I

103D CONGRESS

1ST SESSION H. R. 3046

To amend the Public Health Service Act to limit the referral by a physician

to certain services in which the physician has a financial relationship.

IN THE HOUSE OF REPRESENTATIVES

SEPTEMBER 9, 1993

Mr. WAXMAN (for himself and Mr. STARK) introduced the following bill; which

was referred to the Committee on Energy and Commerce

A BILL

To amend the Public Health Service Act to limit the referral

by a physician to certain services in which the physician

has a financial relationship.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE.

4 This Act may be cited as the ‘‘Physician Ownership

5 and Referral Act of 1993’’.

6 SEC. 2. PUBLIC HEALTH SERVICE ACT AMENDMENT.

7 (a) IN GENERAL.—The Public Health Service Act is

8 amended by adding at the end the following new title:
2

•HR 3046 IH

1 ‘‘TITLE XXVII—LIMITATION ON

2 CERTAIN PHYSICIAN REFER3 RALS

4 ‘‘SEC. 2701. LIMITATION ON CERTAIN PHYSICIAN REFER5 RALS.

6 ‘‘(a) PROHIBITION OF CERTAIN REFERRALS.—

7 ‘‘(1) IN GENERAL.—Except as provided in sub8 section (b), if a physician (or an immediate family

9 member of such physician) has a financial relation10 ship with an entity specified in paragraph (2),

11 then—

12 ‘‘(A) the physician may not make a refer13 ral to the entity for the furnishing of designated

14 health services for which a charge is imposed,

15 and

16 ‘‘(B) the entity may not present or cause

17 to be presented a claim or bill to any individual,

18 third party payor, or other entity for designated

19 health services furnished pursuant to a referral

20 prohibited under subparagraph (A).

21 ‘‘(2) FINANCIAL RELATIONSHIP SPECIFIED.—

22 For purposes of this section, a financial relationship

23 of a physician (or an immediate family member of

24 such physician) with an entity specified in this para25 graph is—
3

•HR 3046 IH

1 ‘‘(A) except as provided in subsections (c)

2 and (d), an ownership or investment interest in

3 the entity, or

4 ‘‘(B) except as provided in subsection (e),

5 a compensation arrangement (as defined in sub6 section (h)(1)) between the physician (or an im7 mediate family member of such physician) and

8 the entity.

9 An ownership or investment interest described in

10 subparagraph (A) may be through equity, debt, or

11 other means and includes an interest in an entity

12 that holds an ownership or investment interest in

13 any entity providing the designated health service.

14 ‘‘(b) GENERAL EXCEPTIONS TO BOTH OWNERSHIP

15 AND COMPENSATION ARRANGEMENT PROHIBITIONS.—

16 Subsection (a)(1) shall not apply in the following cases:

17 ‘‘(1) PHYSICIANS’ SERVICES.—In the case of

18 physicians’ services (as defined in section 1861(q) of

19 the Social Security Act) provided personally by (or

20 under the personal supervision of) another physician

21 in the same group practice (as defined in subsection

22 (h)(4)) as the referring physician.

23 ‘‘(2) IN-OFFICE ANCILLARY SERVICES.—In the

24 case of services (other than durable medical equip-
4

•HR 3046 IH

1 ment (excluding infusion pumps) and parenteral and

2 enteral nutrients, equipment, and supplies)—

3 ‘‘(A) that are furnished—

4 ‘‘(i) personally by the referring physi5 cian, personally by a physician who is a

6 member of the same group practice as the

7 referring physician, or personally by indi8 viduals who are directly supervised by the

9 physician or by another physician in the

10 group practice, and

11 ‘‘(ii)(I) in a building in which the re12 ferring physician (or another physician

13 who is a member of the same group prac14 tice) furnishes physicians’ services unre15 lated to the furnishing of designated health

16 services, or

17 ‘‘(II) in the case of a referring physi18 cian who is a member of a group practice,

19 in another building which is used by the

20 group practice—

21 ‘‘(aa) for the provision of some or

22 all of the group’s clinical laboratory

23 services, or

24 ‘‘(bb) for the centralized provi25 sion of the group’s designated health
5

•HR 3046 IH

1 services (other than clinical laboratory

2 services),

3 unless the Secretary determines other

4 terms and conditions under which the pro5 vision of such services does not present a

6 risk of program or patient abuse, and

7 ‘‘(B) that are billed by the physician per8 forming or supervising the services, by a group

9 practice of which such physician is a member

10 under a billing number assigned to the group

11 practice, or by an entity that is wholly owned

12 by such physician or such group practice,

13 if the ownership or investment interest in such serv14 ices meets such other requirements as the Secretary

15 may impose by regulation as needed to protect

16 against program or patient abuse.

