ORDERS:
PUBLIC HEARING REPORT OF THE ADMINISTRATIVE LAW JUDGE
The
above-captioned matter is before this Court pursuant to S.C. Code Ann. §
1-23-110 (2005) and S.C. Code Ann § 1-23-111 (2005) for a public hearing to
determine the “need and reasonableness” of Regulation 101-12.5 as proposed by
the South Carolina Department of Labor, Licensing and Regulation, State Board
of Physical Therapy Examiners (Board). The Board has proposed the regulation
to provide a grace period for certain physical therapists to comply with the
provisions of S.C. Code Ann. § 40-45-110(A)(1) (2001), which generally prohibits
employment relationships and other fee-sharing arrangements between physical
therapists and referring physicians. The Board contends that such a grace
period for compliance is necessary and reasonable in light of the prior
uncertainty regarding the precise application of Section 40-45-110(A)(1) to
physician-employed physical therapists. In particular, the Board asserts that
the grace period will allow non-conforming physical therapists to bring their
practices into compliance with the law without unnecessary disruption to the
care of their patients.
A
public hearing on the proposed regulation was held on January 26, 2006, at the
Denny Auditorium at the South Carolina Fire Academy in Columbia, South
Carolina. Based upon the statements and documents presented by proponents and
opponents of the proposed regulation and upon the applicable law, I find that
the Board’s proposed regulation is neither necessary nor reasonable and
recommend that the regulation not be promulgated.
BACKGROUND
As
part of the 1998 revision to the Physical Therapy Practice Act, the South
Carolina General Assembly enacted S.C. Code Ann. § 40-45-110(A)(1) to prohibit
physical therapists from sharing fees with persons who refer patients to them. See S.C. Code Ann. § 40-45-110(A)(1) (2001); Act No. 360, §1, 1998 S.C.
Acts 2103, 2107. This section provides that
the [B]oard, after
notice and hearing, may restrict or refuse to grant a license to an applicant
and may refuse to renew the license of a licensed person, and may suspend,
revoke, or otherwise restrict the license of a licensed person who:
(1) requests,
receives, participates, or engages directly or indirectly in the dividing,
transferring, assigning, rebating, or refunding of fees received for
professional services or profits by means of a credit or other valuable
consideration, including, but not limited to, wages, an unearned commission,
discount, or gratuity with a person who referred a patient, or with a relative
or business associate of the referring person.
S.C. Code Ann. §
40-45-110(A)(1). Despite the seemingly plain language of this section, there
was significant uncertainty after its enactment as to whether the statute prohibited
a physical therapist employed by a physician from treating patients referred by
that physician if the physical therapist and physician were otherwise in
compliance with state and federal physician self-referral laws. See S.C. Ass’n of Med. Professionals’ Br. in Opp’n to Need and Reasonableness of
Proposed Regulation, Ex. B. Given this uncertainty, the Board did not
initially enforce the provisions of Section 40-45-110(A)(1) against such
physician-employed physical therapists. Id.
However,
on March 30, 2004, the South Carolina Attorney General issued an opinion on the
applicability of Section 40-45-110(A)(1) to physician-employed physical
therapists, in which he concluded that Section 40-45-110(A)(1) “prohibits a
physical therapist from working for pay for a licensed physician or group of
physicians when the physician (or a member of the group) refers a patient to
the physical therapist for physical therapy services.” S.C. Att’y Gen. Op. of
Mar. 30, 2004, 2004 WL 736934, at *5. The Board adopted the Attorney
General’s opinion at its next meeting on April 8, 2004, and decided to begin
enforcing Section 40-45-110(A)(1) against physician-employed physical
therapists within ninety days of its decision. See S.C. Ass’n of Med.
Professionals’ Br. in Opp’n to Need and Reasonableness of Proposed Regulation,
Ex. G, at 4.
