STATE OF MICHIGAN

FRANK J. KELLEY, ATTORNEY GENERAL

Opinion No. 5498

June 8, 1979

PUBLIC HEALTH CODE:

Clinical laboratories

PUBLIC HEALTH CODE:

Financial interest of a licensed health professional in a clinical laboratory

WORDS AND PHRASES:

'Financial interest'

PHYSICIANS AND SURGEONS:

Financial interest in a clinical laboratory

CLINICAL LABORATORIES:

Financial interest of a licensed health professional

A licensed health professional is prohibited from directing or requiring an individual to purchase or secure a drug, device, treatment, procedure or service, even if necessary, from a person, place, facility or business in which the licensed health professional has a financial interest.

A licensed health professional has a 'financial interest' in a clinical laboratory if he or she is the proprietor, a partner, a limited partner, a shareholder, or has a similar business interest in the clinical laboratory.

Violation of the prohibition against a licensed health professional having a financial interest in a clinical laboratory is not avoided by disclosure of the interest to the individual being directed or required to obtain a drug, device, treatment, procedure or service.

Bert C. Brennan

Executive Director

Board of Medicine

Department of Licensing and Regulation

905 Southland Avenue

Lansing, Michigan 48910

You have asked my opinion of the meaning and application of section 16221(e)(iii) of the Public Health Code, 1978 PA 368, as amended; MCLA 333.1101 et seq; MSA 14.15(1101) et seq, hereafter Code, under which a health professional licensed pursuant to article 15 may be reprimanded, fined, placed on probation or suffer suspension of the license for unprofessional conduct, which is defined to include:

Specifically, you have posed the following questions:

Your questions will be addressed seriatim.

1. Does the term 'unnecessary' modify the phrase 'drug, device, treatment, procedure, or service' each of the two times this phrase appears, or does it only modify this phrase in the one instance where it immediately precedes the phrase?

Section 16221(e)(iii) of the Code actually is composed of two independent clauses separated by the disjunctive word 'or.' If 'unnecessary' is read as an element of only the first clause in which it appears, each clause of section 16221(e)(iii) constitutes a separate and distinct ground for disciplinary action against the licensee.

If instead 'unnecessary' is read into the second clause, the second clause becomes merely one example of conduct prohibited by the first clause, thus making the second clause redundant. 'Directing or requirement a person' is one form of 'promotion' and a 'financial benefit' is one type of 'personal gain.'

This latter construction of section 16221(e)(iii) of the Code, where 'unnecessary' is read as modifying the second clause, must be rejected in favor of the first construction for the reason that the second construction would violate some of the basic principles of statutory construction. One principle prohibits construing a provision of the statute so as to render another part nugatory or of no effect. Melia v Appeal Board of Michigan Employment Security Comm, 346 Mich 544; 78 NW2d 273 (1956). Another relevant principle prohibits reading into a law a requirement that the legislature has seen fit to omit. In Re Hurd-Marvin Drain, 331 Mich 504; 50 NW2d 143 (1952). The legislature is presumed to have been aware of the gramatical necessity of inserting the word 'unnecessary' in the second clause if it intended that the 'drug, device, treatment, procedure, or service' be found as unnecessary in order for the licensee's conduct to be grounds for license action. In other words, the legislature's omission of the word 'unnecessary' in the second clause must be presumed as intentional.

I would note that OAG 1977-1978, No 5229, p ___, was issued on September 30, 1977, while the Code was still being considered by the legislature. Responding to the question of whether a physician could legally refer specimens of his patients to a clinical laboratory in which the physician had a financial interest, I said:

Section 16221(e)(iii) is obviously the legislature's response, and there is no doubt as the authority of the legislature to enact such a provision. This section speaks to conduct not previously addressed by statute but which has been the cause of public concern, and makes that conduct on the part of a physician or other person licensed under article 15 of the Code grounds for disciplinary action against the licensee.

During the course of legislative deliberations, an amendment was offered which would preclude inter alia physician ownership of clinical laboratories. The proposed amendment was subsequently withdrawn without vote, and hence, it is not instructive of legislative intent, nor may it be considered determinative of legislative intent.