17 ‘‘(3) PREPAID PLANS—In the case of services

18 furnished by an organization—

19 ‘‘(A) with a contract under section 1876 of

20 the Social Security Act to an individual enrolled

21 with the organization,

22 ‘‘(B) described in section 1833(a)(1)(A) of

23 such Act to an individual enrolled with the or24 ganization,
6

•HR 3046 IH

1 ‘‘(C) receiving payments on a prepaid

2 basis, under a demonstration project under sec3 tion 402(a) of the Social Security Amendments

4 of 1967 or under section 222(a) of the Social

5 Security Amendments of 1972, to an individual

6 enrolled with the organization, or

7 ‘‘(D) that is a qualified health maintenance

8 organization (within the meaning of section

9 1310(d)) to an individual enrolled with the or10 ganization.

11 ‘‘(4) OTHER PERMISSIBLE EXCEPTIONS.—In

12 the case of any other financial relationship which the

13 Secretary determines, and specifies in regulations,

14 does not pose a risk of program or patient abuse.

15 ‘‘(c) GENERAL EXCEPTION RELATED ONLY TO OWN16 ERSHIP OR INVESTMENT PROHIBITION FOR OWNERSHIP

17 IN PUBLICLY TRADED SECURITIES AND MUTUAL

18 FUNDS.—Ownership of the following shall not be consid19 ered to be an ownership or investment interest described

20 in subsection (a)(2)(A):

21 ‘‘(1) Ownership of investment securities (includ22 ing shares or bonds, debentures, notes, or other debt

23 instruments) which may be purchased on terms gen24 erally available to the public and which are—
7

•HR 3046 IH

1 ‘‘(A)(i) securities listed on the New York

2 Stock Exchange, the American Stock Exchange,

3 or any regional exchange in which quotations

4 are published on a daily basis, or foreign securi5 ties listed on a recognized foreign, national, or

6 regional exchange in which quotations are pub7 lished on a daily basis, or

8 ‘‘(ii) traded under an automated

9 interdealer quotation system operated by the

10 National Association of Securities Dealers, and

11 ‘‘(B) in a corporation that had, at the end

12 of the corporation’s most recent fiscal year, or

13 on average during the previous 3 fiscal years,

14 stockholder equity exceeding $75,000,000.

15 ‘‘(2) Ownership of shares in a regulated invest16 ment company as defined in section 851(a) of the

17 Internal Revenue Code of 1986, if such company

18 had, at the end of the company’s most recent fiscal

19 year, or on average during the previous 3 fiscal

20 years, total assets exceeding $75,000,000.

21 ‘‘(d) ADDITIONAL EXCEPTIONS RELATED ONLY TO

22 OWNERSHIP OR INVESTMENT PROHIBITION.—The follow23 ing, if not otherwise excepted under subsection (b), shall

24 not be considered to be an ownership or investment inter25 est described in subsection (a)(2)(A):
8

•HR 3046 IH

1 ‘‘(1) HOSPITALS IN PUERTO RICO.—In the case

2 of designated health services provided by a hospital

3 located in Puerto Rico.

4 ‘‘(2) RURAL PROVIDER.—In the case of des5 ignated health services furnished in a rural area (as

6 defined in section 1886(d)(2)(D) of the Social Secu7 rity Act) by an entity, if substantially all of the des8 ignated health services furnished by such entity are

9 furnished to individuals residing in such a rural

10 area.

11 ‘‘(3) HOSPITAL OWNERSHIP.—In the case of

12 designated health services provided by a hospital

13 (other than a hospital described in paragraph (1))

14 if—

15 ‘‘(A) the referring physician is authorized

16 to perform services at the hospital, and

17 ‘‘(B) the ownership or investment interest

18 is in the hospital itself (and not merely in a

19 subdivision of the hospital).

