BILL ANALYSIS                                                                                                                                                                                                    



                                                                  SB 1325
                                                                  Page  1

          Date of Hearing:   June 15, 2004

                            ASSEMBLY COMMITTEE ON HEALTH
                                 Rebecca Cohn, Chair
                     SB 1325 (Kuehl) - As Amended:  June 9, 2004
                              As Proposed to be Amended

           SENATE VOTE  :  23-12 
           
          SUBJECT  :   Hospitals: physicians and surgeons: self-governance.

           SUMMARY  :  Clarifies the medical staff's right of self-governance  
          and makes various findings and declarations.  Specifically,  this  
          bill  :   

          1)Requires the medical staff's right of self-governance to  
            include, but not be limited to, all of the following:

             a)   Establishing in medical bylaws, rules or regulation,  
               criteria and standards consistent with the medical peer  
               review process, for medical staff membership and  
               privileges;

             b)   Establishing in medical staff bylaws, rules or  
               regulations, clinical criteria and standards to oversee and  
               manage quality assurance, utilization review, and other  
               medical staff activities including, but not limited to,  
               periodic meetings of the medical staff and its committees  
               and departments and review and analysis of patient medical  
               records;

             c)   Selecting and removing medical staff officers;

             d)   Assessing medical staff dues and utilizing the medical  
               staff dues as appropriate for the purposes of the medical  
               staff;

             e)   The ability to retain and be represented by independent  
               legal counsel at the expense of the medical staff; and,

             f)   Initiating, developing, and adopting medical staff  
               bylaws, rules and regulation, and amendments thereto,  
               subject to approval of the hospital governing board, which  
               approval shall not be unreasonably withheld.









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          2)Prohibits the medical bylaws from interfering with the  
            independent rights of the medical staff to do any of the  
            following, but requires the procedures for:

             a)   Selecting and removing medical staff officers;

             b)   Assessing medical staff dues and utilizing medical staff  
               dues as appropriate for the purposes of the medical staff;  
               and,

             c)   The ability to retain and be represented by independent  
               legal counsel at the expense of the medical staff.

          3)Requires, that with respect to any dispute arising, the  
            medical staff and hospital governing board to meet and confer  
            in good faith to resolve the dispute.  Allows a superior court  
            of any county to issue an injunction, writ of mandate, or  
            other appropriate order whenever a person or entity has  
            engaged in or is about to engage in any acts or practices that  
            hinder, restrict, or otherwise obstruct the ability of the  
            medical staff to exercise its rights, obligations, or  
            responsibilities, as specified.  

          4)Makes legislative findings and declarations on the following:

             a)   That providing quality medical care in hospitals depends  
               on the mutual accountability, interdependence, and  
               responsibility, of the medical staff and the hospital  
               governing body for the proper performance of their  
               respective obligations;

             b)   That the governing board of a hospital must act to  
               protect the quality of medical care provided and the  
               competency of its medical staff, and the responsible  
               governance of the hospital in the event that the medical  
               staff fails in any of its substantive duties or  
               responsibilities, and nothing in this bill undermines their  
               authority.  The final authority of the hospital governing  
               board may be exercised for the responsible governance of  
               the hospital or for the conduct of the business affairs of  
               the hospital but such final authority may only be exercised  
               with a reasonable and good faith belief that the medical  
               staff has failed to fulfill a substantive duty or  
               responsibility in matters pertaining to the quality of  
               patient care.  Specifies that it would be a violation of  








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               the medical staff's self-governance and independent rights  
               for the hospital governing board to assume a duty or  
               responsibility of the medical staff precipitously,  
               unreasonably, or in bad faith; and,

             c)   That the specific actions that would constitute bad  
               faith or unreasonable action on the part of either the  
               medical staff, or hospital governing board will always be  
               fact specific and cannot be precisely described in statute,  
               and that the provisions set forth herein do nothing more  
               than provide for the basic independent rights and  
               responsibilities of a self-governing medical staff.   
               Specifies that a successful relationship between a  
               hospital's medical staff and governing board depends on the  
               mutual respect for the rights and responsibilities of the  
               other.


           EXISTING LAW  : 

          1)Provides for the licensing and regulation of physicians and  
            surgeons by the Medical Board of California in the Department  
            of Consumer Affairs.

          2)Requires a licensed general or specialized hospital with five  
            or more physicians on its medical staff to have rules adopted  
            by its board of directors to govern the operation of the  
            hospital, and the rules to include the following:

             a)   Provision for the organization of licensed physicians  
               within the hospital into a formal medical staff with  
               appropriate officers and bylaws, and with staff  
               appointments on an annual or biennial basis;

             b)   Provision that membership on the medical staff shall be  
               restricted to physicians and other licensed practitioners  
               competent in their respective fields and worthy in  
               professional ethics.  Prohibits the division of profits  
               from professional fees and such division is cause for  
               exclusion from the staff;

             c)   Provision that the medical staff is self-governing with  
               respect to the professional work performed in the hospital;  
               that the medical staff meet periodically and review and  
               analyze at regular intervals their clinical experience; and  








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               the medical records of patients to be the basis for such  
               review and analysis; and,

             d)   Provision that adequate and accurate medical records be  
               prepared and maintained for all patients.

          3)Requires a licensed general or specialized hospital, having  
            less than five physicians on its medical staff to have rules  
            adopted by its board of directors to govern the operation of  
            the hospital, and the rules to include the following  
            provisions:

             a)   That membership on the medical staff shall be restricted  
               to physicians and other licensed practitioners competent in  
               their respective fields and worthy in professional ethics.   
               Division of profits from professional fees in any manner is  
               prohibited and any such division is cause for exclusion  
               from the staff; and,

             b)   That adequate and accurate medical records be prepared  
               and maintained for all patients.

