Citation Numbers: 83 Op. Att'y Gen. 142
Judges: J. JOSEPH CURRAN, JR.
Filed Date: 5/26/1998
Status: Precedential
Modified Date: 7/5/2016
Dear Senator Hollinger:
You have asked for our opinion concerning the application of four separate federal and State laws that attempt to avert conflicts of interest in medical practice. These laws are the Maryland fee-splitting statute, the federal anti-kickback statute, the federal self-referral statute, and the Maryland self-referral statute. Specifically, you have asked how these laws might apply to a situation involving the purchase of a group practice by an entity partly owned by an affiliate of a hospital, and to subsequent arrangements concerning delivery of services by that practice.
We must begin with an explicit acknowledgment of the limits of this opinion. In general, we will decline to state firm conclusions. Our reticence derives from several factors: the highly uncertain state of the law; the necessity to write an opinion based on a set of complicated facts as given, when additional facts might change the analysis; our inability to make judgments about financial matters, like the "fair market value" of certain services, that are inextricably linked to legal conclusions; and, finally, the reality that abstract conclusions in an opinion cannot substitute for the judgment of those who enforce these laws in particular cases, who are able to develop a fuller factual record, and who therefore may have a different perspective on the situation than we do.
Your request presents complex issues that are on the cutting edge of the business side of health care. These issues require the interpretation of statutes about which there is little guiding case law. Furthermore, regulations to implement these provisions are not fully in place, and are constantly being reviewed and revised. See Acosta, TheHealth Insurance Portability and Accountability Act of 1996 and theEvolution of the Government's Anti-Fraud and Abuse Agenda, 30 J. Health Hosp. Law 37 (1997); Dechene, "Stark II" and StateSelf-Referral Restrictions, 29 J. Health Hosp. Law 65 (1996). As a result, the law dealing with joint ventures, kickbacks, and payments for referral has been said to be an "area in which darkness and chaos reign." Hennigan, Structuring Ventures in aPost-Hanlester and Safe Harbors World, 14 Whittier L. Rev. 181, 182 (1993).
In addition, an investigation of whether these laws have been violated is a complex and painstaking matter. Each transaction must be analyzed in minute detail. Your request, by necessity, contains but a brief overview of the facts. Although we have attempted to supplement the facts through inquiries to the person whose situation prompted your request, opinion writing is not an investigatory process. Neither you nor we have a full picture of potentially relevant facts. Even if we did, when the facts must be evaluated against broad criteria like commercial reasonableness or fair market value, we lack the expertise to make these sorts of judgments. Yet, it is exactly these judgments that must sometimes be made before a firm legal conclusion can be reached.
For all of these reasons, our answers to the questions that you raise cannot be definitive.1 Indeed, because our answers are so contingent on the facts, we will depart from our customary practice and not attempt a summary here. Instead, our tentative conclusions will be set out following the discussion of each law and its potential impact on the arrangements in question.
The payments are collected by the professional medical corporation, which deducts a 35% fee for overhead. The amount of this deduction is subject to review and adjustment on a quarterly basis but has apparently remained relatively stable over time. This stability has been maintained even though, according to representatives of the managed care company that purchased the professional medical corporation, actual costs for overhead have approached 55%. An additional deduction of 10% is withheld for a "Reimbursement Adjustment Reserve Fund." This fund is subject to reduction based on a number of factors, and the amount remaining is to be paid to the physicians within 90 days of the end of the calendar year. In practice, however, no payouts have been made from this fund. The four primary care physicians who owned the stock of the professional medical corporation entered into the same contract, but also receive net capitation payments, less the overhead fee and reserve fund, as part of their compensation.
In the beginning of 1996, the professional medical corporation was purchased by a local hospital through its corporate affiliate. This purchase apparently included the practices of the primary care physicians and the specialty care physicians, as well as the stock of an affiliated medical services organization, which was owned by two of the primary care physicians. The purchase price was based on an appraisal by an outside consultant of a value "proportional to the revenue historically generated by each of the primary care physicians and specialty care physicians" at the professional medical corporation over a set period of time. The value of the practice of three of the physicians at a retirement care facility was also included. The purchase price was paid to the four primary care physicians who had held the stock of the professional medical corporation. The hospital liquidated the assets and stock of the corporation and distributed it to the managed care company, which is 49% owned by the hospital and 51% owned by individual physicians. The primary care physicians remained in place and have continued the practice under the terms of the agreement as modified by the terms of the sale and subsequent arrangements with the managed care company. With the addition of these physicians, the managed care company had 23 primary care physicians at eleven locations and intended to expand to include 100 primary care physicians located throughout central Maryland.
