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California Business and Professions Code Section 650.01

Legal Research Home > California Laws > Business and Professions Code > California Business and Professions Code Section 650.01

650.01.  (a) Notwithstanding Section 650, or any other provision of
law, it is unlawful for a licensee to refer a person for laboratory,
diagnostic nuclear medicine, radiation oncology, physical therapy,
physical rehabilitation, psychometric testing, home infusion therapy,
or diagnostic imaging goods or services if the licensee or his or
her immediate family has a financial interest with the person or in
the entity that receives the referral.
   (b) For purposes of this section and Section 650.02, the following
shall apply:
   (1) "Diagnostic imaging" includes, but is not limited to, all
X-ray, computed axial tomography, magnetic resonance imaging nuclear
medicine, positron emission tomography, mammography, and ultrasound
goods and services.
   (2) A "financial interest" includes, but is not limited to, any
type of ownership interest, debt, loan, lease, compensation,
remuneration, discount, rebate, refund, dividend, distribution,
subsidy, or other form of direct or indirect payment, whether in
money or otherwise, between a licensee and a person or entity to whom
the licensee refers a person for a good or service specified in
subdivision (a). A financial interest also exists if there is an
indirect financial relationship between a licensee and the referral
recipient including, but not limited to, an arrangement whereby a
licensee has an ownership interest in an entity that leases property
to the referral recipient. Any financial interest transferred by a
licensee to any person or entity or otherwise established in any
person or entity for the purpose of avoiding the prohibition of this
section shall be deemed a financial interest of the licensee. For
purposes of this paragraph, "direct or indirect payment" shall not
include a royalty or consulting fee received by a physician and
surgeon who has completed a recognized residency training program in
orthopedics from a manufacturer or distributor as a result of his or
her research and development of medical devices and techniques for
that manufacturer or distributor. For purposes of this paragraph,
"consulting fees" means those fees paid by the manufacturer or
distributor to a physician and surgeon who has completed a recognized
residency training program in orthopedics only for his or her
ongoing services in making refinements to his or her medical devices
or techniques marketed or distributed by the manufacturer or
distributor, if the manufacturer or distributor does not own or
control the facility to which the physician is referring the patient.
A "financial interest" shall not include the receipt of capitation
payments or other fixed amounts that are prepaid in exchange for a
promise of a licensee to provide specified health care services to
specified beneficiaries. A "financial interest" shall not include the
receipt of remuneration by a medical director of a hospice, as
defined in Section 1746 of the Health and Safety Code, for specified
services if the arrangement is set out in writing, and specifies all
services to be provided by the medical director, the term of the
arrangement is for at least one year, and the compensation to be paid
over the term of the arrangement is set in advance, does not exceed
fair market value, and is not determined in a manner that takes into
account the volume or value of any referrals or other business
generated between parties.
   (3) For the purposes of this section, "immediate family" includes
the spouse and children of the licensee, the parents of the licensee,
and the spouses of the children of the licensee.
   (4) "Licensee" means a physician as defined in Section 3209.3 of
the Labor Code.
   (5) "Licensee's office" means either of the following:
   (A) An office of a licensee in solo practice.
   (B) An office in which services or goods are personally provided
by the licensee or by employees in that office, or personally by
independent contractors in that office, in accordance with other
provisions of law. Employees and independent contractors shall be
licensed or certified when licensure or certification is required by
law.
   (6) "Office of a group practice" means an office or offices in
which two or more licensees are legally organized as a partnership,
professional corporation, or not-for-profit corporation, licensed
pursuant to subdivision (a) of Section 1204 of the Health and Safety
Code, for which all of the following apply:
   (A) Each licensee who is a member of the group provides
substantially the full range of services that the licensee routinely
provides, including medical care, consultation, diagnosis, or
treatment through the joint use of shared office space, facilities,
equipment, and personnel.
   (B) Substantially all of the services of the licensees who are
members of the group are provided through the group and are billed in
the name of the group and amounts so received are treated as
receipts of the group, except in the case of a multispecialty clinic,
as defined in subdivision (l) of Section 1206 of the Health and
Safety Code, physician services are billed in the name of the
multispecialty clinic and amounts so received are treated as receipts
of the multispecialty clinic.
   (C) The overhead expenses of, and the income from, the practice
are distributed in accordance with methods previously determined by
members of the group.
   (c) It is unlawful for a licensee to enter into an arrangement or
scheme, such as a cross-referral arrangement, that the licensee
knows, or should know, has a principal purpose of ensuring referrals
by the licensee to a particular entity that, if the licensee directly
made referrals to that entity, would be in violation of this
section.
   (d) No claim for payment shall be presented by an entity to any
individual, third party payer, or other entity for a good or service
furnished pursuant to a referral prohibited under this section.
   (e) No insurer, self-insurer, or other payer shall pay a charge or
lien for any good or service resulting from a referral in violation
of this section.
   (f) A licensee who refers a person to, or seeks consultation from,
an organization in which the licensee has a financial interest,
other than as prohibited by subdivision (a), shall disclose the
financial interest to the patient, or the parent or legal guardian of
the patient, in writing, at the time of the referral or request for
consultation.
   (1) If a referral, billing, or other solicitation is between one
or more licensees who contract with a multispecialty clinic pursuant
to subdivision (l) of Section 1206 of the Health and Safety Code or
who conduct their practice as members of the same professional
corporation or partnership, and the services are rendered on the same
physical premises, or under the same professional corporation or
partnership name, the requirements of this subdivision may be met by
posting a conspicuous disclosure statement at the registration area
or by providing a patient with a written disclosure statement.
   (2) If a licensee is under contract with the Department of
Corrections or the California Youth Authority, and the patient is an
inmate or parolee of either respective department, the requirements
of this subdivision shall be satisfied by disclosing financial
interests to either the Department of Corrections or the California
Youth Authority.
   (g) A violation of subdivision (a) shall be a misdemeanor. The
Medical Board of California shall review the facts and circumstances
of any conviction pursuant to subdivision (a) and take appropriate
disciplinary action if the licensee has committed unprofessional
conduct. Violations of this section may also be subject to civil
penalties of up to five thousand dollars ($5,000) for each offense,
which may be enforced by the Insurance Commissioner, Attorney
General, or a district attorney. A violation of subdivision (c), (d),
or (e) is a public offense and is punishable upon conviction by a
fine not exceeding fifteen thousand dollars ($15,000) for each
violation and appropriate disciplinary action, including revocation
of professional licensure, by the Medical Board of California or
other appropriate governmental agency.
   (h) This section shall not apply to referrals for services that
are described in and covered by Sections 139.3 and 139.31 of the
Labor Code.
   (i) This section shall become operative on January 1, 1995.

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Last modified: March 17, 2014