Bills Digest no. 136 2006–07
Health Insurance Amendment (Inappropriate and
Prohibited Practices and Other Measures) Bill 2007
WARNING:
This Digest was prepared for debate. It reflects the legislation as
introduced and does not canvass subsequent amendments. This Digest
does not have any official legal status. Other sources should be
consulted to determine the subsequent official status of the
Bill.
CONTENTS
Passage History
Purpose
Background
Financial implications
Main Provisions
Concluding Comments
Endnotes
Contact Officer & Copyright Details
Passage
History
Date introduced:
29 March 2007
House: House of Representatives
Portfolio: Health and Ageing
Commencement:
Sections 1 to 3 commence on Royal Assent.
The main operative provisions (schedule 1) commence on 1 March
2008. Schedule 2 commences on Royal Assent.
The purpose of the Bill is to prohibit certain practices related
to the rendering of pathology and diagnostic imaging services
provided under Medicare (including inducements between requesters
and providers of such services and other payments that do not
benefit patients).
The Bill seeks to do this by replacing existing prohibitions on
the payment of benefits between providers and requesters of
pathology and diagnostic imaging services under the Health
Insurance Act 1973 (the Act) with new, strengthened
provisions.
In early 2000, the Commonwealth initiated a Review of
Commonwealth legislation for pathology arrangements under
Medicare. This was originally supposed to report to the
Minister for Health and Aged Care by December 2000, but the
final report was not completed until December 2002.
The 2002 Review concluded that the legislative arrangements for
regulating pathology services needed to be updated and streamlined,
including the bribery and prohibited offence provisions of the
Health Insurance Act 1973 (HIA). As a result, the
Commonwealth commissioned the law firm Phillips Fox to:
- evaluate the effectiveness of the current enforcement and
offence provisions in the HIA
- identify compliance arrangements that also apply to providers
of pathology services in State jurisdictions or standards of
professional conduct generally accepted by medical
practitioners
- identify different options for compliance regimes to regulate
pathology services, and
- evaluate each of the identified options.
A
issues and options paper was released in January 2005 and
submissions taken. The final report,
Review of Enforcement and Offence Provisions of the Health
Insurance Act 1973 as they Relate to the Provision of Pathology
Services Under Medicare (the Phillips Fox
Review)(1), was released in August 2005.
The Bill implements certain recommendations of the Phillips Fox
Review, in particular that:
- it be made clear in the HIA that benefits and bribes between
providers and requesters of pathology services are prohibited,
and
- the HIA contains an effective enforcement framework in relation
to such practices.
These recommendations were made as a result of
findings in the Phillips Fox Review that some pathology providers
offer inducements for practitioners to refer patients to them or
order excess services that may not be clinically necessary. It also
found that some medical practitioners were alleged to have demanded
payments from pathology providers in return for referring patients
to particular pathology services.
Specific allegations reported as part of the
Phillips Fox Review included:
- pathology companies (and third parties acting for them)
offering inflated rents, gifts, lump sum payments and staff to
general practices
- doctors actively soliciting inducements, gifts and
benefits.(2)
The Review authors did not attempt to substantiate any of these
allegations. Rather, it suggested that the frequency and
consistency of claims made across the sector generates a high level
of confidence that such conduct is, in fact, occurring
.(3) It found that there was the potential for such
inducements to encourage over-servicing.(4)
The Phillips Fox Review found that, while the HIA already
includes provisions aimed at preventing over-servicing and
prohibited practices in pathology, they have been difficult to
apply because they are expressed very broadly and their scope of
application is unclear. This has meant that Medicare Australia
(formerly the Health Insurance Commission) had been unable to
gather evidence necessary to bring cases to court. As such, the
main recommendations of the Review were that the Government clarify
and strengthen the enforcement and offence provisions under the HIA
and simplify the sanctions process.
In response, the Minister for Health and Ageing, Mr Abbott, said
that he broadly support(ed) the findings and recommendations of the
Review and that the Government would consider whether any
tightening and strengthening of the pathology provisions as a
result of the Review should also be reflected in diagnostic imaging
.(5) The Government has since decided that the Review
recommendations will be extended to diagnostic imaging
services.