After the purchase, the managed care company announced that it would continue the existing employment contracts, with changes in terminology to reflect the new ownership. Subsequently, it has announced that it views the agreement as covering not only the patients who are treated at the old professional medical corporation location (and resulting hospital services for those patients) but also any patient who was referred to a specialty care physician from any physician employed by the managed care company — that is, not only patients referred by the four primary care physicians in the original professional medical corporation but also those referred by physicians who were already, or have since become, a part of the managed care company. In some cases, this group includes patients whom the specialty care physicians have been treating at a retirement care facility prior to their association with the professional medical corporation.
This expansion of the group of covered patients leads to a disparity in the expenses incurred by the managed care company on behalf of the patients covered by the agreement. For example, in some cases, the patients come to the location of the old professional medical corporation to see a primary care physician and are referred to a specialty care physician to be seen at that location. In that instance, the office space, equipment, scheduling, and maintenance of the patients' records are all provided by the managed care company at that site, although there might be an extra charge to the specialty care physician for secretarial services. In another possible situation, a primary care physician employed by the managed care company could refer a patient who was initially seen at the location of the old professional medical corporation to the specialty care physician in the specialty care physician's independent practice. In that case, some of the services mentioned above would come from the independent practice, not from the managed care company, although record maintenance, billing, and even scheduling might be done by the managed care company. On the other hand, a patient from the retirement care facility that is referred to the specialty care physician and treated at the hospital might not benefit from services provided by the managed care company at all.
In March 1996, the managed care company entered into a participation agreement with a physician-hospital organization ("PHO") that is 50% owned by the hospital and 50% owned by hospital-credentialed participating physicians. The goal of the PHO is to provide services under third-party payor agreements, using provider panels made up of PHO members. Under the agreement with the managed care company, the PHO agrees to negotiate third-party contracts on behalf of its members, for which the managed care company pays a fee. The agreement further provides that the managed care company and the physicians in the PHO will accept as patients all enrollees under third-party payor plans who request the services of the managed care company or any of the physicians in the PHO. Members of the PHO include not only physicians from the managed care company but also other physicians, who are not subject to the managed care company contract. Only physicians that meet the qualifications for membership in the PHO may become members; not all physicians within the managed care company qualify. The specialty care physicians who sign the participation agreement pay an additional 7% in administrative fees to the PHO on top of the 45% of fees currently paid to the managed care company for patients in the PHO. The primary care physicians in the managed care company do not sign the participation agreement itself, but are members of an independent practice association, which in turn is a member of the PHO. PHO patients are to be seen only by physicians who are members of the PHO or of the independent practice association, which is a member. While outside referrals are possible, they must be made, or approved by, the medical director of the PHO. The agreement does not currently prevent member physicians from taking patients from outside the PHO.
The medical director of the PHO is a specialty care physician who has an agreement with the managed care company. This agreement is believed to be the same as the one signed by the other specialty care physicians, except that this agreement is believed to include extra compensation for services rendered as the medical director; the extent and manner of the compensation are not known. All referrals of PHO patients at the hospital must go through the medical director, whether they are to member physicians or to physicians outside the PHO. Thus, the medical director can direct patients to the specialty care physicians that have agreements with the managed care company, with the result that the managed care company will get 45% of the fees earned by the specialty care physicians.
While your letter reflects that, in one instance, the medical director at the retirement care facility was told by the managed care company that the purchase price paid by the managed care company had included "the anticipated revenue stream from their practice," the facts supplied elsewhere indicate that the price of the professional medical corporation was based not on the value of future referrals but rather on the amount of income taken in by the professional medical corporation for treatment of all of the patients seen by physicians under contract with the professional medical corporation over a set period in the past. This method of valuing the business is not unusual, but that fact does not imply that the method is without problems under the various laws regulating self-referral and kickbacks.
We shall refer to each of these circumstances in our analysis of the four statutes about which you asked.
The justification for fee-splitting prohibitions is that they prevent a conflict of interest: Fee-splitting creates a danger that non-professionals might recommend the services of a particular professional out of self-interest and not because of the competence of the professional. Also, a physician who knows that he or she must split his fees with someone else might hesitate to provide needed services, or conversely, might provide unneeded services just because of the need to split fees.Practice Management Ltd. v. Schwartz,
The provision has not been the basis of much activity in Maryland. There are no reported cases, and the legislative history of the 1986 bill reflects that there had only been two complaints in the previous three years, neither of which had been verified. Research Analysis on House Bill 1637 of 1986.