          4)States that it is unprofessional conduct if the rules for the  
            medical staff and hospital are not adopted.

           FISCAL EFFECT  :   Unknown.  This bill passed out of the Senate  
          Appropriations Committee pursuant to Senate Rule 28.8.

           COMMENTS  :   

           1)PURPOSE OF THIS BILL  .  The California Medical Association  
            (CMA), the sponsor of this bill, states that too much is left  
            to implication regarding the authority of the medical staff  
            and the authority of the adopted bylaws.  CMA claims that  
            while the intent of the law is clear, there is no explicit  
            statement in the law indicating that the adopted bylaws of the  
            medical staff govern all professional services provided in the  
            hospital, even if it is the hospital itself that enters into a  
            medical service provider contract.  CMA states that a recent  
            incident where one hospital is attempting to exploit the  
            ambiguity in the law and exercise the authority to contract  
            for medical service providers is the impetus for this bill.   
            The sponsor points out that this bill is an attempt to clarify  
            the role of the governing bylaws of the medical staff.









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           2)VENTURA INCIDENT  .  CMA points out that a Ventura incident  
            illustrates the need for this bill.  The hospital  
            administration of a hospital in Ventura County is being sued  
            by its medical staff for violating state laws requiring  
            medical staff self-governance.  The suit alleges that the  
            administration usurped the medical staff's credentialing,  
            standard setting, disciplinary and quality assurance  
            functions; refused to recognize duly elected medical staff  
            officers; unilaterally amended the medical staff bylaws;  
            improperly interfered with medical staff's efforts to review  
            and update its bylaws; and illegally seized the medical staff  
            dues totaling $250,000.  CMA has filed a brief with the court  
            discussing state and federal precedents that establish and  
            reinforce a medical staff's position as a separate legal  
            entity.  The case is still pending in Ventura County Superior  
            Court.

           3)MEDICAL STAFF SELF-GOVERNANCE  .  According to CMA, for over  
            thirty years, oversight and quality assurance of medical care  
            has been the responsibility of licensed physicians.  CMA  
            points out that ensuring the needs of patients remains the top  
            priority in all medical decisions and that California law  
            provides that "medical staff shall be self-governing with  
            respect to the professional work performed in the hospital."   
            CMA claims the purpose of this doctrine is to insulate medical  
            decision making from influence by hospital administrative  
            staff who are primarily concerned with the administrative  
            needs of the hospital, and its profitability.  CMA illustrates  
            the potential conflict that may arise between hospital and  
            medical staff using the example of the selection of service  
            providers for radiology.  While a hospital may prefer a  
            long-term contract offering low cost services to ensure future  
            profitability and cost control, the medical staff may prefer a  
            probationary period to assess the skills of the new service  
            provider.  CMA states that staff physicians are also concerned  
            about cost control but their primary interest lies on what is  
            best for a patient.  CMA stresses that medical staff  
            self-governance ensures that such decisions are made by  
            licensed physicians who act under the duty of care to their  
            patients and not to the governing board of a hospital acting  
            under a fiduciary duty to shareholders.

          The Joint Commission on Accreditation of Healthcare  
            Organizations (JCAHO) which accredits hospitals across the  
            country, requires medical staff self-governance because it  








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            believes self-governance also leads to quality patient care.   
            JCAHO specifies in its 2004 Medical Staff Standards for  
            Hospitals that "the hospital has an organized, self-governing  
            medical staff that provides oversight of care, treatment, and  
            services provided by the practitioners with privileges,  
            provides for a uniform quality of patient care, treatment, and  
            services and reports to and is accountable to the governing  
            body.  Medical staff bylaws address self governance and  
            accountability to the governing body and the organized medical  
            staff has a leadership role in organization performance  
            improvement activities to improve quality care, treatment and  
            services and patient safety."  

           4)SUPPORT  .  Supporters believe this bill is necessary to protect  
            patient care and preserve medical staff independence from  
            intrusions by hospital administrators.  To them, this bill  
            reinforces the protection already provided to medical staffs  
            under existing law.

           5)OPPOSITION .  The opponents are concerned that this bill would  
            create an uncertainty between hospital governing board and  
            medical staff.  They point out this bill would significantly  
            change the relationship between the hospital and its medical  
            staff.  The California Healthcare Association (CHA) and other  
            hospitals oppose this bill.  However, the proposed amendments  
            represent a compromise between the sponsors and CHA.
            
           6)PRIOR LEGISLATION  .  AB 405 (Kuehl) of 1997,  would have  
            required hospitals to establish a formal process to consult  
            with its medical staff prior to making a decision to enter  
            into, continue, or terminate an exclusive contract for medical  
            services.  In his veto message, then Governor Pete Wilson  
            indicated that hospital management and the medical staff can  
            and should consult with each other on quality of care issues,  
            and require no legislative directive to do so.



           REGISTERED SUPPORT / OPPOSITION  :

           Support 

           California Medical Association (sponsor)
          California Academy of Family Physicians
          California Nurses Association








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          California Podiatric Medical Association
          California Society of Anesthesiologists

           Opposition 
           
          Adventist Healthcare Coalition
          Alliance of Catholic Health Care
          Beta Health Care Group
          California Healthcare Association
          Catholic Healthcare West 
          Loma Linda University Medical Center
          MemorialCare Medical Centers
          Palomar Pomerado Health
          Scripps Health
          Sutter Health 
          United Hospital Association 

           Analysis Prepared by  :    Rosielyn Pulmano / HEALTH / (916)  
          319-2097