BILL ANALYSIS
SB 1369
Page 1
Date of Hearing: June 27, 2006
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Gloria Negrete McLeod, Chair
SB 1369 (Maldonado) - As Amended: June 19, 2006
SENATE VOTE : 35-1
SUBJECT : Clinical laboratories: anatomic pathology services.
SUMMARY : Requires "direct billing" for anatomic pathology
services (unless the person performing the services is exempted)
and defines anatomic pathology services for this purpose.
Specifically, this bill :
1)Expands existing law requiring direct billing for cytologic
services relating to the examination of gynecologic slides to
apply to the professional assessment and interpretation of
anatomic pathology services, as defined.
2)Provides that if a hospital, public health clinic, or
nonprofit health clinic orders professional assessment and
interpretation of anatomic pathology services, a clinical
laboratory shall bill these entities directly for the services
provided.
3)Prohibits a clinical laboratory from directly billing a
physician who requests the professional assessment and
interpretation of anatomic pathology services.
4)Provides that a clinical laboratory may directly bill a
physician and surgeon for the preparation of technical slides.
5)Provides that when a clinical laboratory knows, or should
know, that a patient is covered by a health care service plan
or insurance, it must first attempt to bill the patient's
health care service plan or insurance for any amounts in
excess of any co-payment, deductible, or coinsurance. If the
patient's health care service plan or insurance denies the
claim, then the clinical laboratory may bill the patient or a
responsible third-party payer.
6)Requires a licensed professional that orders tests from a
clinical laboratory to include complete and accurate billing
information with the request if the law requires the clinical
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laboratory to directly bill the patient or a third-party
payer.
7)Defines anatomic pathology as any of the following:
a) Histopathology or surgical pathology, meaning the gross
and microscopic examination of organ tissue, as specified;
b) Cytopathology, meaning the examination of cells obtained
from fluids, aspirates, washings, brushings, or smear,
including Pap test examinations, as specified;
c) Hematology, meaning the microscopic evaluation of bone
marrow aspirates and biopsies and blood smears, as
specified; and,
d) Sub-cellular pathology and molecular pathology.
EXISTING LAW provides for the licensure, regulation and
discipline of healing arts professionals by various boards
within the Department of Consumer Affairs, and prohibits a
licensed healing art professional, unless exempted or employed
by an entity that is exempted, from charging, billing, or
otherwise soliciting payment from a patient, client, customer or
third party payer for cytologic services relating to the
examination of gynecologic slides if those services were not
actually rendered by the health care professional, or under his
or her direct supervision. A licensed medical care professional
may not "mark-up" the cost of any clinical laboratory service
that is not performed by the licensed medical care professional
and itemized in the bill or solicitation for payment. Clinical
laboratories that perform cytologic examinations of gynecologic
slides are expressly prohibited from billing a physician and
surgeon who requests the tests and must directly bill either the
patient or responsible third-party payer for these services.
FISCAL EFFECT : Unknown
COMMENTS :
Background . In September 2005, the Wall Street Journal reported
that some physicians significantly increase their profits by
referring work to an outside clinical laboratory for a given
cost and then billing the patient or insurance company at a
marked up price, sometimes two or more times greater than the
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actual cost of performing the test. The Wall Street Journal
noted that this practice entices doctors to order many tests,
thereby driving up the nation's health care bill, and that the
practice is "harmful because doctors have an incentive to send
work to the cheapest lab, not necessarily the best one, to
maximize their profit margins."
Purpose of this bill . According to the author, this bill
addresses the growing problem of physicians marking up the cost
of laboratory tests in order to increase their profits. The
author contends that "by requiring the lab to bill the
responsible party (insurance company, Medi-Cal, or patient), the
incentive for a physician to mark up the cost of the lab service
or to split the fee with a lab is eliminated." The author notes
that the Center for Health Policy Studies (CHPS) released a
study in 1993 that concluded that laboratory charges and
utilization rates are higher in states that do not require
direct billing, and that the enactment of a national direct
billing law would substantially reduce health care costs, by
between $2.4 and $3.2 billion a year. The CHPS study found that
laboratory charges per test, utilization per enrollee, and
charges per enrollee were markedly higher in states that did not
have direct-billing laws in place. Finally, the author
maintains that "by removing the possibility that economic
motivation may dictate the referral of outside anatomic
pathology services, patients can be assured that their
physicians are choosing the pathologist or laboratory to
evaluate biopsy specimens and other anatomic pathology services
on the basis of quality and professional expertise."