Declaratory
judgment actions were filed in the Court of Common Pleas against the Board on
April 8, 2004, and May 21, 2004, to prevent it from enforcing Section
40-45-110(A)(1) as interpreted by the Attorney General. By a Temporary
Injunction entered in the first of those matters on April 14, 2004, the Board
was enjoined from disciplining physician-employed physical therapists for their
referral practices during the pendency of the proceedings before the Circuit
Court. Subsequently, on February 24, 2005, the Honorable J. Ernest Kinard,
Jr., issued an Order resolving the cases on the cross-motions for summary
judgment filed by the parties. See Sloan v. S.C. Bd. of Physical
Therapy Exam’rs, CA No. 04-CP-40-1797 (S.C. Ct. Com. Pl. Feb. 24, 2005).
In the Order, Judge Kinard concurred with the Board and the Attorney General as
to the meaning of Section 40-45-110(A)(1) and specifically found that “the
language of [Section 40-45-110(A)(1)] of the South Carolina Physical Therapy
Practice Act authorizes the South Carolina Board of Physical Therapy Examiners
to discipline physical therapists who receive referrals from employing
physicians.” Id. at 4. While the initial Order terminated the
temporary injunction enjoining the Board from enforcing Section
40-45-110(A)(1), a subsequent Order issued by Judge Kinard on March 24, 2005,
restored the injunction for an additional ninety days from the date of the
February 24, 2005 Order and explicitly granted the plaintiffs “leave to return
to seek a further extension of this Order, which may be granted upon good cause
shown.” See Order
Granting Plaintiffs’ Motions for Restoration of Injunction, S.C. Ass’n of
Med. Professionals v. S.C. State Bd. of Physical Therapy Exam’rs, Case No.
04-CP-40-2526, at 2-3 (S.C. Ct. Com. Pl. Mar. 24, 2005). The plaintiffs in
those actions have also appealed Judge Kinard’s Order interpreting Section
40-45-110(A)(1) to the South Carolina Court of Appeals. In addition,
legislation has been introduced in the General Assembly to allow
physician-employed physical therapists to receive referrals from their
employing physicians in certain circumstances. See S.C. Ass’n of Med.
Professionals’ Br. in Opp’n to Need and Reasonableness of Proposed Regulation,
Ex. L.
THE
PROPOSED REGULATION
Pursuant
to its authority under Section 40-45-60(A), the Board has proposed Regulation
101-12.5 to implement its enforcement decision as sustained by the Circuit
Court. See S.C. Code Ann. § 40-45-60(A) (2001) (authorizing the Board
to “promulgate regulations necessary to carry out the provisions” of the
Physical Therapy Practice Act). In particular, the Board proposes the
regulation to “provide guidance to physical therapists concerning what types of
practice arrangements are prohibited by Section 40-45-110(A)(1) . . . . [and]
to avoid unnecessary disruption of patient services by allowing licensees
currently practicing in non-conforming situations to continue the practice for
a reasonable time and under reasonable conditions.” S.C. State Register, vol.
29, no. 10, at 101 (Oct. 28, 2005). To accomplish these goals, the first
sentence of the proposed regulation tracks the self-referral prohibition of
Section 40-45-110(A)(1), while the last sentence provides an exception to that
prohibition under which certain therapists are granted a three-year window to
bring their practices into compliance with the law:
A physical therapist
may not accept wages, an unearned commission, discount or gratuity from a
person who referred a patient or a relative or business associate of the
referring person. Patients may be referred to a physical therapist from a
licensed medical doctor or dentist. However, any individual physical therapist
or physical therapist assistant who is actively employed by a licensed medical
doctor or dentist or with a relative or business associate of a licensed
medical doctor or dentist on May 23, 2005, and who registers that employment
with the board by May 23, 2006, may continue to accept both referrals and wages
from the employing physician or dentist, until May 23, 2008.
Id. at
102.
In
proposing the regulation, the Board complied with all of the notice and
procedural requirements of the South Carolina Administrative Procedures Act and
the Rules of Procedure for this Court. The notice of drafting of the proposed
regulation was published in the State Register on July 22, 2005, see S.C. State Register, vol. 29, no. 7, at 25-26 (July 22, 2005), and notice of
final text of the proposed regulation was published in the State Register on
October 28, 2005, see S.C. State Register, vol. 29, no. 10, at 100-02
(Oct. 28, 2005). Further, because a hearing on the proposed regulation was
requested by an association having more than twenty-five members, a public
hearing on the regulation was conducted by this Court on January 26, 2006, at the
Denny Auditorium at the South Carolina Fire Academy in Columbia, South Carolina.
