assignment 
performed or any pharmacy for pUrposes of purchasing any 
prescribed drug or any other medical goods or devices used in 
connection with medical or other health care 
services. 
Causes for Denial. 
Sec. 19.  Probation. Suspension or Revocation
of Licenses and Permits 
1. 
Sec. 19. The Board may deny an application for a license or
permit 
, place a licensee or permit holder on probation 
license or permit  , suspend a
, limit or restrict a license or permit
revoke any license or permit heretofore or hereafter issu,e do rby
the Board, upon satisfactory proof that the licensee or permit 
holder has: 
r. 
Paid or received any commission 
rebate  , bonus , kickback or
, or engaged in any split-fee arrangement in any form
whatsoever with a physician, organization 
ei ther directly or  , agency or person,
indirectly, for patients referred to
providers of health care goods and services 
limited to , hospitals , nursing homes  , including, but not
, clinical laboratories,
ambulatory surgical centers or 
pharmacies. The provisions of
this paragraph shall not be construed to prevent a physician 
from receiving a fee for professional consultation 
services;  Page 32

w. Exercised influence on the patient or client in such a 
manner as to exploit the patient or client for financial ga~ n 
of the licensee or of a third party, which shall include, but 
not be limited to, the promoting or selling of services, goods, 
appliances or drugs, and the promoting or advertising on any 
pharmacy. For the purposes of 
prescription form of a community 
prescribing, 
this paragraph, it shall be legally presumed that 
dispensing, administering, mixing or otherwise preparing legend 
drugs, including all controlled substances, inappropriately or 
in excessive or inappropriate quantities, is not in the best 
interests of the patient and is not in the course of the
physician' 
s professional practice, without regard to his
intent;
gg. Knowingly maintained a professional connection or

association with any person who is in violation of the Medical

Practice Act or the rules or regulations of the Board; or

knowingly aided, assisted, procured, or advised any person to

practice medicine contrary to the Medical Practice Act or to

the rules and regulations of the Board; or knowingly performed

any act which in any way aids, assists, procures, advises or

encourages any unlicensed person or entity to practice

medicine; or divided fees or agreed to divide fees received for

professional services with any person, firm, association,

corporation or other entity for bringing or referring a

patient; or engaged in the practice of medicine as an officer

or employee of any corporation other than one organized and

existing pursuant to the Medical. Practice Act, except as a

licensed physician, intern or resident of a hospital or

state.
teaching institution licensed by this 
WISCONSIN
WIS. STAT. ANN. i 49. 49.  Medical assistance offenses

(2) Kickbacks, Bribes and Rebates.

Solicitation or receiot of remuneration  Any person who

(a) 
solicits or receives any remuneration, including any kickback,
covertly,
bribe, or rebate, directly or indirectly, overtly or 
in cash or in kind, in return for referring an individual to a

person ~or the furnishing or arranging for the furnishing of

any item or service for which payment may be made in whole or

in part under a medical assistance program, or in return for

purchasing, leasing, ordering, or arranging for or recommending

service,
purchasing, leasing, or ordering any good, facility, 
or item for which payment may be made in whole or in part under

a medical assistance program, may be fined not more than

$25, 000 or imprisoned for not more than 5 years. Page 33 
Offer or oavrnent of remuneration  Whoever offers or pays 
(b) 
any remuneration including any kickback, bribe, or rebate 
directly or indirectly, overtly or covertly, in cash or in ~ind 
to any person to induce such person to refer an individual to a 
person for the furnishing or arranging for the furnishing of 
any item or service for which paYment may be made in whole or 
in part under a medical assistance program, or to purchase, 
leasing,
lease, order, or arrange for or recommend purchasing, 
or ordering any good, facility, service or item for which 
payment may be made in whole or in part under a medical 
000 or 
assistance program, may be fined not more than $25, 
both. 
imprisoned for not more than 5 years or 
WISC. STAT. ANN. ~ 49.  Medical Assistance: Administration 
45 
Disclosure 
Any person who is an employee of, or an 
(9s) 
owner, partner, stockholder or investor in, any legal entity 
section, 
providing services which are reimbursed under this 
sshalel notcify tthei deopartmnent, .on  forms provided by the 
of, 
department for that purpose, if such person is an employee 
or an owner, partner, stockholder or investor in, any other 
legal entity providing services which are reimbursed under this
WISC. STAT. ANN. i 448.  Fee Solittina: seoarate billina 
08.  exceotions. 
reQUired. oartnershios and corporations: contract 
Fee Solittina  Except as otherwise provided in this 
(1) 
section, no person licensed or certified under this chapter may 
person, 
give or receive , directly or indirectly, to or from any 
commission, rebate or other form 
firm or corporation any  fee, 
of compensation or anYthing of value for sending, referring or 
otherwise inducing a person to communicate with a licensee in a 
professional capacity, or for any professional services not 
actually rendered personally or at his or her direction.