                       TO BE PUBLISHED IN THE OFFICIAL REPORTS


                            OFFICE OF THE ATTORNEY GENERAL

                                      State of California


                                      DANIEL E. LUNGREN

                                        Attorney General


                          ______________________________________

                  OPINION            :

                                     :          No. 93-807

                  of                 :

                                     :          June 30, 1994

        DANIEL E. LUNGREN            :

           Attorney General          :

                                     :

        ANTHONY S. Da VIGO           :

        Deputy Attorney General      :

                                     :
______________________________________________________________________________


          THE HONORABLE BOB EPPLE, MEMBER OF THE CALIFORNIA STATE
ASSEMBLY, has requested an opinion on the following question:

                May a podiatry referral service for profit direct callers on the following basis: (1) to
a service subscriber who pays $500 monthly for a nonexclusive listing according to geographic
proximity; (2) to a service subscriber who pays $750 monthly for a semi-exclusive listing within a
five-mile radius; and (3) to a service subscriber who pays $1000 monthly for an exclusive listing
within a five-mile radius, where the caller may, during the call, request and select an alternative
referral?

                                           CONCLUSION

                A podiatry referral service for profit may not direct callers on the following basis:
(1) to a service subscriber who pays $500 monthly for a nonexclusive listing according to
geographic proximity; (2) to a service subscriber who pays $750 monthly for a semi-exclusive
listing within a five-mile radius; and (3) to a service subscriber who pays $1000 monthly for an
exclusive listing within a five-mile radius, where the caller may, during the call, request and select
an alternative referral.

                                             ANALYSIS

                We are presented with a proposed marketing program for podiatrists involving the
referral of patients located within a particular geographical area. Telephone callers would be
referred to a podiatrist who contracts with the referral service and who pays a prescribed rate




                                                  1.                                            93-807

defining the exclusivity of such referrals within the designated geographical area.1 We conclude
that the program would violate the provisions of Business and Professions Code section 650.2

                  Section 650 provides in pertinent part:

                  ". . . [T]he offer, delivery, receipt, or acceptance by any person licensed under
          this division [§§ 500-4998.7] of any rebate, refund, commission, preference,
          patronage dividend, discount, or other consideration, whether in the form of money
          or otherwise, as compensation or inducement for referring patients, clients, or
          customers to any person, irrespective of any membership, proprietary interest or
          coownership in or with any person to whom these patients, clients or customers are
          referred is unlawful."

The statutes regulating the practice of podiatric medicine (§§ 2460-2499.8) are found in "this
division" for purposes of section 650's prohibition.3

                As noted in 70 Ops.Cal.Atty.Gen. 65, 67 (1987), the Legislature has enacted section
650 to protect the public from excessive health care costs (Mason v. Hosta (1984) 152 Cal.App.3d
980, 986), referrals based upon considerations other than the best interests of the patients (Magan
Medical Clinic v. Cal. State Bd. of Medical Examiners (1967) 249 Cal.App.2d 124, 132; 68
Ops.Cal.Atty.Gen. 28, 31 (1985)), deceit and fraud (63 Ops.Cal.Atty.Gen. 89, 91 (1980)), and
payment to a licensee where professional services have not been rendered (65 Ops.Cal.Atty.Gen.
252, 253 (1982)).

                In Beck v. American Health Group Internat., Inc. (1989) 211 Cal.App.3d 1555, 1564,
the court stated:

                  ". . . . The evil to be proscribed by section 650 `". . . is not just the payment
          for the referral, but also any relationship where the referral may be induced by
          considerations other than the best interests of the patient . . . ."' (63
          Ops.Cal.Atty.Gen. 89, 92 (1980), fn. omitted.)"



   1
    The proposed recorded message would represent to the caller that a referral will be made "to a
doctor nearest you." It is proposed, however, that the referral may be made to the nearest doctor
who has paid for an exclusive referral. It is unlawful for a licensed professional to disseminate or
cause to be disseminated any form of public communication containing a false, fraudulent,
misleading, or deceptive statement or claim, for the purpose of or likely to induce, directly or
indirectly, the rendering of professional services in connection with such license, or to use a medical
or similar directory listing which includes such a statement or claim. (Bus. & Prof. Code, § 651,
subds. (a), (e).)
   2
       All references hereafter to the Business and Professions Code are by section number only.
  3
    Health and Safety Code section 445 states in part: "No person, firm, partnership, association or
corporation, or agent or employee thereof, shall for profit refer or recommend a person to a
physician, hospital, health-related facility, or dispensary for any form of medical care or treatment
of any ailment or physical condition." In view of the conclusion herein, we need not consider
whether the term "physician" includes a practitioner of podiatric medicine within the meaning of that
section. (Cf. 57 Ops.Cal.Atty.Gen. 79 (1974).)

