Assembly Bill Enables Doctor 'Kickbacks' at the Expense of Patients

Physical therapists say patients will suffer if MDs are allowed to refer patients for profit

Feb 23, 2011, 16:07 ET from California Private Practice Group

SACRAMENTO, Calif., Feb. 23, 2011 /PRNewswire/ -- Hundreds of physical therapists in California vowed today to aggressively fight a bill recently introduced that allows physicians to profit from referring patients to physical therapy services owned by the doctors.  

AB 783, authored by Assemblymember Mary Hayashi (D-Hayward), slipped by public notice over the holiday weekend as news broke about a massive federal bust involving nine states and the arrests of more than a hundred physicians, physical therapists and other health care practitioners alleged to have engaged in the largest Medicare scam in history.  

The California Medical Association coincidentally named Hayashi its "Legislator of the Year" in 2009.  Hayashi's bill would override current state law preventing physician corporations from employing physical therapists and referring patients to their own physical therapy clinics, greatly increasing their profits.  

"This would be a disaster for patients and the state of California," said the California Private Practice Group of physical therapists (CA PPG) President, Dave Powers, PT, DPT, MBA.  "Studies have shown when physicians control other professions, costs go up and quality goes down.  That's why California lawmakers made it illegal years ago for physical therapists to be employed by medical doctors."

The group also calls into question the intent of the proposed legislation introduced on February 17, 2011. Hayashi, who has strong ties to the California Medical Association (CMA) and chairs the committee that will hear the bill, put the bill on "urgency status" meaning it will take effect immediately upon passage by the Legislature.  

"What's the hurry?" asked Paul Gaspar, PT, DPT, a private practice owner.  "We know physicians are illegally employing physical therapists in California for the purpose of increasing profits at the expense of consumers.  Is the urgency to protect those cozy relationships?  Why not let this issue be fully vetted by the Legislature and the public before rushing through legislation enabling "kickbacks" to physicians for physical therapy services?"

In California, the Moscone-Knox Act, as found in the California Corporations Code 13401.5, and provisions in the California Business and Professions Code, were legislatively designed to prevent the unlawful practice of a special licensed profession by those not holding that same professional license. In short, the current statutory construction prevents the CMA and their physicians from owning physical therapy practices or controlling and directing physical therapists in how they exercise their independent, professional judgment because that would be against the public policy protected by Moscone-Knox thus putting the public at risk.

In September 2010, the California Legislative Counsel rendered an opinion declaring employment of physical therapists by medical corporations illegal. Current law supports that opinion, and the Physical Therapy Board of California (PTBC) has declared its intent to discipline physical therapists employed by medical corporations.  

Studies by the Medicare Payment Advisory Committee and the Office of Inspector General examining physician-owned physical therapy services (POPTS) have found over-referrals, excessive costs and substandard care in over 91 percent of reviewed cases.  Using statistics from a California workers' compensation study concluded during the early 1990s, the adverse economic impact of POPTS on the California workers' compensation system can be estimated to have exceeded $8 billion during the last two decades.  

Powers emphasized, "California taxpayers can no longer afford these abusive referral relationships."

Hayashi's ties to CMA are transparent.  In addition to the award in 2009, lists the CMA as the top contributor to Assemblymember Hayashi during the last two years of available data from October 2008 to October 2010.  Contributions from the CMA totaled $22,608.  The next highest contributor was the California Teachers Association at $15,600. The contributions from the CMA to Hayashi are more than twice the amount given by number 10 on the list of top 10 contributors.  For more information, visit

"It seems like Assemblymember Hayashi is trying to push through a bill that will, without question, financially benefit physicians.  No one will know what is happening until all of a sudden doctors can legally refer to themselves and put patients at risk for substandard care, increased costs and unnecessary treatments," said Powers.  "Patients and health care consumers should never let this happen!"

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SOURCE California Private Practice Group