Rather than simply amend the current prohibited practice
provisions, the Government has decided to replace them with new and
updated provisions. According to the Regulation Impact Statement
for the Bill, this is because the latter option:
reduces the potential for any ambiguity or
inconsistency which might arise from amending the existing
requirements. Replacing the current requirements with new and
updated provisions sends a stronger message to the industry
regarding the Government s expectations in relation to
inappropriate payments.(6)
Further, this approach has been taken to ensure that:
- doctors only order those pathology and diagnostic imaging
services that are necessary(7)
- the Government is therefore able to proactively contain
Medicare expenditure on appropriate and relevant pathology and
diagnostic imaging services (8)
- the integrity of agreements between the Government and
pathology and diagnostic imaging sectors are not
undermined,(9) and
- there is a level playing field for the conduct of pathology and
diagnostic imaging business (such that those business that comply
with the spirit of the existing prohibited practices provisions are
no longer disadvantaged).(10)
Prior to commencement of the new prohibited practices
provisions, the Government will develop regulations that will
provide details about specific elements of the reforms introduced
in the Bill.(11)
Royal
College of Pathologists of Australasia Chief Executive Officer, Dr
Debra Graves, is reported to have expressed support for the
measures contained in this Bill. She has argued that:
While this is not a widespread problem there are
reports of a small number of practices that have not acted
appropriately, and it is this behaviour the anti-rorting
legislation will target.(12)
The measures in the Bill are also reported to have been welcomed
by pathology provider organisation, the Australian Association of
Pathology Practices (AAPP). According to AAPP President, Michael
Guerin:
There s always one rotten apple in the bottom of
the barrel, and the AAPP is very keen to create the level playing
field and most pathology practitioners in fact play the fair
game.(13)
Media reports suggest that the Australian Medical Association
(AMA) believes that there are already sufficient regulatory
mechanisms in place to address inappropriate interactions between
requesters and providers of pathology services. According to one
report, AMA President, Dr Mukesh Haikerwal, has said that Medicare
Australia already has strict guidelines in relation to such
activity and that any practitioners suspected of fraud should be
referred to the federal police.(14)
The ALP and minor parties do not appear to have made public
comments on the Bill.
The Explanatory Memorandum states the Bill will have no
financial impact. However, as the Bill is designed in part to
reduce unwarranted pathology and diagnostic imaging servicing,
presumably some savings in Medicare outlays may result, although
the precise impact may be difficult if not impossible to
quantify.
The Explanatory Memorandum provides detailed coverage of the
provisions of the Bill. The following analysis concentrates on the
key provisions only, particularly the new civil penalty provisions
and the revised criminal offences.
Item 32 repeals Division 3 of Part IIB of the
HIA which contain the current prohibitions on certain practices in
diagnostic imaging services. These are replaced by new Part IIBA
(new sections 23DZZIA-DZZIU) in item
34. Part IIBA will cover both pathology services and
diagnostic imaging services. Note that the current prohibitions
relating to diagnostic imaging services do not carry any criminal
or civil penalty sanctions. Rather, suspected contravention of
the prohibitions are referred to the Medicare Participation Review
Committee (the MPRC), a statutory body under the HIA. If the MPRC
is satisfied that the prohibitions have been contravened, it may
take a range of actions, including making services provided by that
person ineligible for Medicare payments.
New Section 23DZZIC provides that Part IIBA
binds the Crown (including State and Territory Governments as well
as the Commonwealth), but it cannot be prosecuted for a criminal
offence or subject to civil penalty. Any unlawful action may
however be stopped by the bringing of an injunction through the
court system.
New section 23DZZID defines a number of key
terms. Notably a benefit (which may be to subject of the Part IIBA
prohibitions) can include a potential benefit or an actual
benefit.
New section 23DZZIF defines what is a permitted
benefit that is a benefit that is not prohibited under Part IIBA.
Amongst other matters, this section deals with what is permitted in
cases where a service requester (such as a General Practitioner)
owns, or part owns, a pathology or diagnostic imaging service
provider, or where a requester and a provider share premises.