At the hearing, the Board and other interested persons, including
representatives from the South Carolina Chapter of the American Physical
Therapy Association (SCAPTA) and the South Carolina Association of Medical
Professionals (SCAMP), presented oral and written comments on the proposed
regulations, all of which were incorporated into the record of this matter. At
the request of interested persons, the record of this matter was held open
pursuant to S.C. Code Ann. § 1-23-111(B) (2005) for an additional twenty days
after the hearing for the submission of additional written comments.
The
Board contends that the proposed Regulation 101-12.5 is necessary and
reasonable for the implementation of its enforcement of Section 40-45-110(A)(1)
in light of the Attorney General’s opinion and the Circuit Court’s Order
regarding that statute. It argues that the prohibitionary language in the
regulation is necessary to clarify the application of Section 40-45-110(A)(1)
to physician-employed physical therapists and that the three-year
grandfathering provision provides a reasonable period for non-conforming therapists
to re-organize their practices without disrupting the care of their patients.
The opponents of the proposed regulation, including the South Carolina
Association of Medical Professionals, contend that Regulation 101-12.5, as
proposed, is neither necessary nor reasonable. In particular, these opponents
argue: (1) that the promulgation of a concrete enforcement regulation like
Regulation 101-12.5 is “untimely” and “premature” given the “unsettled” state
of the law regarding the proper interpretation of Section 40-45-110(A)(1); (2)
that the proposed regulation will harm both physical therapists and their
patients by prohibiting therapists from working closely with doctors in a
practice setting that is convenient and beneficial for patients; and (3) that
the registration required for grandfathered therapists under the regulation is
vague and may result in an invasion of privacy rights. In short, the opponents
of the proposed regulation contend that the regulation should be revised to
indefinitely exempt physical therapists who are employed by physicians from the
self-referral prohibition of Section 40-45-110(A)(1).
FINDINGS
AS TO NEED AND REASONABLENESS
Pursuant
to S.C. Code Ann. § 1-23-111(B) (2005) and ALC Rule 48, I make the following
Findings as to the need and reasonableness of proposed Regulation 101-12.5:
Under
Section 1-23-111(B), an Administrative Law Judge who presides over a public
hearing on a proposed regulation is required to “issue a written report which
shall include findings as to the need and reasonableness of the proposed
regulation” based upon on an analysis of the factors listed in subsections (1)
through (3) and (9) through (11) of S.C. Code Ann. § 1-23-115(C) (2005). See S.C. Code Ann. § 1-23-111(B) (2005). In applying these factors, the ALJ must,
among other things, consider the basic purpose of and authority for the
regulation, determine the need and reasonableness of the regulation, weigh the
costs and benefits of the regulation, and evaluate the effect of the regulation
on the environment and public health. See S.C. Code Ann. §
1-23-115(C)(1)-(3), (9)-(11) (2005). In addition to analyzing these factors,
the ALJ may consider “other factors as [he or she] identifies and may include
suggested modifications to the proposed regulation in the case of a finding of
lack of need or reasonableness.” S.C. Code Ann. § 1-23-111(B). In the case at
hand, I find that Regulation 101-12.5 as proposed by the Board is neither
necessary nor reasonable because it fails to meet basic standards of legitimacy
for regulations and, therefore, I recommend that it not be promulgated.
The
proposed regulation is not a necessary or reasonable means of implementing the
enforcement provisions of the Physical Therapy Practice Act administered by the
Board. In enacting a law complete in itself, such as the Physical Therapy
Practice Act, the General Assembly may authorize an administrative agency like
the Board “to fill up the details” by prescribing rules and regulations for the
complete operation and enforcement of the law within the expressed general
purpose of the law. See McNickel’s, Inc. v. S.C. Dep’t of Revenue,
331 S.C. 629, 634, 503 S.E.2d 723, 725 (1998). Accordingly, an administrative
regulation is valid so long as it is reasonably related to the purpose of the
enabling legislation. Id. However, in such cases, the regulation may
only implement the law, and “must fall when it alters or adds to a statute.” Id.
