States may strengthen provider referral regulation
Attorney cites recent SC case
There are signs that states may become more aggressive in their regulation of provider referrals, suggests Elizabeth E. Hogue, Esq., a Burtonsville, MD-based attorney specializing in health care issues.
Federal regulators have long been active in the oversight and monitoring of referral arrangements, she says, with the federal anti-kickback statute and the so-called Stark laws as the bases for these activities.
While many states have also enacted statutes and implemented regulations governing referrals, Hogue adds, a recent decision by the Supreme Court in South Carolina indicates they may be taking that focus to a new level of emphasis.
In Sloan v. South Carolina Board of Physical Therapy Examiners, No. 26209 (S.C. Sept. 25, 2006), the Supreme Court concluded that a state statute prohibits physical therapists from being employed by physicians who refer patients to them for therapy services, she notes, and also specifically recognized the right of the state's Board of Physical Therapy Examiners to enforce the statute against therapists who violate it.
South Carolina Code 40-45-110(A)(1), enacted in 1998, states that the Board of Physical Therapy Examiners may restrict, renew, suspend or revoke licenses of physical therapists when the board decides that therapists "request, receive, participate, or engage directly or indirectly in the dividing, transferring, assigning, rebating, or refunding of fees received for professional services or profits by means of a credit or other valuable consideration, including wages, with a person who referred a patient."
Before 2004, the board did not take any action to enforce the statute, Hogue says, but in that year the attorney general of South Carolina issued an opinion addressing the statute. "Specifically, the attorney general said that physical therapists cannot work for physician-employers who make referrals to them."
After the attorney general's opinion was issued, she adds, the board voted to endorse it, and then announced at an open meeting its intention to begin enforcing the statute. The board also announced that no enforcement action would be taken for 90 days, Hogue continues, so that physicians and therapists would have a chance to modify referral relationships that violated the statute.
Individual practitioners and state trade associations joined forces to sue the board to prevent it from enforcing the statute, she says, and the trial court decided in favor of the board. That decision was appealed to the South Carolina Supreme Court, Hogue adds, and the Supreme Court upheld the board's position despite a number of arguments raised against it.
The court, she says, generally expressed concern about over-utilization, stating in part, "It is no great stretch to conclude that [40-45-110(A)(1)] was passed for the same reasons which prompted enactment of the state Provider Self Referral Act."
Those reasons, the court goes on to state, were to protect consumers, as well as Medicare and Medicaid, "from actual and potential conflicts of interest, which are likely to lead to overuse of medical services by physicians who, for their own financial gain, refer patients to entities in which the physicians hold a financial interest."
As a result of the court's decision, Hogue advises providers to take these actions:
- Review statutory and regulatory requirements, if any, in the state(s) in which they do business to make sure they are in compliance with these requirements.
- Closely monitor new developments in the state(s) in which they do business so that they are up to date on recent developments and can account for them as they structure referral arrangements.
[Editor's note: Elizabeth Hogue can be reached at [email protected].]
There are signs that states may become more aggressive in their regulation of provider referrals, suggests Elizabeth E. Hogue, Esq., a Burtonsville, MD-based attorney specializing in health care issues.You have reached your article limit for the month. Subscribe now to access this article plus other member-only content.
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