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April 8, 2014  



Bill to Remove In-Office Exception

to be Heard on APRIL 21st  

Please Act Now


SB 1215 by Senator Ed Hernandez would repeal the current in office exemption under the California self-referral law for anatomic pathology among other services. The CSP supports this bill and it is now scheduled for hearing in the Senate Business, Professions and Economic Development Committee on Monday April 21, 2014. It is important that CSP members that are constituents of the members of that Committee make contact to show support for the bill. Here are some of the talking points that you can raise in your letters, emails or phone calls:


The in office exception was originally created so that physicians could continue to render non-complex services, like X-Rays and simple blood tests, within their offices at the same time as the patient's visit. It was never intended to include biopsy testing,  complex and costly advanced imaging services, radiation therapy, and physical therapy . Instead, this exception has created perverse incentives and led to overutilization. For example:


Current state law prohibits physicians from referring services to entities in which they have a financial interest to ensure that clinical decisions are not influenced by financial gain. The In Office Ancillary Service (IOAS)  exception was created with the intent to allow providers to self-refer basic same-day services as a convenience to patients. However, today the exception is being misused and in some cases exploited for services such as complex laboratory testing not performed during the patient's initial office visit. SB 1215 would close the exception for these complex services but retain the exception for basic services performed during a patient's initial office visit.


There is clear and extensive evidence that providers with a financial incentive are more apt to over-utilize services. This is confirmed by numerous Government Accountability Office (GAO) and independent studies that show the IOAS exception leads to over utilization which costs Medicare hundreds of millions of dollars each year with no clinical benefit to patients


Specific to laboratory medicine, GAO found self-referring providers made an estimated 918,000 more referrals for AP services than if they were not self-referring at a cost of $69 million to the Medicare program in 2010. Self-referred anatomic pathology services was higher than non self-referred anatomic pathology services (164% vs. 38%). Dermatology, gastroenterology and urology accounted for 90% of the self referred services.  The number of referrals by these specialties dramatically increased the year after they "switched" to providing these services in their offices rather than referring them to an outside lab or pathology group.  "Financial incentives for self -referring providers were likely a major factor driving the increase in referrals", the GAO concluded. The President's 2014 budget included a provision to close the IOAS exception with an estimated $6.1 billion in savings over 10 years to the Medicare program.


Moreover, GAO pointed out in 3 separate studies that overutilization of AP and other services increases the risk of medical complications to Medicare patients who are most likely not aware of the financial interests their provider has in these services.


The evidence of increased utilization through self-referral is overwhelming. Pathologists compete for referrals of patients from physicians based upon competency and quality.  Opponents claim that this practice occurs due to patient convenience or no alternative location for services, i.e. the only option is the more expensive hospital setting. Neither argument has merit since few of these services occur at the time of the office visit, less than 10%, and freestanding clinical labs and pathology practices are in every community and are a convenient and cost effective alternative to the hospital setting.


Here is the contact information for the members of the Committee and their district city/county. Please send copies of letters to bachermann@amgroup.us. Thanks for your help and please act prior to April 18th. There will be opposition from other specialists and the CMA.




Letters should be addressed as follows:


The Honorable Senator (first/lastname)

State Senate

State Capitol Room (number)

Sacramento, CA  95814



Senate Member

District / County


Room #


Ted Lieu, Chair

D -  Torrance

C- Los Angeles


916-651-4928 - fax



Mark Wyland, Vice Chair

D- Escondido

C- San Diego / Orange


916-651-4938 - fax



Tom Berryhill

D- Modesto

C- Fresno/ Madera / Mariposa/ San Joaquin/ Stanislaus/ Tuolumne


916-651-4914 - fax



Marty Block

D- San Diego

C- San Diego


916-651-4939 - fax



Ellen Corbett

D- Hayward

C- Alameda/ Santa Clara


916-651-4910 - fax



Cathleen Galgiani

D- Stockton

C- Sacramento /San Joaquin /Stanislaus


916-651-4905 - fax



Ed Hernandez, O.D.

D -  West Covina

C - Los Angeles


916-651-4924 - fax



Jerry Hill

D- San Mateo 

C- San Mateo & Santa Clara


916-651-4913 - fax



Alex Padilla

D- Van Nuys

C- Los Angeles


916-651-4920 - fax





California Society of Pathologists
One Capitol Mall Suite 320
Sacramento, CA 95814 
Tel : 916-446-6001
Fax :  916-444-7462