20 ‘‘(e) EXCEPTIONS RELATING TO OTHER COMPENSA21 TION ARRANGEMENTS.—The following shall not be consid22 ered to be a compensation arrangement described in sub23 section (a)(2)(B):

24 ‘‘(1) RENTAL OF OFFICE SPACE; RENTAL OF

25 EQUIPMENT.—
9

•HR 3046 IH

1 ‘‘(A) OFFICE SPACE.—Payments made by

2 a lessee to a lessor for the use of premises if—

3 ‘‘(i) the lease is set out in writing,

4 signed by the parties, and specifies the

5 premises covered by the lease,

6 ‘‘(ii) the space rented or leased does

7 not exceed that which is reasonable and

8 necessary for the legitimate business pur9 poses of the lease or rental and is used ex10 clusively by the lessee when being used by

11 the lessee, except that the lessee may make

12 payments for the use of space consisting of

13 common areas if such payments do not ex14 ceed the lessee’s pro rata share of expenses

15 for such space based upon the ratio of the

16 space used exclusively by the lessee to the

17 total amount of space (other than common

18 areas) occupied by all persons using such

19 common areas,

20 ‘‘(iii) the lease provides for a term of

21 rental or lease for at least 1 year,

22 ‘‘(iv) the rental charges over the term

23 of the lease are set in advance, are consist24 ent with fair market value, and are not de25 termined in a manner that takes into ac-
10

•HR 3046 IH

1 count the volume or value of any referrals

2 or other business generated between the

3 parties,

4 ‘‘(v) the lease would be commercially

5 reasonable even if no referrals were made

6 between the parties, and

7 ‘‘(vi) the lease meets such other re8 quirements as the Secretary may impose

9 by regulation as needed to protect against

10 program or patient abuse.

11 ‘‘(B) EQUIPMENT.—Payments made by a

12 lessee of equipment to the lessor of the equip13 ment for the use of the equipment if—

14 ‘‘(i) the lease is set out in writing,

15 signed by the parties, and specifies the

16 equipment covered by the lease,

17 ‘‘(ii) the equipment rented or leased

18 does not exceed that which is reasonable

19 and necessary for the legitimate business

20 purposes of the lease or rental and is used

21 exclusively by the lessee when being used

22 by the lessee,

23 ‘‘(iii) the lease provides for a term of

24 rental or lease of at least 1 year,
11

•HR 3046 IH

1 ‘‘(iv) the rental charges over the term

2 of the lease are set in advance, are consist3 ent with fair market value, and are not de4 termined in a manner that takes into ac5 count the volume or value of any referrals

6 or other business generated between the

7 parties,

8 ‘‘(v) the lease would be commercially

9 reasonable even if no referrals were made

10 between the parties, and

11 ‘‘(vi) the lease meets such other re12 quirements as the Secretary may impose

13 by regulation as needed to protect against

14 program or patient abuse.

15 ‘‘(2) BONA FIDE EMPLOYMENT RELATION16 SHIPS.—Any amount paid by an employer to a phy17 sician (or an immediate family member of such phy18 sician) who has a bona fide employment relationship

19 with the employer for the provision of services if—

20 ‘‘(A) the employment is for identifiable

21 services,

22 ‘‘(B) the amount of the remuneration

23 under the employment—

24 ‘‘(i) is consistent with the fair market

25 value of the services, and
12

•HR 3046 IH

1 ‘‘(ii) is not determined in a manner

2 that takes into account (directly or indi3 rectly) the volume or value of any referrals

4 by the referring physician,

5 ‘‘(C) the remuneration is provided pursu6 ant to an agreement which would be commer7 cially reasonable even if no referrals were made

8 to the employer, and

9 ‘‘(D) the employment meets such other re10 quirements as the Secretary may impose by reg11 ulation as needed to protect against program or

12 patient abuse.

13 Subparagraph (B)(ii) shall not prohibit the payment

14 of remuneration in the form of a productivity bonus

15 based on services performed personally by the physi16 cian (or an immediate family member of such physi17 cian).

