Authorizes health care facilities and professions to pay for the fair market value of practice management, billing or health information technology services

Summary of provisions

Section 1 amends section 2811 of the Public Health Law 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 facilities or professionals (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 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 technology services based on a percentage of fees billed or collected, a flat fee, or any other arrangement, provided that the licensed professionals (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 assistants (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, typically 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 (and its consistent interpretation by regulators in New York) does not merely prohibit referral-related fee-splitting: the New York law also precludes 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 prohibits 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.

As a result, 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, professional billing and health information technology vendors whose customary pricing practices are not consistent with the unique New York limitations. 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.

Legislative history

New Bill.

Fiscal implications

None.

Effective date

Immediate.