Federal law bans doctor referral incentives. Lawmakers also want to prohibit it under Indiana law

An Indiana-based health network paid a $345 million settlement in 2023 after accusations that physicians received incentives for referrals – which goes against federal law. Now, state lawmakers want to make that practice a violation of state law as well.

Hospitals already have to comply with federal laws pertaining to physician referrals and compensation or incentives. Senate Bill 147 would codify that in Indiana law.

The Senate Health and Provider Services Committee moved the measure forward Wednesday.

Tim Kennedy serves as general counsel for the Indiana Hospital Association, which is neutral on the legislation. He said a lot of federal laws already regulate these issues, and the state may not have the time and resources to regulate the space in the same way.

“Eventually they're going to have to define that in a regulation, and when you compare that with what the feds have done, it gets very complicated very, very quickly,” Kennedy said.

Kennedy said lawmakers should consider if the state needs legislation beyond existing federal law, especially considering the work that’s been done on this issue at the federal level.

For example, Kennedy said the federal government has made exceptions to these laws for the sake of “value-based” programs.

“The goal is to incentivize folks to refer within a network on the belief that by referring in the network, you get higher quality care, more efficiently delivered care, ultimately less expensive care,” Kennedy said. “Those referrals and compensation are permitted. Just superficially looking at this language, it appears that this language would prohibit that or at least would conflict with it.”

Kennedy also said there might need to be further consideration around the language of the bill, such as if the intent of the physicians receiving the compensation or incentive matters to the violation.

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The author of the bill, Sen. Justin Busch (R-Fort Wayne), said he had this language in a bill two years ago because he was hearing rumors of this practice happening in Indiana. He said those rumors were confirmed by the $345 million settlement in 2023.

“The federal government has that in their code. But I think also, it's a warning to those that the state of Indiana and the General Assembly is going to be watching out for that,” Busch said.

The bill also seeks to create more transparency around physician reimbursement rates. However, as Indiana continues to address high health care costs, some lawmakers are concerned efforts to increase transparency are just placing more administrative burdens on Indiana hospitals.

SB 147 would require hospitals to report average negotiated charges for specific health care services and quality metrics for facilities and providers. When Busch introduced the bill, he said the goal is for the data to be shared in a user-friendly way and allow comparisons across several factors.

Sen. Liz Brown (R-Fort Wayne) said Indiana has already been collecting some data from hospitals, and it's too soon to know if it’s had an impact on health care costs. She said introducing more data reporting requirements may end up costing hospitals more money with little benefit.

“We may say, ‘Well, they have millions and millions and millions. Who cares?’ But, somebody's got to pay for that,” Brown said. “We need to be good stewards when we impose these kinds of requirements.”

Several other lawmakers agreed that the data reporting requirements in the legislation should be discussed further and amended. The bill passed through committee and now heads to the Senate floor for consideration.
 

Abigail is our health reporter. Contact them at aruhman@wboi.org.