18 ‘‘(3) PERSONAL SERVICE ARRANGEMENTS.—

19 ‘‘(A) IN GENERAL.—Remuneration from

20 an entity under an arrangement (including re21 muneration for specific physicians’ services fur22 nished to a nonprofit blood center) if—

23 ‘‘(i) the arrangement is set out in

24 writing, signed by the parties, and specifies

25 the services covered by the arrangement,
13

•HR 3046 IH

1 ‘‘(ii) the arrangement covers all of the

2 services to be provided by the physician (or

3 an immediate family member of such phy4 sician) to the entity,

5 ‘‘(iii) the aggregate services con6 tracted for do not exceed those that are

7 reasonable and necessary for the legitimate

8 business purposes of the arrangement,

9 ‘‘(iv) the term of the arrangement is

10 for at least 1 year,

11 ‘‘(v) the compensation to be paid over

12 the term of the arrangement is set in ad13 vance, does not exceed fair market value,

14 and except in the case of a physician in15 centive plan described in subparagraph

16 (B), is not determined in a manner that

17 takes into account the volume or value of

18 any referrals or other business generated

19 between the parties,

20 ‘‘(vi) the services to be performed

21 under the arrangement do not involve the

22 counseling or promotion or a business ar23 rangement or other activity that violates

24 any State or Federal law, and
14

•HR 3046 IH

1 ‘‘(vii) the arrangement meets such

2 other requirements as the Secretary may

3 impose by regulation as needed to protect

4 against program or patient abuse.

5 ‘‘(B) PHYSICIAN INCENTIVE PLAN EXCEP6 TION.—

7 ‘‘(i) IN GENERAL.—In the case of a

8 physician incentive plan (as defined in

9 clause (ii)) between a physician and an en10 tity, the compensation may be determined

11 in a manner (through a withhold, capita12 tion, bonus, or otherwise) that takes into

13 account directly or indirectly the volume or

14 value of any referrals or other business

15 generated between the parties, if the plan

16 meets the following requirements:

17 ‘‘(I) No specific payment is made

18 directly or indirectly under the plan to

19 a physician or a physician group as an

20 inducement to reduce or limit medi21 cally necessary services provided with

22 respect to a specific individual en23 rolled with the entity.

24 ‘‘(II) In the case of a plan that

25 places a physician or a physician
15

•HR 3046 IH

1 group at substantial financial risk as

2 determined by the Secretary pursuant

3 to section 1876(i)(8)(A)(ii) of the So4 cial Security Act, the plan complies

5 with any requirements the Secretary

6 may impose pursuant to such section.

7 ‘‘(III) Upon request by the Sec8 retary, the entity provides the Sec9 retary with access to descriptive infor10 mation regarding the plan, in order to

11 permit the Secretary to determine

12 whether the plan is in compliance with

13 the requirements of this clause.

14 ‘‘(ii) PHYSICIAN INCENTIVE PLAN DE15 FINED.—For purposes of this subpara16 graph, the term ‘physician incentive plan’

17 means any compensation arrangement be18 tween an entity and a physician or physi19 cian group that may directly or indirectly

20 have the effect of reducing or limiting serv21 ices provided with respect to individuals

22 enrolled with the entity.

23 ‘‘(4) REMUNERATION UNRELATED TO THE PRO24 VISION OF DESIGNATED HEALTH SERVICES.—In the

25 case of remuneration which is provided by a hospital
16

•HR 3046 IH

1 to a physician if such remuneration does not relate

2 to the provision of designated health services.

3 ‘‘(5) PHYSICIAN RECRUITMENT.—In the case of

4 remuneration which is provided by a hospital to a

5 physician to induce the physician to relocate to the

6 geographic area served by the hospital in order to be

7 a member of the medical staff of the hospital, if—

8 ‘‘(A) the physician is not required to refer

9 patients to the hospital,

10 ‘‘(B) the amount of the remuneration

11 under the arrangement is not determined in a

12 manner that takes into account (directly or in13 directly) the volume or value of any referrals by

14 the referring physician, and

15 ‘‘(C) the arrangement meets such other re16 quirements as the Secretary may impose by reg17 ulation as needed to protect against program or

18 patient abuse.

19 ‘‘(6) ISOLATED TRANSACTIONS.—In the case of

20 an isolated financial transaction, such as a one-time

21 sale of property or practice, if—

22 ‘‘(A) the requirements described in sub23 paragraphs (B) and (C) of paragraph (2) are

24 met with respect to the entity in the same man25 ner as they apply to an employer, and
17

•HR 3046 IH

1 ‘‘(B) the transaction meets such other re2 quirements as the Secretary may impose by reg3 ulation as needed to protect against program or

4 patient abuse.