                                                     2.                                               93-807

       We have examined the language of section 650 in a variety of contexts, finding a violation
in some instances, while not in others. (See 76 Ops.Cal.Atty.Gen. 204, 206 (1993).) Here, we are
presented with a proposed referral plan strikingly similar to a plan for dentists that was analyzed in
65 Ops.Cal.Atty.Gen. 252, supra. We stated in the latter opinion:

                  "The referral plan about which inquiry is made fits squarely within the
       section's broad prohibition. The verb `refer' is defined as `to send or direct for
       treatment, aid, information, decision' (Webster's Third New Internat. Dict. (1971 ed.)
       at p. 1907, def. (2a)) and a `referral' as `the process of directing . . . a patient . . . to
       an appropriate specialist or agency for definitive treatment' (id., at p. 1908, def. (1b)).
       The phrase `referral of patients' used in section 650 may thus be thought of as the
       process whereby a third party independent entity who initially has contact with a
       person in need of health care first selects a professional to render the same and then
       in turn places the prospective patient in contact with that professional for the receipt
       of treatment. In other words it is the selection of a dentist to provide professional
       services for a patient by someone other than the patient or dentist (or their employees
       or agents on their behalf) that constitutes the `referring of patients' under section 650.
        In our situation, the individual dentists who participate in the referral service plan
       pay a fee to just such a third party independent entity to secure new patients by being
       selected by it to render professional services to persons who have contacted it, and
       not the dentist, initially. As we have seen section 650 was designed to ensure that
       that selection and subsequent reference would not be tainted by the receipt of a fee
       and that the patient would not pay more for the ultimate services he receives because
       of it. . . . Inasmuch as in the process described herein consideration is paid to obtain
       the advantage of being selected by the referral service to be the treating professional,
       a violation of section 650 occurs. We therefore conclude that the operation of a
       dental referral service described herein runs afoul of section 650's prohibition on
       payment for referrals, and is therefore prohibited by that section." (Id., at pp. 254-
       255.)

               We reject the suggestion that the proposed program would not involve "a third party
independent entity" as in our prior opinion because telephonic access would be to a computerized
directory. The subscriber fees would be accepted by persons in the referral agency who would
determine which names would be included in the directory. This is so even though the referral
service is denominated a "television advertising supported computerized/audio location service,"
and the determination as to inclusion or exclusion of names is denominated as "management of the
computer system."

                 We find no legal significance in the fact that the caller would be able to request an
alternative referral. While the caller could thereby "select" a podiatrist from among two, or even
perhaps more than two, who have paid the prescribed rate for the privilege, it is still the referral
agency that would make the initial selection and referral, rendering the language of section 650
applicable. We believe that even if the caller could request and receive the referral agency's entire
list of professionals willing to pay its price, the referral would nevertheless be predicated upon
considerations other than the best interests of the prospective patient. The number of referrals in the
proposed program would correlate with nothing other than the amount of money paid by the
podiatrist to the referral agency which neither has nor expresses any interest whatsoever in the health
care of the patient.

                The proposed referral plan for podiatrists comes squarely under our 1982 dental
referral opinion. The only significant event that has occurred during the past 12 years has been the
Legislature's enactment of express authorization for dental referral services (§ 650.2) and

                                                    3.                                                 93-807

chiropractic referral services (§ 650.3) subject to strict limitations. Such legislative authorization
and the lack thereof for podiatrist referral services support the conclusion that a referral plan for
podiatrists such as proposed here would violate the terms of section 650.4

                As stated in section 650, the proposed plan would involve the "delivery" by a
podiatrist "licensed under this division" of "consideration . . . in the form of money . . . as
compensation or inducement for referring patients . . . to any person," the podiatrist. It is concluded
that a podiatry referral service may not direct callers to a professional based upon a fee paid by the
professional for such referrals.

                                              *****




   4
    In view of the conclusion herein, we have no occasion to consider any concomitant provisions
of federal law. (Cf. 42 U.S.C. § 1320a-7b(b).)

                                                  4.                                           93-807