Therefore, it has long been recognized that, “although [the General Assembly]
may vest in administrative officers and bodies a large measure of discretionary
authority, especially to make rules and regulations relating to the enforcement
of the law[,] [s]uch rules are valid for the enforcement of the law not for
a non-enforcement or suspension of the laws.” One Hundred Second
Cavalry Officers Club v. Heise, 201 S.C. 68, 75, 21 S.E.2d 400, 404 (1942)
(emphasis added); Heyward v. S.C. Tax Comm’n, 240 S.C. 347, 355, 126
S.E.2d 15, 20 (1962) (holding that, while an agency may “fill up the details”
of an enactment by promulgating regulations for the operation and enforcement
of the law, “[s]uch rules are valid for the enforcement of the law, not for a
nonenforcement or suspension of the law”).
In
the instant case, both the Board and its opponents propose a regulation that
would not enforce, or would at least suspend the effect of, the prohibition
against certain referral practices found in Section 40-45-110(A)(1). Within
the past two years, the Attorney General has opined and a Circuit Court Judge
has held that, without any further implementing language, Section
40-45-110(A)(1) prohibits physician-employed physical therapists from receiving
referrals from their employing physicians and authorizes the Board to
discipline those physical therapists who violate the prohibition. However, the
regulation proposed by the Board would not immediately implement this
enforcement provision, but would allow all non-conforming physical therapists,
who were in practice on May 23, 2005, and who properly register with the Board,
to continue their non-conforming practices for an additional three years. The
opponents of the Board’s proposed regulation would seek to have such
non-conforming practices continue indefinitely. Such proposals do not
implement the provisions of Section 40-45-110(A)(1), but instead constitute a
“non-enforcement or suspension” of that section. As such, the proposed
regulation cannot be considered necessary and reasonable for the implementation
of the Physical Therapy Practice Act.
Further,
the “prosecutorial discretion” vested with the Board regarding disciplinary
matters under Section 40-45-110 does not validate the proposed regulation in
question. Section 40-45-110 clearly grants the Board discretion as to the
precise penalty to be imposed against a physical therapist who commits a
violation of the practice act. See S.C. Code Ann. § 40-45-110(A)
(“[T]he Board, after notice and hearing, may restrict or refuse to grant
a license to an applicant and may refuse to renew the license of a licensed
person, and may suspend, revoke, or otherwise restrict the license of a
licensed person” who violates a provision of the statute, including Section
40-45-110(A)(1)) (emphasis added). However, this discretion is limited to the
determination of the appropriate penalty to be imposed for a particular
violation committed by a particular licensee, and does not authorize the Board
to generally disregard the provisions of Section 40-45-110(A)(1) by allowing an
entire class of licensees to engage in prohibited activities. The specific
endorsement of such prohibited activities would not constitute an exercise of
the Board’s discretion under Section 40-45-110, but would be a direct
contravention of the law. See One Hundred Second Cavalry Officers
Club, 201 S.C. at 75, 21 S.E.2d at 404 (holding that an agency may
promulgate regulations for the enforcement of a law, but may not adopt
regulations for the “non-enforcement or suspension of the law”); Heyward,
240 S.C. at 355, 126 S.E.2d at 20 (same).
In
sum, the regulation proposed by the Board does not implement its enforcement of
Section 40-45-110(A)(1) or “fill up the details” of that section, but instead
constitutes a non-enforcement or suspension of that provision. Thus, I cannot
find that the regulation is a necessary and reasonable means of implementing
Section 40-45-110(A)(1) and must recommend that the regulation not be
promulgated. Moreover, to the extent the Board or other interested persons
wish to stay the enforcement of Section 40-45-110(A)(1) pending the appeal of
Judge Kinard’s Order or to change the requirements of Section 40-45-110(A)(1),
such concerns should be directed toward the courts and the legislature,
respectively, and are not properly addressed by an administrative regulation
that effectively nullifies a statute. Therefore, for the reasons stated above,
I
FIND AND CONCLUDE that Regulation 101-12.5 as proposed by the Board is
neither necessary nor reasonable and RECOMMEND that it not be
promulgated.
______________________________
JOHN D. GEATHERS
Administrative
Law Judge
March 7, 2006
Columbia, South Carolina
|