5 ‘‘(7) CERTAIN GROUP PRACTICE ARRANGE6 MENTS WITH A HOSPITAL.—

7 ‘‘(A) IN GENERAL.—An arrangement be8 tween a hospital and a group under which des9 ignated health services are provided by the

10 group but are billed by the hospital if—

11 ‘‘(i) with respect to services provided

12 to an inpatient of the hospital, the ar13 rangement is pursuant to the provision of

14 inpatient hospital services under section

15 1861(b)(3) of the Social Security Act,

16 ‘‘(ii) the arrangement began before

17 December 19, 1989, and has continued in

18 effect without interruption since such date,

19 ‘‘(iii) with respect to the designated

20 health services covered under the arrange21 ment, substantially all of such services fur22 nished to patients of the hospital are fur23 nished by the group under the arrange24 ment,
18

•HR 3046 IH

1 ‘‘(iv) the arrangement is pursuant to

2 an agreement that is set out in writing and

3 that specifies the services to be provided by

4 the parties and the compensation for serv5 ices provided under the agreement,

6 ‘‘(v) the compensation paid over the

7 term of the agreement is consistent with

8 fair market value and the compensation

9 per unit of services is fixed in advance and

10 is not determined in a manner that takes

11 into account the volume or value of any re12 ferrals or other business generated between

13 the parties,

14 ‘‘(vi) the compensation is provided

15 pursuant to an agreement which would be

16 commercially reasonable even if no refer17 rals were made to the entity, and

18 ‘‘(vii) the arrangement between the

19 parties meets such other requirements as

20 the Secretary may impose by regulation as

21 needed to protect against program or pa22 tient abuse.

23 ‘‘(8) PAYMENTS BY A PHYSICIAN FOR ITEMS

24 AND SERVICES.—Payments made by a physician—
19

•HR 3046 IH

1 ‘‘(A) to a laboratory in exchange for the

2 provision of clinical laboratory services, or

3 ‘‘(B) to an entity as compensation for

4 other items or services if the items or services

5 are furnished at a price that is consistent with

6 fair market value.

7 ‘‘(f) REPORTING REQUIREMENTS.—Each entity pro8 viding covered items or services for which a charge is im9 posed shall provide the Secretary with the information

10 concerning the entity’s ownership arrangements, includ11 ing—

12 ‘‘(1) the covered items and services provided by

13 the entity, and

14 ‘‘(2) the names and unique physician identifica15 tion numbers (used under title XVIII of the Social

16 Security Act) of all physicians with an ownership or

17 investment interest (as described in subsection

18 (a)(2)(A)) in the entity, or whose immediate rel19 atives have such an ownership or investment.

20 Such information shall be provided in such form, manner,

21 and at such times as the Secretary shall specify, Such in22 formation shall first be provided not later than December

23 31, 1994. The requirement of this subsection shall not

24 apply to covered items and services furnished outside the

25 United States or to entities which the Secretary deter-
20

•HR 3046 IH

1 mines furnishes services for which a charge is imposed

2 very infrequently.

3 ‘‘(g) SANCTIONS.—

4 ‘‘(1) NO LIABILITY FOR PAYMENT.—No individ5 ual, third party payer, or other entity is liable for

6 payment for designated health services for which a

7 claim is presented in violation of subsection

8 (a)(1)(B).

9 ‘‘(2) REQUIRING REFUNDS FOR CERTAIN

10 CLAIMS.—If a person collects any amounts that were

11 billed in violation of subsection (a)(1), the person

12 shall be liable to the individual for, and shall refund

13 on a timely basis to the individual, any amounts so

14 collected.

15 ‘‘(3) CIVIL MONEY PENALTY AND EXCLUSION

16 FOR IMPROPER CLAIMS.—Any person that presents

17 or causes to be presented a bill or a claim for a serv18 ice that such person knows or should know is for a

19 service for which payment may not be made under

20 paragraph (1) or for which a refund has not been

21 made under paragraph (2) shall be subject to a civil

22 money penalty of not more than $15,000 for each

23 such service.

24 ‘‘(4) CIVIL MONEY PENALTY AND EXCLUSION

25 FOR CIRCUMVENTION SCHEMES.—Any physician or
21

•HR 3046 IH

1 other entity that enters into an arrangement or

2 scheme (such as a cross-referral arrangement) which

3 the physician or entity knows or should know has as

4 a principal purpose of assuring referrals by the phy5 sician to a particular entity which, if the physician

6 directly made referrals to such entity, would be in

7 violation of this section, shall be subject to a civil

8 money penalty of not more than $100,000 for each

9 such arrangement or scheme.

