Details about California’s anti-markup statute

California’s anti-markup statute is designed to prevent health care providers from profiting from purchased laboratory fees. Physicians are therefore barred from charging patients more than they paid for these lab tests. Health providers should be aware of the details about California’s anti-markup statute, as it is a law that the government is ever ready to enforce.

Section 655.5 of the California Business and Professions Code, limits the ability of physicians in California to mark-up lab tests. A mark-up takes place when a health care provider outsources a lab test, and then charges the patient more than the lab would have charged if they had been billed directly. Section 655.5 relates to lab tests that are purchased or outsourced, not to those tests that are done by the provider at their in-office lab.

Physicians cannot charge patients for lab tests that are not performed at an in-office lab, unless the patient received prior notification of those charges. Specifically, the patients must be advised of the name and address of the lab that will be carrying out the test, and also the amount to be charged. In addition, they should not be charged more than the actual fees the lab charged. Health care providers who violate this provision may be subject to imprisonment and/or a $10,000 fine.

California’s anti-markup statute also prohibits markups on other tests such as anatomic pathology (section 655.7), and diagnostic imaging (section 655.8).

In May 2014 the San Diego district attorney filed criminal charges against a chiropractor due to violation of Section 655.5. This underlines the need for health care providers to understand the details of the anti-markup statute, so that they do not breach the regulations in any way.

Physicians needing legal advice on this matter can contact Nelson Hardiman, LLP, Los Angeles at 310-203-2800.

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