§ 238-a. Prohibition of financial arrangements and referrals. 1. (a)
A practitioner authorized to order clinical laboratory services,
pharmacy services, radiation therapy services, physical therapy services
or x-ray or imaging services may not make a referral for such services
to a health care provider authorized to provide such services where such
practitioner or immediate family member of such practitioner has a
financial relationship with such health care provider.

(b) A health care provider or a referring practitioner may not present
or cause to be presented to any individual or third party payor or other
entity a claim, bill, or other demand for payment for clinical
laboratory services, pharmacy services, radiation therapy services,
physical therapy services or x-ray or imaging services furnished
pursuant to a referral prohibited by this subdivision.

2. Subdivision one of this section shall not apply in any of the
following cases:

(a) practitioners' services - in the case of practitioners' services
provided personally by, or under the supervision of, another
practitioner in the same group practice as the referring practitioner;

(b) in-office ancillary services - in the case of health or health
related items or services (i) that are furnished personally by the
referring practitioner, personally by a practitioner who is a member of
the same group practice as the referring practitioner, or personally by
individuals who are employed by such practitioner or group practice and
who are supervised by the practitioner or by another practitioner in the
group practice; and in a building in which the referring practitioner,
or another practitioner who is a member of the same group practice,
furnishes practitioners' services unrelated to the furnishing of such
items or services, or in the case of a referring practitioner who is a
member of a group practice, in another building which is used by the
group practice for the centralized provision of such items or services
of the group; and (ii) that are billed by the practitioner performing or
supervising the services, by a group practice of which such practitioner
is a member, or by an entity that is wholly owned by such practitioner
or such group practice;

(c) in the case of health or health related items or services
furnished to subscribers of a health maintenance organization operating
pursuant to article forty-three of the insurance law or article
forty-four of this chapter, participants in a managed care program
operating pursuant to section three hundred sixty-four-j of the social
services law or persons enrolled in a prepaid health services plan
authorized by law;

(d) in the case of a referral for inpatient hospital services,
including services by hospital staff practitioners provided in the
hospital;

(e) in the case of a referral of a hospital inpatient, outpatient or
emergency services patient for clinical laboratory services, pharmacy
services, radiation therapy services, physical therapy services or x-ray
or imaging services provided by the hospital, including services by
hospital staff practitioners provided in the hospital;

(f) in the case of a financial relationship with a general hospital if
the financial relationship does not relate specifically to the provision
of clinical laboratory services, pharmacy services, radiation therapy
services, physical therapy services or x-ray or imaging services for
which the referral was made; and

(g) in the case of any other financial relationship which the public
health council determines and specifies in regulations, subject to
approval by the commissioner, does not pose a substantial risk of payor
or patient abuse in relation to patient benefits consistent, to the
extent practicable, with financial relationships specified in
regulations adopted pursuant to federal law applicable to reimbursement
pursuant to title XVIII of the federal social security act (medicare)
for clinical laboratory services provided to beneficiaries of title
XVIII of the federal social security act (medicare).

3. For the purposes of this section, an ownership interest or an
investment interest:

(a) may be through equity, debt or other means; but

(b) shall not include ownership of investment securities, including
shares or bonds, debentures, notes or other debt instruments, which were
purchased on terms generally available to the public and which are in a
corporation that is listed for trading on the New York stock exchange or
on the American stock exchange, or is a national market system security
traded under an automated interdealer quotation system operated by the
national association of securities dealers, and had, at the end of the
corporation's most recent fiscal year, total assets exceeding one
hundred million dollars or to the extent such ownership would be
permitted by federal law or regulation if the services rendered were
clinical laboratory services provided to beneficiaries of title XVIII of
the federal social security act (medicare).