10 ‘‘(5) FAILURE TO REPORT INFORMATION.—Any

11 person who is required, but fails, to meet a reporting

12 requirement of subsection (f) if subject to a civil

13 money penalty of not more than $10,000 for each

14 day for which reporting is required to have been

15 made.

16 ‘‘(6) CIVIL MONEY PENALTY PROCEDURES.—

17 The provisions of section 1128A of the Social Secu18 rity Act (other than the first sentence of subsection

19 (a) and other than subsection (b)) shall apply to a

20 civil money penalty under this subsection in the

21 same manner as such provisions apply to a penalty

22 or proceeding under section 1128A(a) of such Act.

23 ‘‘(h) DEFINITIONS AND SPECIAL RULES.—For pur24 poses of this section:
22

•HR 3046 IH

1 ‘‘(1) COMPENSATION ARRANGEMENT; REMU2 NERATION.—(A) The term ‘compensation arrange3 ment’ means any arrangement involving any remu4 neration between a physician (or an immediate fam5 ily member of such physician) and an entity other

6 than an arrangement involving only remuneration

7 described in subparagraph (C).

8 ‘‘(B) The term ‘remuneration’ includes any re9 muneration, directly or indirectly, overtly or covertly,

10 in cash or in kind.

11 ‘‘(C) Remuneration described in this subpara12 graph is any remuneration consisting of any of the

13 following:

14 ‘‘(i) The forgiveness of amounts owed for

15 inaccurate tests or procedures, mistakenly per16 formed tests or procedures, or the correction of

17 minor billing errors.

18 ‘‘(ii) The provision of items, devices, or

19 supplies that are used solely to—

20 ‘‘(I) collect, transport, process, or

21 store specimens for the entity providing

22 the item, device, or supply, or

23 ‘‘(II) order or communicate the re24 sults of tests or procedures for such entity.
23

•HR 3046 IH

1 ‘‘(iii) A payment made by an insurer or a

2 self-insured plan to a physician to satisfy a

3 claim, submitted on a fee for service basis, for

4 the furnishing of health services by that physi5 cian to an individual who is covered by a policy

6 with the insurer or by the self-insured plan,

7 if—

8 ‘‘(I) the health services are not fur9 nished, and the payment is not made, pur10 suant to a contract or other arrangement

11 between the insurer or the plan and the

12 physician,

13 ‘‘(II) the payment is made to the phy14 sician on behalf of the covered individual

15 and would otherwise be made directly to

16 such individual,

17 ‘‘(III) the amount of the payment is

18 set in advance, does not exceed fair market

19 value, and is not determined in a manner

20 that takes into account directly or indi21 rectly the volume or value of any referrals,

22 and

23 ‘‘(IV) the payment meets such other

24 requirements as the Secretary may impose
24

•HR 3046 IH

1 by regulation as needed to protect against

2 program or patient abuse.

3 ‘‘(2) EMPLOYEE.—An individual is considered

4 to be ‘employed by’ or an ‘employee’ of an entity if

5 the individual would be considered to be an employee

6 of the entity under the usual common law rules ap7 plicable in determining the employer-employee rela8 tionship (as applied for purposes of section

9 3121(d)(2) of the Internal Revenue Code of 1986).

10 ‘‘(3) FAIR MARKET VALUE.—The term ‘fair

11 market value’ means the value in arms length trans12 actions, consistent with the general market value,

13 and, with respect to rentals or leases, the value of

14 rental property for general commercial purposes (not

15 taking into account its intended use) and, in the

16 case of a lease of space, not adjusted to reflect the

17 additional value the prospective lessee or lessor

18 would attribute to the proximity or convenience to

19 the lessor where the lessor is a potential source of

20 patient referrals to the lessee.