Under the facts as we are given them, the managed care company provides services for some of the patients seen by the specialty care physicians, but these services vary, depending upon the source of the patient and where the treatment is provided. Although we do not suggest that a percentage fee must accurately reflect the services provided on a patient-by-patient basis, in our view, the Maryland fee-splitting statute requires that the percentage charged must reasonably reflect the value of the services provided to patients in the aggregate. Moreover, while that aggregate might include some patients on whose behalf no services are provided, inclusion of a large, identifiable group of such patients would, in our view, raise fee-splitting problems.
In this case, the 45% charge seems high, but the facts indicate that it may be below the actual overhead when all patients are considered in the aggregate. Thus, we cannot say that a violation is necessarily occurring, although it might be, depending upon the actual value of the services. In addition, if there is a significant group of patients as to whom the fee is charged but no services are rendered, then a violation might be found.
This analysis depends, in part, on the correctness of the conclusion that the arrangement between the managed care company and the specialty care physicians is one in which the specialty care physicians pay a fee to the managed care company that is deducted by the managed care company in its role as a conduit for the collection of fees paid by patients and third parties. If the fee paid to the specialty care physicians is in fact one paid by the managed care company out of a capitated fee that it receives for a member of a plan that has a contract with the PHO, the result would arguably be different, because the physicians would not be splitting a fee received from patients but would be retaining the full amount paid to them for services.
D. Application to Dual Employment Question
Nothing in the facts available to us indicates that this situation raises fee-splitting issues other than those discussed above.
The federal anti-kickback statute was originally enacted in 1972. Pub.L. No.
The application of this law to joint ventures and other types of self-referral arrangements is not fully settled. The Office of the Inspector General in the Department of Health and Human Services, taking a broad view of the statute's reach, would apply it to many self-referral arrangements. Because the law is often enforced through consent agreements, this view has significant weight for parties structuring such agreements. Acosta, TheHealth Insurance Portability and Accountability Act of 1996 andthe Evolution of the Government's Anti-Fraud and Abuse Agenda, 30 J. Health Hosp. L. 37 (1997). However, the first self-referral case to be tried under the anti-kickback statute, HanlesterNetwork v. Shalala,
The first of these holdings is consistent with the stated position of the Inspector General. CCH Medicare and Medicaid Guide ¶ 37,838, at 19,928 ("The current view of federal authorities is that physician ownership does not, in and of itself, violate the anti-kickback laws."). The Inspector General, however, has disagreed with Hanlester's interpretation of the "knowing and wilful" requirement. See BNA Medicare Reports No. 15, at 463. So have other courts. United States v. Jain,
A court that analyzes a transaction to determine whether the anti-kickback statute has been violated will assess whether the payments at issue were for legitimate services. The mere fact that legitimate services were provided, however, will not protect against a finding of a violation, if part of the purpose was to induce referrals. United States v. Kats,
Courts have interpreted the statute broadly in other ways. The term "remuneration" has been given a broad interpretation and includes the opportunity to make money. United States v. BayState Ambulance Hosp. Rental Serv.,
A broad interpretation of this statute, one commentator has suggested, endangers "business arrangements which are encouraged by, and comport with, the present incentives created by Medicare's prospective payment system," because the acknowledged intent of these ventures is to increase the hospitals' revenue streams. Comment, The Medicare-Medicaid Anti-Fraud and Abuse Amendments:Their Impact on the Present Health Care System, 36 Emory L. J. 691, 693 (1987). It has also been suggested that the statute might be given a narrower interpretation if the issue were to arise in a case that does not involve a blatant kickback scheme. Id. Seealso Comment, Curing the Health Care Industry: Government Responseto Medicare Fraud and Abuse, 5 J. Contemp. Health Care L. Policy 175, 183 (Spring 1989) (hereafter cited as Curing the Health CareIndustry). The restrictive reading of the court in Hanlester has been praised as an appropriate way to limit the perceived overbreadth of the statute, especially in the area of self-referral. Kucera, Hanlester Network v. Shalala: A Model Approachto the Medicare and Medicaid Kickback Problem, 91 N.W.U. L.Rev. 413, 446-52 (1996).