Unintended consequences . Recent amendments to this bill provide
that it is unlawful for a medical professional to bill a patient
or third-party payer for the "professional assessment and
interpretation" of anatomic pathology services unless actually
performed by the medical professional. Effectively, these
amendments narrow the application of the existing direct-billing
requirement so that it would allow a medical professional to
bill for some anatomic pathology services (e.g., the technical
preparation of samples) even if those services are performed by
another individual. As such, these amendments confuse and undo
aspects of existing law regarding direct billing. This does not
appear to be the author's intent and the Committee may wish to
amend this bill so that it applies to all aspects of anatomic
pathology services, not just the "professional assessment and
interpretation" of anatomic pathology services.
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Support . The California Society of Pathologists (CSP), supports
this bill arguing that it "removes the potential conflict of
interest by the referring physician who might choose a lab based
upon the opportunity to mark-up the actual charge by the
rendering lab or pathologist" and notes that Medicare has
required direct-billing since 1994. CSP asserts that this bill
ensures that a physician refers anatomic pathology services to a
given clinical laboratory because of the quality and
professional expertise of the clinical laboratory, not because
of economic motivation.
With the recent amendments to this bill, the California Society
of Dermatology & Dermatologic Surgery (CSDDS) has changed its
position to support. CSDDS supported the general objectives of
this bill, but was concerned that it inadvertently limited "the
capacity of physicians and surgeons to render their licensed
professional services and bill third party payers for the
services rendered."
Opposition . Quest Diagnostics opposes this bill, arguing that
it "is not modeled after laws in other states (such as Arizona,
Iowa, and Montana) and as a result falls short of the author's
intent." Quest maintains that this bill would make it more
difficult for it to operate efficiently. One of Quest's major
concerns with this bill is that it would not permit clinical
laboratories to bill one another for work referred by one
clinical laboratory to another. One of Quest's laboratories is
the Nichols laboratory "which does highly specialized and
complex tests that cannot be performed by other labs. These
referring labs will do the non-complex tests and then send
tissue samples to Nichols Institute for the more specialized
anatomic pathology tests." Quest asserts that lab-to-lab
billing for anatomic laboratory services in these instances is
appropriate and will ensure "that all of the work is presented
on a single bill to the payer."
The California Clinical Laboratory Association (CCLA) opposes
this bill arguing that California's existing anti-mark up law
prohibits a third party from marking up the cost of a laboratory
test when no additional services were actually performed and
already addresses the problem that this bill seeks to solve.
CCLA adds that this bill "has provisions which will make
existing law more complicated and more difficult to enforce" and
notes that it would support this bill if it were amended to
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simply require direct billing for all laboratory services.
Related legislation . SB 165 (Machado), Chapter 319, Statutes of
2003, provided that a clinical laboratory could bill for
cytologic services relating to the examination of gynecologic
slides that were performed by one of its affiliated clinical
laboratories.
AB 474 (Tanner), Chapter 295, Statutes of 1991, required "direct
billing" for cytologic services relating to the examination of
gynecological slides.
AB 2544 (Tanner), Chapter 1019, Statutes of 1990, permitted
clinical laboratories to directly bill persons or clinics that
provide cytologic examinations of gynecological services free of
charge or on a sliding scale.
Technical amendment . On page 3, line 1, insert a comma after
"hospital".
Double-referral . This bill has also been referred to the
Assembly Committee on Health.
REGISTERED SUPPORT / OPPOSITION :
Support
California Society of Dermatology & Dermatologic Surgery
California Society of Pathologists
Opposition
California Academy of Family Physicians
California Clinical Laboratory Association
Quest Diagnostics
Analysis Prepared by : Pablo Garza / B. & P. / (916) 319-3301