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In Texas, Added Protection For Physicians Making Out of Network Referrals

Texas physicians now have stronger protection in their relationships with Health Maintenance Organizations (HMOs) thanks to a new law that took effect September 1, 2015. Under the new law, HMOs are prohibited from terminating physicians solely on the basis that the physician informed a patient about all available health care providers including those that are out of network.

In the past, physicians had great discretion to decide where to send patients for additional medical services based on the physician’s assessment of the patient’s best interests along with the patient’s personal preferences. But recently, HMOs have unilaterally imposed limits on out of network referrals by targeting any physicians making such referrals and sending them demand letters to stop making such referrals or face termination from the HMO network. HMOs had a large financial incentive to put heavy pressure on physicians to keep all patients within the network because paying out of network claims is significantly more expensive. And HMOs typically have exclusive lab arrangements with large laboratories that give huge discounts in exchange for steering the bulk of the HMO’s business to those labs; out of network labs would thus be much less attractive.

Voicing concerns about the HMOs usurping their professional judgment and authority by abusing their greater bargaining power and ability to divide and conquer the individual physicians, the physicians pushed for legal protection. They cited reasons including the obvious pressure to send patients to in network providers even when the provider is not the best choice for the patient, and the perverse incentives that were causing some physicians to refer patients in a manner that created conflicts that resulting from physicians having legally permissible ownership interests in certain out of network entities.

Although physicians will now have to make some specific disclosures when referring patients to an out of network provider, they will no longer have to fear retaliatory termination for freely exercising their professional judgment when making the decision.

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