4. An ownership interest or an investment interest shall not be
subject to subdivision one of this section if:

(a) the health care provider authorized to provide clinical laboratory
services, pharmacy services, radiation therapy services, physical
therapy services or x-ray or imaging services is in a rural area and the
referring practitioner or the patient is in such rural area; or

(b) the clinical laboratory services, pharmacy services, radiation
therapy services, physical therapy services or x-ray or imaging services
are provided by a general hospital, the referring practitioner is
authorized to perform services at such general hospital and the
ownership or investment interest is in the general hospital itself and
not merely in a subdivision thereof; or

(c) the clinical laboratory services, pharmacy services, radiation
therapy services, physical therapy services or x-ray or imaging services
are provided by an ambulatory surgical center issued an operating
certificate pursuant to article twenty-eight of this chapter in
conjunction with a surgical procedure performed by the referring
practitioner at the ambulatory surgical center;

(d) and if each practitioner who is an interested investor in a health
care provider within a category specified in paragraph (a), (b) or (c)
of this subdivision and who makes a referral of a patient to such health
care provider discloses to the patient, in a brief and reasonable form
and manner specified in regulations proposed by the commissioner after
consultation with representatives of consumer and physician
organizations and adopted by the public health council, subject to
approval by the commissioner, the practitioner's, or family member's
ownership interest or investment interest in the health care provider
and the patient's right to utilize a specifically identified alternative
health care provider if any such alternative is reasonably available.

5. (a) For the purposes of this section, a compensation arrangement
means any arrangement involving any remuneration between a practitioner,
or immediate family member, and a health care provider. The term
remuneration includes any remuneration, directly or indirectly, overtly
or covertly, in cash or in kind.

(b) For the purposes of this section a compensation arrangement shall
not include:

(i) payments made for the rental or lease of office space, if (A)
there is a written agreement, signed by the parties, for the rental or
lease of the space, which agreement specifies the space covered by the
agreement and dedicated for the use of the lessee, provides for a term
of rental or lease of at least one year, provides for a payment on a
periodic basis of an amount that is consistent with fair market value,
provides for an amount of aggregate payments that does not vary,
directly or indirectly, based on the volume or value of any referrals of
business between the parties, and would be considered to be commercially
reasonable even if no referrals were made between the parties; or (B) in
the case of rental or lease of office space in which a practitioner who
is an interested investor, or an interested investor who is an immediate
family member of the practitioner, has an ownership or investment
interest, the office space is in the same building as the building in
which the practitioner or group practice of which the practitioner is a
member has a practice;

(ii) an arrangement between a general hospital and a practitioner, or
immediate family member, for the employment of the practitioner, or
immediate family member, or for the provision of administrative
services, if the arrangement is for identifiable services, the amount of
remuneration under the arrangement is consistent with the fair market
value of the services, the remuneration is not determined in a manner
that takes into account, directly or indirectly, the volume or value of
any referrals by the referring practitioner and such remuneration is
provided pursuant to an agreement which would be commercially reasonable
even if no referrals were made to the general hospital;

(iii) an arrangement between a health care provider other than a
general hospital and a practitioner if (A) the arrangement is for
specific identifiable services as the medical director or as a member of
a medical advisory board at the provider, for specific identifiable
practitioner services to be furnished to an individual receiving hospice
care payable as hospice care, for specific practitioners' services
furnished to a non-profit blood center, or for specific identifiable
administrative services, other than direct patient care services, but
only under exceptional circumstances; and (B) the amount of remuneration
under the arrangement is consistent with the fair market value of the
services, the remuneration is not determined in a manner that takes into
account, directly or indirectly, the volume or value of any referrals by
the referring practitioner and such remuneration is provided pursuant to
an agreement which would be commercially reasonable even if no referrals
were made;

(iv) remuneration which is provided by a general hospital to a
practitioner to induce the practitioner to relocate to the geographic
area served by the general hospital in order to be a member of the
medical staff of the general hospital if the practitioner is not
required to refer patients to the hospital and the amount of the
remuneration under the arrangement is not determined in a manner that
takes into account directly or indirectly the volume or value of any
referrals by the referring practitioner;

