Mid-Atlantic Health Law TOPICS

In December of 2006, the Maryland Board of Physicians examined a hypothetical urology group's referrals to its own in-office pathology lab, and concluded in a Declaratory Ruling that the referrals violated the Maryland Patient Referral Law (MPRL), because the lab was staffed by independent contractor pathologists.
In the same month, a Maryland assistant attorney general wrote a letter in response to a question from a member of the Maryland General Assembly about other hypothetical urologic referrals, and also concluded that those referrals violated the MPRL and the Maryland Physician Fee Splitting Prohibition.
The Declaratory Ruling and the letter (collectively, the Writings) are advisory and not binding on any existing Maryland urologist. However, the Writings are clear warnings to Maryland urologists that they should follow the Writings or risk a disciplinary action by the Board of Physicians.
A. The Declaratory Ruling
Generally, the MPRL prohibits health care providers from referring patients to a health care entity with which the referrer has a financial interest, unless an exemption applies. In this context, the Declaratory Ruling addressed whether a urologist who refers his or her patients to the urologist's practice group's in-office pathology laboratory violates the MPRL, if the urology group hires a pathology group as an independent contractor to supervise the lab.
The Declaratory Ruling concluded that such a referral was prohibited, and that neither the group practice nor in office ancillary services exemptions of the MPRL applied. These exemptions generally allow members of a group practice to refer patients to other health care providers in the group practice. However, the Board concluded that these exemptions did not apply because the pathologist was not a "member" of the urology group practice.
Curiously, the Board reached this conclusion without discussing an applicable Maryland regulation that explicitly states that independent contractors may be members of a group practice for purposes of the MPRL.
The Declaratory Ruling further stated that a third MPRL exemption, the direct supervision exemption, also did not apply. That exemption permits a health care provider to refer a patient to a health care entity with which the referring provider has a financial interest, as long as the referring provider is on premises and available for consultation when the referred services are provided. However, the Board concluded that this exemption only applies when the referring provider is clinically capable of supervising the referred service, which, in the Board's opinion, was not the case here.
B. The Letter
The letter addressed a urologist that refers patients to an independent radiation oncologist who, in turn, purchases brachytherapy seeds from a company owned in part by the referring urologist. The letter concluded that this scenario constitutes a prohibited "indirect" referral, because the referring urologist knew that the radiation oncologist would buy seeds from the brachytherapy company.
C. Implications
There are three significant implications of the Writings. First, while applicable regulations indicate that independent contractors may be "members" of a group practice for MPRL purposes, the Board disagrees. Therefore, doctors who want to expand the breadth of services they offer should do so through full or part-time employees, and not independent contractors.
Second, doctors need to be more sensitive to potentially illegal "indirect" relationships, and avoid them, because the analysis of the letter could be applied to other fact patterns. For example, some non-surgeons may own interests in surgery centers. However, a non-surgeon who refers a patient to an independent surgeon who, in turn, refers the patient to the non-surgeon owned surgery center might be violating the MPRL.
Finally, the Writings are clear warnings that the Board wants doctors to curb their entrepreneurial zeal. In a time of flat or decreasing revenue, it is natural for doctors to explore offering related services to their patients. However, doctors who are so inclined will be taking action in a local regulatory environment that presently appears committed to thwart that tendency.