An early letter from the Office of the Inspector General on this issue suggested that payment for intangibles (including goodwill, covenants not to compete, exclusive dealing arrangements, the value of an ongoing business unit, patient lists, and patient records) might be payment for a stream of referrals and, thus, violate the anti-kickback statute. Letter from D. McCarty Thornton, Associate General Counsel, to T. J. Sullivan, Internal Revenue Service (December 22, 1992). Mr. Thornton also expressed the view that the fair market value of a practice may not include elements of "traditional or common methods of economic valuation," because certain "[i]tems ordinarily considered in determining the fair market value may be expressly barred by the anti-kickback statute." The third major point in the letter was that the Inspector General's concern extends not only to arrangements in which the purchasing entity enters into independent contractor relationships with the physicians after a practice acquisition but also to arrangements in which the purchasing entity and the physicians enter into employment relationships, notwithstanding the "bona fide employee" exception in the statute.
Since the issuance of the letter, the Office of the Inspector General has retreated somewhat, saying that it does not believe that a hospital can never purchase a physician practice or even that it cannot pay for good will or other items beyond the hard assets of such a practice. See 1 BNA Health Care Policy Report, No. 5, at 216 (April 5, 1993). Nevertheless, the office has continued to express concern that the hospital may really be buying the flow of business from the physicians to the hospitals.Id. The Inspector General has suggested that a solution might be to judge these transactions based upon the amount that a new doctor would pay a retiring doctor for the latter's practice. Id.
Thus, if the question is about the legality of the payment, assuming that the payment was based on an anticipated future stream of referrals from the primary care physicians to the hospital, or to the physicians employed by the managed care company, the question answers itself: the federal anti-kickback statute would be violated. If, however, the facts are that the payment was based on past earnings of the professional medical corporation, the legality of the transaction depends on whether the price paid would be reasonable in a context in which there was no opportunity for referrals.4 We cannot make this determination of reasonableness.
Unlike the Maryland fee-splitting law, the federal anti-kickback law applies to any person who makes payments intended to induce referrals, not just to physicians. Thus, another way that the anti-kickback law could be violated is if the managed care company provides services to the specialty care physicians for less than their cost, with the intent of inducing the physicians to make referrals to other managed care company physicians. Polk County v. Peters,
Finally, the language of the anti-kickback statute does not foreclose the possibility that it would be violated if one party makes payments in return for referrals that are made to a third party. Thus, a violation could occur if the managed care company performed services for less than their cost in return for referrals by the specialty care physicians to the hospital. Conversely, payments made by the physicians to the managed care company to induce the hospital to make referrals to the specialty care physicians would also be covered. Of course, whether the intent was to induce such referrals would have to be answered on a case-by-case basis, and the proof in cases where referrals to or from a third party is involved would likely be correspondingly more difficult.
Presumably, the imbalance in payment, if any, only goes one way, so that the arrangement could constitute illegal remuneration under the anti-kickback law only in one direction or the other. As we have pointed out, we lack the information that would be necessary to determine the relationship between the fees and the costs of the services provided. If the issue is whether the percentage fee amounts to a kickback from the physicians to the managed care company for referral of patients, it would appear that none of the statutory exemptions or the safe harbors would be applicable. There is a safe harbor for payments that are made pursuant to a personal services contract, but the aggregate compensation must be set in advance and cannot take into account the volume or value of any referrals or business otherwise generated between the parties.
If the imbalance goes the other way, and the issue is whether it amounts to a payment by the managed care company to the physicians to induce the referral of patients to managed care physicians or to the hospital, it would likewise appear that these payments also would not qualify for any of the arguably applicable exceptions or safe harbors. The statute exempts amounts paid by an employer to an employee who has a bona fide employment relationship with an employer "for employment in the provision of covered items or services." 41 U.S.C. § 1320a-7b(b)(3)(B). The contractual relationship between the managed care company and the specialty care physicians, however, is such that, in our view, the physicians should be considered to be independent contractors rather than employees.
Five criteria are generally considered in determining whether a person is an employee or an independent contractor. They are (1) the power to select and hire the employee, (2) the payment of wages, (3) the power to discharge, (4) the power to control the employee's conduct, and (5) whether the work is a part of the regular business of the employer. Mackall v. Zayre Corp.,
The regulations also create a safe harbor for amounts paid under personal services and management contracts, including amounts paid to independent contractors.
As we pointed out earlier, the unavailability of a safe harbor does not, in itself, mean that a violation has occurred. Instead, while an imbalance between the value of the services and the amount paid for them would constitute remuneration, it still must be determined whether the remuneration was paid with the intent of inducing referrals. We cannot make that determination.