(v) an isolated financial transaction, such as a one-time sale of
property, if the amount of remuneration under the arrangement is
consistent with the fair market value, the remuneration is not
determined in a manner that takes into account, directly or indirectly,
the volume or value of any referrals by the referring practitioner and
such remuneration is provided pursuant to an agreement which would be
commercially reasonable even if no referrals were made;

(vi) a compensation arrangement involving payment by a group practice
of the salary of a practitioner member of the group practice;

(vii) and provided that any arrangement specified in subparagraphs (i)
through (vi) of this paragraph meets such other requirements as the
public health council may impose by regulation, subject to approval by
the commissioner, as needed to protect against payor or patient abuse
consistent with requirements imposed by regulations adopted pursuant to
federal law applicable to reimbursement pursuant to title XVIII of the
federal social security act (medicare) for clinical laboratory services
provided to beneficiaries of title XVIII of the federal social security
act (medicare);

(viii) an arrangement between a health care provider and an immediate
family member of a practitioner for the employment of the immediate
family member which the commissioner determines on application by the
parties does not pose a substantial risk of payor or patient abuse in
relation to patient benefits subject to such requirements as the
commissioner shall determine necessary to protect the public interest,
and which for a clinical laboratory that provides services to
beneficiaries to title XVIII of the federal social security act
(medicare) qualifies for an exception from the prohibitions on such
compensation arrangements for purposes of reimbursement of clinical
laboratory services pursuant to title XVIII of the federal social
security act (medicare). Such application shall be in a form and content
specified by the commissioner after consultation with representatives of
consumer and physician organizations. The commissioner shall make such
determination within sixty days of receipt of a complete application.

6. For the purposes of this title:

(a) in the case of clinical laboratory services, pharmacy services,
radiation therapy services, physical therapy services or x-ray or
imaging services, the request by a practitioner for such services,
including the request by a practitioner for a consultation with another
practitioner, and any test or procedure ordered by, or to be performed
by or under the supervision of that other practitioner, shall constitute
a referral by a referring practitioner; and

(b) in the case of clinical laboratory services, pharmacy services,
radiation therapy services, physical therapy services or x-ray or
imaging services, the request or establishment of a plan of care by a
practitioner which includes the provision of clinical laboratory
services, pharmacy services, radiation therapy services, physical
therapy services or x-ray or imaging services shall constitute a
referral by a referring practitioner;

(c) provided further, however, that the following shall not constitute
a referral by a referring practitioner:

(i) a request by a practitioner for practitioners' services consisting
solely of professional services to be furnished personally by that
practitioner, or under that practitioner's supervision;

(ii) a request by a pathologist for clinical diagnostic laboratory
tests and pathological examination services, if such services are
furnished by or under the supervision of such pathologist pursuant to a
consultation requested by another practitioner; and

(iii) a request by a radiologist for diagnostic x-ray or imaging
services, if such services are furnished by or under the supervision of
such radiologist pursuant to a consultation requested by another
practitioner.

7. If a referring practitioner or a health care provider furnishing
clinical laboratory services, pharmacy services, radiation therapy
services, physical therapy services or x-ray or imaging services or any
other person or entity collects any amounts that were billed in
violation of this section, such referring practitioner and health care
provider and other person or entity shall be jointly and severally
liable to the payor for any amounts so collected.

8. Each health care provider furnishing clinical laboratory services,
pharmacy services, radiation therapy services, physical therapy services
or x-ray or imaging services shall submit such information as reasonably
may be required by the department for purposes of this title.

9. Subdivision one of this section shall apply to an arrangement or
scheme, such as a cross-referral arrangement, which the practitioner or
health care provider knows or should know has a principal purpose of
assuring referrals by the practitioner for clinical laboratory services,
pharmacy services, radiation therapy services, physical therapy services
or x-ray or imaging services to a particular health care provider which,
if the practitioner directly made referrals to such health care
provider, would be in violation of subdivision one of this section.

10. The public health council shall adopt rules and regulations,
subject to approval by the commissioner, necessary to effectuate the
provisions and purposes of this title.