New section 23DZZIG enables the Minister to make a
determination that a specified class of benefit is a permitted
benefit in relation to specified classes of persons. The
Explanatory Memorandum comments that it is intended that
determinations will be made in respect of benefits such as gifts,
education, hospitality and consumables, and that reasonable limits
will be prescribed for such benefits .(15) These
Ministerial determinations are legislative instruments and thus
disallowable by Parliament in the usual manner.
In cases where corporations contravene either the criminal or
civil penalty provisions in Part IIBA, its executive officers may
potentially be subject to the same sanction as if they had
contravened the relevant provision themselves: new sections
23DZZIN and 23DZZIT. An executive officer
is a person who is concerned in, or takes part in, the management
of the corporation this is standard definition in Commonwealth
legislation. Where a relevant corporation has contravened a Part
IIBA criminal or civil penalty provisions, executive officers are
themselves liable if they:
- knew that the contravention would occur, and
- were in a position to influence the conduct of the body in
relation to the contravention, and
- failed to take all reasonable steps to prevent the
contravention.(16)
These elements required for executive officer liability mirror
those in other Commonwealth legislation such as section 54B of the
Therapeutic Goods Act 1989.
New Division 2 (new sections 23DZZII-DZZIN)
contains the civil penalty provisions. These are imposed by a court
where it is satisfied on the balanced of probabilities that the
relevant person has contravened the relevant provisions (see
discussion of item 85 below). These are entirely new provisions for
the HIA.
New section 23DDZZII usefully summarises the
provisions. Essentially:
- A service requester must not ask for or accept a pathology or
diagnostic imaging service-related benefit (other than a permitted
benefit) from a provider or a person connected to a
provider.(17)
- A service provider must not offer or provide such a benefit to
a requester or a person connected to a requester.
- A service provider must not make a pathology or diagnostic
imaging service-related threat to a requester or a person connected
to a requester.
The provisions may also be contravened by a requester or
provider if they know that a person connected to him or her has
asked for, accepted, offered or provided such a benefit or made
such a threat and they fail to report the person within 30
days to the Medicare Australia CEO: see new subsections
23DZZIK(2)-(3).
In the context of the above, a
threat is something that would either be reasonably likely to
induce a requester to request any of those kinds of services from a
provider or is related to the business of rendering pathology
services or diagnostic imaging services.
The maximum penalty under the civil penalty provisions is 600
penalty units ($66,000) for an individual (including executive
officers of corporations) and 6,000 penalty units ($660,000) for a
corporation.
New Division 3 ((new sections 23DZZIO-23DZZIU)
contains the criminal offences. Many of the elements of the
offences are similar to the civil penalty provisions. However, with
the criminal offences it is necessary to prove (beyond reasonable
doubt) certain levels of intention and/or knowledge on the part of
the persons involved in the making or receiving of requests or
benefits or the making of threats. In contrast, the civil penalty
provisions only require to proof on the balance of probabilities
that, for example, the benefit in question would be reasonably
likely to induce a doctor to request diagnostic imaging or
pathology services from the relevant service provider.
The maximum penalty for a Division 3 offence is 5 years
imprisonment (and/or 300 penalty units by virtue of subsection
4B(2) of the Crimes Act 1914). This applies to a corporate
executive officer where the offence was committed by the
corporation. The elements to establish the officer s personal
liability in such cases are the same applying as for the civil
penalty provisions, but of course the required level of proof is
higher that of beyond reasonable doubt.
Items 39 to 84 amend various
elements of Part VB, which deals with the Medicare Participation
Review Committee (MPRC). Currently, in cases where persons have
been convicted of HIA pathology-related offences or the MPRC
considers they have contravened the prohibitions relating to
diagnostic imaging services, the MPRC may take a range of actions
under the HIA, including making services provided by that person
ineligible for Medicare payments. The Bill amends Part VB so that
the MPRC will be able to take the same range of actions upon a
person s conviction of a Part IIBA offences or them being subject
to civil penalty order.
Item 66 adds new subsection
124F(6). In cases where, under Part IIBA, a person was
convicted of an offence or subject to a civil penalty order and the
MPRC determines that relevant services were in the course of the
relevant offence or contravention of the civil penalty provision,
the MPRC may determine that the relevant Medicare benefit not be
paid to the person. In cases where the payment has been made, it
may determine that it be repaid to the Commonwealth.