The law would apply if there were a contract with a federal health care program, many of which have started to use managed care systems. Nevertheless, it would not appear from the facts that any remuneration between the managed care company and the director is being paid in order to induce referrals, since the facts reflect that he has the same contract with the managed care company as do those specialty care physicians that are not in a position to make referrals from the PHO. The PHO (not the managed care company) does pay the director extra compensation over what it pays for his services as a specialty care physician, and that compensation is clearly paid for services that include the making, or approval, of referrals, as the making and approval of such referrals is a part of his job. But he is making referrals as an agent of the PHO, in a context in which it cannot increase costs to the health program, at least where the program is paying on a capitated basis.
It is our view that referrals within a managed care system, made by an employee of that system, would not ordinarily be found to violate the anti-kickback law, so long as the payments are not intended to induce referrals in a way that will increase utilization or costs, but instead operate consistently with federal laws that permit delivery of program services through the use of managed care organizations. See,
The statute, enacted in 1989 as part of that year's Omnibus Budget Reconciliation Act, originally covered only clinical laboratory services and applied only to Medicare. Pub.L. No.
Opponents of self-referral fear that it leads to unnecessary tests, creates a conflict between the patient's interests and the physician's own, and could adversely affect the health care market by squeezing out other facilities and wasting health care dollars. Comment, The Physician as Entrepreneur: State and FederalRestrictions on Physician Joint Ventures, 73 N.C. L.Rev. 293, 295 (1994).9 Supporters of self-referral say that it encourages competition and allows physicians, rather than non-physicians, to maintain control over the delivery of health care services. McDowell, Physician Self-Referral Arrangements: LegitimateBusiness or Unethical "Entrepreneuralism," 15 Am. J. L. Med. 61 (1989).10 Some commentators feel that Stark II goes too far and actually eliminates practices that could save the system money and result in better delivery of services. Comment, Regulation ofPhysician Self-Referral Arrangements: Is Prohibition the Answer orHas Congress Operated on the Wrong Patient?, 30 San Diego L.Rev. 161 (1993). Commentators have also remarked that possibilities for fraud in what is permitted are not that much different than in what is prohibited. McDowell, Physician Self-ReferralArrangements: Legitimate Business or Unethical"Entrepreneuralism", 15 Am. J. L. Med. 61 (1989).
A few reported cases mention the self-referral statute. See,e.g., United States v. Columbia/HCA Healthcare Corp.,
The purchase of a physician practice by a hospital can constitute a financial relationship that could lead to a violation of the self-referral statute if referrals are made to the hospital for any of the designated services covered by the statute. The statute contains an exemption, however, for an "isolated financial transactions, such as a one-time sale of property."
We cannot determine whether the exemption for isolated financial transactions would apply in this instance, because we do not know whether the purchase price for the practice was at fair market value or would be commercially reasonable even if no referrals were made; whether payment for the practice was made in a single payment or over time; and whether the parties were involved in any other transactions in the six months after the sale. Depending on how it was done, the retransfer of the practice to the managed care company might have constituted an additional transaction. Other transactions may have taken place as well. If the exemption for isolated transactions does not apply, any referrals by the primary care physicians to the hospital for designated services, which include inpatient and outpatient hospital services, would violate the self-referral law.
In this case, a compensation arrangement clearly exists. The specialty care physicians pay the managed care company a percentage of their fees, while the managed care company provides in-kind services to the specialty care physicians.11 The existence of a compensation arrangement prevents the specialty care physicians from making referrals for covered services to the other physicians in the managed care association unless there is an applicable exemption. Referrals for services other than covered services, however, are not affected. Thus, referrals for many of the services ordinarily performed by primary care physicians would still be permissible.
As far as we are able to ascertain, referrals to the hospital itself would not violate the self-referral law. There is no compensation agreement with the hospital, only with the managed care company. Just as an ownership interest in an entity that is also owned in part by a hospital does not constitute an ownership interest in the hospital, it is our view that a compensation agreement with an entity that is partially owned by a hospital does not constitute a compensation agreement with the hospital unless the entity is a part of the hospital. See
It is our view that referrals to physicians who are a part of the managed care company constitute referrals to an entity. Furthermore, it seems clear that the specialty care physicians have a financial relationship with that entity. The law would be violated by referrals to the physicians who are a part of the managed care company, however, only if the referrals were for covered services and no exemption were available.
The self-referral law has a number of exemptions that are potentially applicable. One exemption, for example,
The statute also creates an exemption for referral between physicians in the same group practice.