I would also note that Congress has acted in this area by amending provisions of federal law relating to health insurance for the aged and disabled. 1395nn of 42 USC 1395nn now provides in part:

It is clear that section 16221(e)(iii) of the Code and 42 USC 1395nn(b)(1) represent legislative attacks on the problem of overutilization of health services by providing for disciplinary proceedings where the licensee has directed or required a patient to purchase a drug, device, treatment, procedure or service from another person, place, facility or business in which the licensee has a financial interest.

Accordingly, it is my opinion that the second clause of section 16221(e)(iii) of the Code prohibits a licensed health professional from directing or requiring an individual to purchase or secure a drug, device, treatment, procedure or service, even if necessary, from another person, place, facility or business in which the licensed health professional has a financial interest.

2. What constitutes a 'financial interest?'

The term 'financial interest' is not defined by any provision of the Code. Accordingly, its definition must be arrived at in accordance with the statutory principle of construction set forth in MCLA 8.3a; MSA 2.212(1), which states:

A court is bound to construe and sustain a legislative enactment as written if it is not violative of constitutional provisions. General Motors Corp v Unemployment Compensation Comm, 321 Mich 604; 33 NW2d 90 (1948). When legislation is within the scope of police power, its wisdom and propriety are for legislative and not judicial determination, People v Breen, 326 Mich 720; 40 NW2d 778 (1950), and the court is not at liberty to rewrite a statute or to read into it restrictions at variance with its plain language and clear meaning, Threet v Pinkston, 20 Mich App 39; 173 NW2d 731 (1969).

A review of the authorities indicates that there is no peculiar or technical meaning associated with the phrase 'financial interest.' It is a term commonly understood to mean an opportunity for pecuniary or proprietary gain or loss, In Re Petition of Farber, 260 Mich 652; 245 NW 793 (1948), or a relationship having the character of an investment, Restatement of Torts, Sec. 769 (1939), or an ownership interest, either legal or equitable, however small, In Re Virginia Electric & Power Co, 539 F2d 357 (1976), or a right, title or legal share relating to money and its use or distribution in some entity, Webster's Third International Dictionary, 3rd Ed. (1966). The obvious evil to be avoided is the inherently suspect practice of self-dealing.

It is, therefore, my opinion that a licensed health professional has a 'financial interest' in a clinical laboratory if he or she is the proprietor, a partner, a limited partner, a shareholder, or has a similar business interest in the clinical laboratory.

3. Will physician disclosure of the physician's financial interest in an entity to which an individual is being directed or required to obtain a drug, device, treatment, procedure or service, avoid violation of this section?

The statute is clear on this point. In this factual situation, the physician's conduct would be grounds for disciplinary action. To read this provision to mean that a licensed health professional may exonerate himself or herself by disclosing the financial interest would, in effect, and a superfluous element to the provision, i.e., a licensee's failure to disclose. One of the principles of statutory construction prevents a court from reading into a law requirement that the legislature has seen fit to omit. In Re Hurd-Marvin Drain, supra.

Furthermore, the legislative intent of the provision is to diminish overutilization of laboratory and similar health care services. The physician-patient relationship is based upon patient trust and reliance in the judgment of the physician, who is authorized to practice the profession of medicine because of his or her specialized knowledge. Disclosure by the physician of his or her ownership interest in a laboratory would not in any way better enable a patient to determine the necessity of obtaining the laboratory services or diminish the likelihood of physician-engendered overutilization of the laboratory services.

Accordingly, it is my opinion that there is a violation of section 16221(e)(iii) of the Code even if the licensee discloses the licensee's financial interest.

4. Is a violation of this section established upon proof that a physician collected a specimen from a patient and sent it for analysis to a laboratory in which the physician has a financial interest?

This is perhaps the most extreme example of a physician 'requiring' an individual to obtain a service from a facility in which the physician has a financial interest. The physician leaves nothing to chance. The physician personally sees to it that the specimen is taken and that it is sent to the laboratory in which the physician has a financial interest as opposed to any other laboratory.

It is my opinion that a violation of section 16221(e)(iii) of the Public Health Code occurs where the licensed health professional arranges to have a specimen sent to a clinical laboratory in which he or she has a financial interest, whether or not there is consultation with the patient.

Frank J. Kelley