21 ‘‘(4) GROUP PRACTICE.—

22 ‘‘(A) DEFINITION OF GROUP PRACTICE.—

23 The term ‘group practice’ means a group of 2

24 or more physicians legally organized as a part25 nership, professional corporation, foundation,
25

•HR 3046 IH

1 not-for-profit corporation, faculty practice plan,

2 or similar association—

3 ‘‘(i) in which each physician who is a

4 member of the group provides substantially

5 the full range of services which the physi6 cian routinely provides, including medical

7 care, consultation, diagnosis, or treatment,

8 through the joint use of shared office

9 space, facilities, equipment and personnel,

10 ‘‘(ii) for which substantially all of the

11 services of the physicians who are members

12 of the group are provided through the

13 group and are billed under a billing num14 ber assigned to the group and amounts so

15 received are treated as receipts of the

16 group,

17 ‘‘(iii) in which the overhead expenses

18 of and the income from the practice are

19 distributed in accordance with methods

20 previously determined,

21 ‘‘(iv) except as provided in subpara22 graph (B)(i), in which no physician who is

23 a member of the group directly or indi24 rectly receives compensation based on the
26

•HR 3046 IH

1 volume or value of referrals by the physi2 cian,

3 ‘‘(v) in which members of the group

4 personally conduct no less than 75 percent

5 of the physician-patient encounters of the

6 group practice, and

7 ‘‘(vi) which meets such other stand8 ards as the Secretary may impose by regu9 lation.

10 ‘‘(B) SPECIAL RULES.—

11 ‘‘(i) PROFITS AND PRODUCTIVITY BO12 NUSES.—A physician in a group practice

13 may be paid a share of overall profits of

14 the group, or a productivity bonus based

15 on services personally performed or serv16 ices incident to such personally performed

17 services, so long as the share or bonus is

18 not determined in any manner which is di19 rectly related to the volume or value of re20 ferrals by such physician.

21 ‘‘(ii) FACULTY PRACTICE PLANS.—In

22 the case of a faculty practice plan associ23 ated with a hospital, institution of higher

24 education, or medical school with an ap25 proved medical residency training program
27

•HR 3046 IH

1 in which physician members may provide a

2 variety of different specialty services and

3 provide professional services both within

4 and outside the group, as well as perform

5 other tasks such as research, subparagraph

6 (A) shall be applied only with respect to

7 the services provided within the faculty

8 practice plan.

9 ‘‘(5) REFERRAL; REFERRING PHYSICIAN.—

10 ‘‘(A) PHYSICIANS’ SERVICES.—Except as

11 provided in subparagraph (C), in the case of an

12 item or service for which payment may be made

13 under part B, the request by a physician for the

14 item or service, including the request by a phy15 sician for a consultation with another physician

16 (and any test or procedure ordered by, or to be

17 performed by (or under the supervision of) that

18 other physician), constitutes a ‘referral’ by a

19 ‘referring physician’.

20 ‘‘(B) OTHER ITEMS.—Except as provided

21 in subparagraph (C), the request or establish22 ment of a plan of care by a physician which in23 cludes the provision of the designated health

24 service constitutes a ‘referral’ by a ‘referring

25 physician’.
28

•HR 3046 IH

1 ‘‘(C) CLARIFICATION RESPECTING CER2 TAIN SERVICES INTEGRAL TO A CONSULTATION

3 BY CERTAIN SPECIALISTS.—A request by a pa4 thologist for clinical diagnostic laboratory tests

5 and pathological examination services, a request

6 by a radiologist for diagnostic radiology serv7 ices, and a request by a radiation oncologist for

8 radiation therapy, if such services are furnished

9 by (or under the supervision of) such patholo10 gist, radiologist, or radiation oncologist pursu11 ant to a consultation requested by another phy12 sician does not constitute a ‘referral’ by a ‘re13 ferring physician’.

14 ‘‘(6) DESIGNATED HEALTH SERVICES.—The

15 term ‘designated health services’ means any of the

16 following items or services:

17 ‘‘(A) Clinical laboratory services.

18 ‘‘(B) Physical therapy services.

19 ‘‘(C) Occupational therapy services.

20 ‘‘(D) Radiology or other diagnostic serv21 ices.

22 ‘‘(E) Radiation therapy services.

23 ‘‘(F) Durable medical equipment.

24 ‘‘(G) Parenteral and enteral nutrients,

25 equipment, and supplies.
29

•HR 3046 IH

1 ‘‘(H) Prosthetics, orthotics, and prosthetic

2 devices.

3 ‘‘(I) Home health services.

4 ‘‘(J) Outpatient prescription drugs.

5 ‘‘(K) Inpatient and outpatient hospital

6 services.’’.

7 (b) EFFECTIVE DATE.—The amendment made by

8 subsection (a) shall apply to referrals made on or after

9 January 1, 1995.

Æ

HR 3046 IH——2

HR 3046 IH——3