The statute exempts amounts paid pursuant to a bona fide employment relationship.
The statute also provides an exemption for remuneration to a physician under a personal services contract.
That exemption requires that the arrangement be set out in writing, be signed by the parties, and specify the services covered by the arrangement. These requirements are met here. It further requires that the agreement cover all the services to be provided by the physician to the entity, which also appears to be the case from the facts available to us. The next requirement is that the services contracted for do not exceed those that are reasonable and necessary for the legitimate business purposes of the arrangement. In this case, the purposes of the arrangement are to make specialty health care services available to the patients of the primary care physicians, and the services contracted for would appear to be reasonable and necessary to the achievement of that aim. The term of the arrangement is greater than one year, as required by the statute. In addition, the services to be provided do not, to the best of our knowledge, involve the counseling or promotion of a business arrangement or other activity that violates any state or federal law.
The final requirement is that the compensation to be paid is set in advance, that it does not exceed fair market value, and that it is not determined in a manner that takes into account the volume or value of any referrals or other business generated between the parties. In this case, the method of payment, in the form of the provision of services, is set in advance, but the total value is not known in advance, as it will depend on the volume of services performed by the physician, and as such, reflects the business generated between the parties. The conference committee report on Stark II observes that the requirement that the compensation be paid in advance is not intended to prohibit arrangements under which entities pay physicians on a per service basis, as long as other requirements are satisfied. H. Conf. Rep. No. 103-213, at 814, reprinted in 1993 U.S.C.C.A.N. 1496, 1503-1504. The remuneration in question here is not payment on a per-service basis, as the payments are made by the patients. Instead, the remuneration arises from services provided for the specialty care physicians by the managed care company. These payments are not for services provided by the specialty care physicians in any ordinary sense of the term, especially since the value of the services provided by the managed care company varies, depending upon the source of the referral and where the patient is seen. Thus, the financial relationship between the specialty care physicians and the managed care company would not appear to fall within this exemption.
Although the provision of services to the physicians in excess of the amount that the physicians are charged is technically remuneration, it seems more natural to analyze this arrangement under the exemption for payments by physicians to entities for items and services if the items and services are "furnished at a price that is consistent with fair market value."
The final potentially applicable exemption covers office and equipment rental.
In conclusion, many referrals from the specialty care physicians to the primary care physicians would not be for covered services and therefore would not violate the self-referral law. Referrals that are for covered services might be permissible if remuneration between the parties is exempt as a payment by a physician for items and services.
Enacted as Chapter 376 of the Laws of Maryland 1993, the Maryland statute is similar to the federal law, but covers all services, all payors, and all health care providers, thus making it somewhat broader. The exceptions also differ from those in the federal law. For example, no exemption is made for isolated financial transactions. The Maryland statute reflects the view that the prohibited arrangements, in the words of the bill's sponsor, "result in abuse, over-charging, and over-utilization." Testimony of Delegate Ronald A. Guns on House Bill 1280 of 1993.See generally 79 Opinions of the Attorney General ___ (1994) [Opinion No. 94-062 (December 12, 1994)].
No cases have been decided under the Maryland law. Nor have implementing regulations been adopted.
Our research has found only two cases interpreting comparable state self-referral restrictions. The first, a Michigan case, held that the Michigan statute bars investment by independent practitioners in a freestanding facility to which they refer patients or specimens, even if referral is not required by the agreement and, indeed, even if the agreement expressly prohibits a physician from directing or requiring use of that facility.Indenbaum v. Board of Medicine,
The Maryland self-referral statute also has an exemption for referrals by a physician when treating a member of a HMO, if the physician does not have a beneficial interest in the entity to which the referral is made. HO, § 1-302(d)(1). Since the specialty care physicians do not have a beneficial interest in the managed care company, referrals of HMO patients to primary care physicians employed by the managed care company would not violate the statute.
Our research raises two questions about the Maryland self-referral law that the General Assembly may wish to address. The first is whether the omission of an exemption for isolated transactions has the effect of forever barring referrals from a physician who, for example, sold a single piece of property to a hospital but who has no other beneficial interest or compensation arrangement. The second is whether the exemption for referrals of HMO enrollees should be expanded to cover referrals of Medicaid recipients enrolled in managed care organizations pursuant to §
Very truly yours,
J. Joseph Curran, Jr. Attorney General
Kathryn M. Rowe Assistant Attorney General
_________________________ Jack Schwartz Chief Counsel Opinions Advice
*Page 174
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