Doctors lobby to 'amend' conflict-of-interest bill; critics say AB 819 is actually being watered down.

A California Assembly bill originally designed to further restrict doctors from owning pharmacies and laboratories where they send their patients has been significantly watered down due to efforts by the California Medical Association and other health-care lobbies.

Physicians' groups that start or buy medical labs and refer their own patients there without full disclosure are the targets of the bill, confirmed independent pharmacists and lab owners. Similar bills have been introduced but have been struck down during the past three years.

Assembly Bill 819, the newest measure, is still being amended. Some critics, notably advocates of tighter controls on doctors referring clients to their own labs or taking referral fees from pharmacies or labs, contended that "amending" is watering down the bill to the point where it has no purpose. Instead, the bill has been refocused to deal with abuses of workers' compensation insurance the California Medical Association said have been prevalent for years.

California regulations won't let workers' compensation insurance providers make more than 33.3 percent profit on their operations. Instead of placing a ceiling on the cost of care delivered to those insured by the workers' compensation policies, it lets insurers constantly adjust rates, usually increasing them, to make sure they make 33.3 percent on their operations. Thus, there is no incentive for efficiency, said Daniell Walters, a spokeswoman with the Sacramento office of the California Medical Association.

Independent pharmacists and lab owners don't see things the same way. They believe AB 819 and other legislation introduced to control conflicts of interest in the health care industry fail because it is almost impossible to outspend the California Medical Association and American Medical Association lobbies.

Woodland Hills pharmacist Rubin Snyder wants laws that ban doctors from taking referral fees from pharmacies. He also wants doctors to sell their interests in medical labs and a ban on referral payments from pharmacies.

"They make enough money as it is," said Snyder, a 22-year veteran pharmacist who owns Taft Pharmacy in Woodland Hills.

"Lobbyists can be very powerful. The government doesn't see fit to restrict this practice. It isn't in the patients' best interest when the doctors own the lab facilities. They tend to request more tests for their patients," Snyder said.

Resugio Garcia, chief inspector of the lab unit in the Los Angeles branch office of the California Department of Corporations, claimed there are no laws that prohibit doctors from owning all or part of the labs they use, even though it presents a potential for abuse.

"There are 18 bills in the Legislature now that deal with this type of issue," Garcia said.

One of the best-known measures to be approved in California, the Clinical Laboratory Improvement Act of 1988, requires testing labs to be tested and certified. It also requires that doctors notify patients if they are sending them to a lab or a pharmacy in which they own an interest. Or they must post a sign somewhere in their office that states they own an interest in a lab or pharmacy.

Vincent Thorpe, a health care law expert with the law firm of Thorpe & Thorpe, said many of the labs, clinics and pharmacies throughout California are owned wholly by or in partnerships with physicians.

"They (consumerist lobbies) have been trying to get laws passed banning that for years but the Legislature hasn't taken any major action. It's a question of whether or not they have the right to deny a doctor access to investments," he said.

Government intervention into the practice of doctors collecting referral fees and commissions has been fought off successfully for the most part, but Thorpe said the activists are gaining some ground.

"State law requires a doctor to provide in writing, or post on his office walls, a notification if he or she owns any interest in a pharmacy or a lab. But there is nothing in the law that says where it has to be posted," Thorpe said.

Daniell Walters, a Sacramento-based spokeswoman for the California Medical Association, said her organization has opposed many bills introduced to ban physician ownership of labs and their ability to collect referral fees.

Walters said the bills warranted opposition because they often were not properly written and applied uniform restrictions, even though potential for abuse changed from urban to rural settings.

"In some areas, the only way the community could gain access to expensive modern diagnostic equipment was if the doctors who prescribed their use bought them," she said.

Some states have passed laws that make doctors sell their interests in medical labs and pharmacies. Walters said the laws made doctors conform in such a short time period that one or two financially strong health care providers bought up all the labs and machinery and have virtually created a monopoly.