(a) Physician investment in health care can provide important benefits for patient care; however, when physicians refer patients to entities in which they have an ownership interest, a potential conflict of interest exists. A physician having an investment interest in a health care entity shall not refer patients to the entity unless:

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Terms Used In Tennessee Code 63-6-602

  • Fair market value: The price at which an asset would change hands in a transaction between a willing, informed buyer and a willing, informed seller.
  • health care entity: means and includes a health care facility and an agency, company or health care professional, other than the referring physician, providing health care services. See Tennessee Code 63-6-601
  • Health care facility: means and includes any real property or equipment of a health care institution as that term is defined in §. See Tennessee Code 63-6-601
  • Lease: A contract transferring the use of property or occupancy of land, space, structures, or equipment in consideration of a payment (e.g., rent). Source: OCC
  • written: includes printing, typewriting, engraving, lithography, and any other mode of representing words and letters. See Tennessee Code 1-3-105
  • Year: means a calendar year, unless otherwise expressed. See Tennessee Code 1-3-105
(1) The physician performs health care services at the entity; or
(2) The investment interest satisfies the requirements set forth in § 63-6-603.
(b) Subsection (a) shall not apply to physicians when a health care facility leases premises or equipment from an entity owning the premises or equipment, even if physicians have an ownership interest in the entity that leases the premises or equipment to the health care facility and refer patients to the health care facility, if:

(1) There is a written lease agreement between the health care facility leasing the premises or equipment and the entity owning the premises or equipment;
(2) The lease specifies the premises or equipment covered by the lease;
(3) The term of the lease is for not less than one (1) year;
(4) The aggregate rental charge is set in advance, is consistent with fair market value in arms-length transactions and is not determined in a manner that takes into account the volume or value of any referrals by physicians having an ownership interest in the entity leasing the premises or space to the health care facility; and
(5) A physician having an ownership interest in the entity leasing the premises or space to the health care facility discloses that interest to any patient referred by the physician to the health care facility.
(c)

(1) Subsection (a) shall not apply in the limited circumstances where the referring physician is referring physical therapy services and, in writing, the physician:

(A) Discloses the physician’s investment interest or financial relationship to patients when making a referral of the patient for physical therapy services;
(B) Notifies patients that they may receive physical therapy services at the provider of their choice;
(C) Informs patients that they have the option to use one (1) of the alternative providers; and
(D) Assures patients that they will not be treated differently by the physician if they do not choose to use the physician-owned entity.
(2) Notwithstanding any law to the contrary, nothing in subdivision (c)(1) shall be construed to affect the ability of the commissioner of labor and workforce development to regulate, through the workers’ compensation comprehensive medical fee schedule and regulated system established by rules promulgated pursuant to § 50-6-204, all health care providers providing services to workers’ compensation patients.
(d) Conduct or activity that does not violate or is protected under the federal physician self-referral law, compiled at 42 U.S.C. § 1395nn, as amended, or rules promulgated to effectuate 42 U.S.C. § 1395nn, is not a violation of this part. The conduct or activity has the same protections as provided under federal law and rule.
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