Amd §2811, Pub Health L; amd §§6509-a & 6530, Ed L
Authorizes healthcare facilities and professionals to pay for the fair market value of practice management, billing or health information technology services.
NEW YORK STATE ASSEMBLY MEMORANDUM IN SUPPORT OF LEGISLATION submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A193
SPONSOR: Buchwald TITLE OF BILL: An act to amend the public health and education law,
in relation to the provision of practice management, billing and health
information technology services for healthcare facilities and profes-
sionals
PURPOSE OR GENERAL IDEA OF BILL:
To allow hospitals and licensed professionals to pay a fee to vendors of
practice management, billing or health information technology services
based on a percentage of fees billed or collected, a flat fee, or any
other arrangement, provided that the hospitals or licensed professionals
(a) are responsible for the contents of claims submitted, (b) receive
the third-party payments in their own name, and (3) do not receive
referrals from the vendor.
SUMMARY OF SPECIFIC PROVISIONS:
Section 1 amends section 2811 of the Public Health Law to allow hospi-
tals and licensed professionals to pay a fee to vendors of practice
management, billing or health information technology services based on a
percentage of fees billed or collected, a flat fee, or any other
arrangement, provided that the facilities or professionals (1) are
responsible for the contents of claims submitted, (2) receive third-par-
ty payments directly in their own name, and (3) do not receive referrals
from the payee.
Section 2 amends section 6509-a of the Education Law to provide that it
is not professional misconduct for licensed professionals to pay a fee
to vendors of practice management, billing or health information tech-
nology services based on a percentage of fees billed or collected, a
flat fee, or any other arrangement, provided that the licensed profes-
sionals (1) are responsible for the contents of claims submitted, (2)
receive third-party payments directly in their own name, and (3) do not
receive referrals from the payee.
Section 3 amends section 6530 of the Education Law to provide that it is
not professional misconduct for a physician, physician assistant or
specialist assistant to pay a fee to vendors of practice management,
billing or health information technology services based on a percentage
of fees billed or collected, a flat fee, or any other arrangement,
provided that the physicians, physician assistants or specialist assist-
ants (1) are responsible for the contents of claims submitted, (2)
receive third-party payments directly in their own name, and (3) do not
receive referrals from the payee.
Section 4 provides that this act would take effect immediately.
JUSTIFICATION:
The bill would permit healthcare facilities and professionals in New
York to contract for various practice management, billing and health
information services on a percentage basis, as is already permitted in
every other state, as long as certain conditions are satisfied.
Laws in many states, including New York, prohibit "fee-splitting." They
are aimed primarily at situations where a healthcare professional, typi-
cally in order to generate patient referrals from other licensed or
unlicensed persons, splits part of the professional fee earned from
treating the referred patient with the source of the referral. This
practice is potentially problematic because it can result in increasing
the cost of healthcare, may lead to referring patients based on the
economic return on the referral, rather than clinical appropriateness,
and can generate excessive utilization through the substitution of a
financial motive for sound professional judgment. New York is one of
approximately two-thirds of the states that statutorily prohibit fee-
splitting. Uniquely, however, the New York statute does not merely
prohibit referral-related fee-splitting: the New York law also appears
(at least on its face) to preclude any number of legitimate business
arrangements commonly employed in the health care sector today that
actually promote efficiency and quality by ensuring that the incentives
of providers and vendors are properly aligned. New York's law seems to
prohibit accepted and customary business relationships that permit
health care providers to efficiently outsource practice management and
billing functions to those with appropriate expertise, and to compensate
such vendors based on a percentage of reimbursement collection, which
most accurately reflects the fair market value of the services rendered.
New York State courts have begun realizing the inappropriateness of
applying the fee-splitting statue to common billing collection arrange-
ments. Said one court, "the statutory purposes behind the Education Law
§ 6509-a, which was enacted in response to abuses at so-called Medicaid
mills, would not be served by applying the statue to the case at bar"
(I. Grays, Active Processing, Inc. v. Sup Ct, Queens County, 2013 David
N. Gunther Associates).
Nevertheless, New York healthcare professionals, either knowingly or
unknowingly, run the risk of being charged with professional misconduct
by entering into agreements with national practice management, profes-
sional billing and health information technology vendors whose customary
pricing practices are not consistent with the unique New York limita-
tions. Alternatively, to do business in New York, some companies and
professionals have opted to devise alternative arrangements for paying
for billing services that are not based on the volume of billings, may
not appropriately calculate the fair market value of the services
provided and may actually have the effect of increasing health care
costs in the long term.
This bill would allow such arrangements to be structured on a percentage
basis, provided that the parties meet other requirements designed to
eliminate the risks that the fee-splitting prohibition was intended to
address. Specifically, vendors in percentage-based relationships may not
be responsible for the content of claims, so that there is neither an
incentive nor the opportunity to increase the amount of such claims
beyond what is appropriate. In addition, providers must receive third
party payments directly in their own name and would pay the vendor the
appropriate fee, rather than having the vendors actually receive the
payments directly themselves. Finally, no referral may flow from the
vendor to the provider, thereby eliminating the potential of payment for
referral.
With these requirements, New York's fee-splitting law would remain among
the most stringent. Twenty states have no fee-splitting prohibitions at
all. Twenty-four states have adopted fee-splitting prohibitions that are
narrowly designed to combat the abuses related to financially-driven
referral practices. These statutes specifically target fees that are
shared in return for referrals; about half of the statutes (11) only
apply to fees shared between a referring physician and the physician to
whom the referral was made, while the balance (13) apply to any person
who might bring a patient to a particular physician in return for
compensation from the physicians. None of the prohibitions in these
states prohibit a physician from paying a percentage-based fee to a
practice management, billing or health information technology company.
Of the five remaining states, three have broad prohibitions against
fee-splitting that nonetheless have been interpreted as not prohibiting
percentage-based arrangements. The last two, California and Illinois,
explicitly permit percentage-based arrangements, similar to what has
been proposed in this bill.
FISCAL IMPLICATIONS:
None.
IMPACT ON REGULATION OF BUSINESSES AND INDIVIDUALS:
None.
EFFECT ON FINES, TERMS OF IMPRISONMENT OR OTHER PENAL SANCTIONS:
If anything, reduces regulations while maintaining consumer protections.
LEGISLATIVE HISTORY:
2016: A.10385 (Buchwald) - Referred to Health
2015: S.4736 (Harmon) - Referred to Health
EFFECTIVE DATE:
This act shall take effect immediately.
