BILL ANALYSIS                                                                                                                                                                                                    






               Senate Committee on Labor and Industrial Relations
                             Richard Alarcon, Chair

          Date of Hearing: April 23, 2003      2003-2004 Regular  
          Session                              
          Consultant: Liberty Reiter Sanchez   Fiscal:No
                                               Urgency:No
          
                                Bill No: SB 899
                               Author: Poochigian
                            Amended: April 21, 2003
          

          Subject:

          Workers' compensation:  physician referral

          Purpose:
          
          To prohibit a physician from referring a person for  
          outpatient surgery purposes if the physician or his or her  
          immediate family has a financial interest with the person  
          or in the entity that receives the referral.

          Analysis:
          
          Existing law: 

          Prohibits a physician from referring a person for specified  
          medical and medical-legal purposes if the physician or his  
          or her immediate family, have a financial interest with the  
          person or in the entity that receives the referral.
           
           Defines physician, for the purposes of workers'  
          compensation to mean, physicians and surgeons,  
          psychologists, acupuncturists, optometrists, dentists,  
          podiatrists and chiropractic practitioners licensed by  
          California state law.
           
          This Bill  , prohibits physicians from referring patients to  
          outpatient surgery centers when they or a family member  
          have a financial interest in such referral and defines  
          outpatient surgery to include (1) any procedure preformed  
          on an outpatient basis in the operating rooms, ambulatory  
          surgery rooms, endoscopy units, cardiac catherization  
          laboratories, or other sections of a freestanding  









          ambulatory surgery clinic; and, (2) the ambulatory surgery  
          itself. 

          Comments:
          
          Medical costs in California's workers' compensation system  
          are estimated to be 50-100% higher than in group-health  
          systems. Since the inception of outpatient surgical  
          centers, there has been a shift from inpatient to  
          outpatient admissions.  Due to the fact that inpatient  
          hospitals have a facility fee schedule and outpatient  
          clinics do not, the outpatient model has moved from  
          cost-containment to cost-driver.  Many procedures that  
          could, and some think should, be performed in a doctor's  
          office are now preformed on an outpatient basis. Outpatient  
          surgical costs are estimated to be 60% of total hospital  
          costs in workers' compensation.  For 2004, workers'  
          compensation total incurred costs are estimated to be $3  
          billion and outpatient costs are estimated to be $1.8  
          billion. Outpatient facility costs are approximately 15% of  
          total workers' compensation medical costs.

          1.  Proponents  :
            
            The author contends that when the ban against  
            self-referral was first implemented, it was estimated to  
            save the workers' compensation system hundreds of  
            millions of dollars a year.  Unfortunately, the loophole  
            in current law which enables physicians to self-refer to  
            out-patient surgery centers, when combined with the  
            dramatic increase in patient admissions on an out-patient  
            basis, and a lack of any cost controls in the out-patient  
            arena, is leading to over-utilization.

            The California Chamber of Commerce, the sponsors of this  
            bill, assert that this is one of many steps necessary to  
            rein in the high cost of workers' compensation insurance  
            premiums.

          2.  Opponents  :
          Hearing Date:  April 23, 2003                            SB  
          899  
          Consultant: Liberty Reiter Sanchez                           
                                        Page 2

          Senate Committee on Labor and Industrial Relations 
          









            The California Applicants' Attorneys Association opposes  
            this bill because it "pursues an oversimplified and  
            piecemeal approach that is restricted to the single area  
            of physician self referrals to outpatient facilities," in  
            place of ongoing comprehensive efforts to address the  
            complex range of medical cost issues.

          3.  Related Legislation  :

            SB 354 (Speier), currently pending before the Senate  
            Labor and Industrial Relations Committee, contains a  
            similar provision to this bill.
          
          Support:
          
          California Chamber of Commerce (Sponsor)
          Agricultural Council of California -Support in Concept
          CA Agricultural Aircraft Association -Support in Concept 
          CA Assoc. of Nurseries & Garden Centers -Support in Concept
          CA Beer and Beverage Distributors -Support in Concept
          CA Citrus Mutual -Support in Concept 
          Ca Cotton Ginners Association -Support in Concept
          CA Farm Bureau Federation -Support in Concept
          CA Fig Institute -Support in Concept 
          CA Grocers Association -Support in Concept
          CA Lodging Industry Association -Support in Concept
          CA Plant Health Association -Support in Concept
          CA Restaurant Association -Support in Concept
          CA State Association of Counties -Support in Concept
          CA Women for Agriculture -Support in Concept
          California Apartment Association
          California Association for Health Services at Home
          California Association of Joint Powers Authorities
          California Association of Sheet Metal and Air Conditioning  
          Contractors Natl Association
          California Manufacturers and Technology Association
          League of California Cities -Support in Concept
          Milk Producers Council -Support in Concept
          Nat'l Federation of Independent Business -Support in  
          Hearing Date:  April 23, 2003                            SB  
          899  
          Consultant: Liberty Reiter Sanchez                           
                                        Page 3

          Senate Committee on Labor and Industrial Relations 
          








          Concept
          Murrieta Chamber of Commerce
          Tulare Chamber of Commerce
          Western Growers Association -Support in Concept

          
          Opposition:
          
          California Applicants' Attorneys Association

                                     * * *


























          Hearing Date:  April 23, 2003                            SB  
          899  
          Consultant: Liberty Reiter Sanchez                           
                                        Page 4

          Senate Committee on Labor and Industrial Relations