Item 85 inserts new Part VIA (new
sections 125A-125H) and deals with civil penalties.
Civil penalties are ordered by the Federal Court upon
application by the Medicare Australia CEO: new subsection
125A(1). Applications may be made up to six years after
the actual contravention of the relevant civil penalty provision.
Civil evidence and procedure rules apply thus the court only has to
be satisfied to the balance of probabilities: new
subsection 125A(4).
Persons who aid, abet, counsel, induce, procure a civil penalty
convention, or conspire to contravene one, are taken to have
contravened it and are thus subject to penalty; new section
125C.
No civil penalty order can be made if the person has already
been convicted of a criminal offence for substantially the same
conduct: new section 125E. Nor can criminal
proceedings be instituted if a civil penalty order has been made:
new section 125G. If any criminal proceedings are
underway, civil proceedings must be stayed. They can be resumed if
the criminal proceedings are unsuccessful: new section
125F.
Evidence given by a person in civil proceedings against them is
not admissible in criminal proceedings against them where the
proceedings are in relation to substantially the same conduct:
new section 125H. However, evidence is admissible
if the criminal proceedings are in relation to giving false
evidence. Presumably evidence given in (unsuccessful) criminal
proceedings is admissible in subsequent civil proceedings.
The Medicare Australia Act 1973 (MAA) contains certain
powers that allow authorised officers to require the production of
information or conduct searches where there are reasonable grounds
for believing Medicare-related offences have been committed.
Items 98-109 amend the MAA so that these powers
would apply to situations were it is suspected that a civil penalty
provision under the HIA has been contravened.
This makes some minor procedural amendments.
The measures in this Bill appear
relatively uncontroversial and have not attracted significant
public comment. The move to make it clear that inducements between
providers and requesters of pathology services are prohibited under
the Act (and that these provisions can be effectively enforced)
implements recommendations made to the Government in the
Phillips Fox Review of Enforcement and Offence Provisions of
the Health Insurance Act. However, rather than simply amend
the current prohibited practice provisions, the Government has
taken the more direct approach of replacing them with new and
updated provisions. It seems reasonable to suggest that such an
approach may, as the Government argues, send a stronger message to
the industry regarding the Government s expectations in relation to
inappropriate payments.
- Review of Enforcement and Offence Provisions of the Health
Insurance Act 1973 as they Relate to the Provision of Pathology
Services Under Medicare Final report to the Department of Health
and Ageing (August 2005), Phillips Fox Lawyers, 2005.
- ibid p. 45.
- ibid p. 45.
- ibid p. 47.
- The Australian Government Response to the 2005
Review of Enforcement & Offence Provisions of the Health
Insurance Act 1973 (HIA) as they relate to the Provision of the
Pathology Services under Medicare (May
2006), Department of Health and Ageing, 2006,
p 2.
- Explanatory Memorandum, p. 16.
- Hon Tony Abbott, Minister for Health and Ageing, Health
Insurance Amendment Inappropriate and Prohibited Practices and
Other Measures) Bill 2007 (Second reading speech), House of
Representatives, Debates, 29 March 2007, pp. 1-2
- Explanatory Memorandum, p. 16.
- Hon Tony Abbott, op. cit. p. 2.
- Explanatory Memorandum, p. 16.
- Hon Tony Abbott, op cit. p. 4.
- N. Vanderkroef, New laws target kickbacks , Medical
Observer Weekly, 6 April 2007.
- C. Nader, Unethical doctors to face jail , Age, 27
March 2007.
- N. Vanderkroef, New laws target kickbacks , Medical
Observer Weekly, 6 April 2007.
- Explanatory Memorandum, p. 27.
- New section 23DZZIH contains guidance as to whether
the executive office did take the necessary reasonable steps .
- Persons may be connected by family or marriage, business
relationship or trustee relationship or some combination of these:
see new section 23DZZIJ.
Luke Buckmaster
Social Policy Section
Angus Martyn
Law and Bills Digest Section
7 May 2007
Bills Digest Service
Parliamentary Library
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ISSN 1328-8091
© Commonwealth of Australia 2007
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