BILL NUMBER: AB 2697 ENROLLED BILL TEXT PASSED THE SENATE AUGUST 11, 2008 PASSED THE ASSEMBLY AUGUST 13, 2008 AMENDED IN SENATE AUGUST 6, 2008 AMENDED IN SENATE JULY 2, 2008 AMENDED IN SENATE JUNE 18, 2008 AMENDED IN ASSEMBLY APRIL 15, 2008 AMENDED IN ASSEMBLY APRIL 2, 2008 INTRODUCED BY Assembly Member Huffman FEBRUARY 22, 2008 An act to add Article 4 (commencing with Section 127450) to Chapter 2 of Part 2 of Division 107 of the Health and Safety Code, relating to hospitals. LEGISLATIVE COUNSEL'S DIGEST AB 2697, Huffman. Boutique hospitals. Existing law provides for the licensure and regulation of health facilities, including hospitals, by the State Department of Public Health. This bill would require a boutique hospital, as defined, to contract with an independent contractor for a study on the impact of the boutique hospital on the health of the community care system, focusing particularly on the financial impact on hospitals in the area served by the boutique hospital. The bill would require these studies to be filed with the Office of Statewide Health Planning and Development and the board of supervisors of the county in which the hospital is located, and would require the boutique hospital to make the study available to the public, upon request. The bill would not apply to specified charitable acute care hospitals. THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS: SECTION 1. The Legislature hereby finds and declares all of the following: (a) The preservation of California's full-service hospitals is of critical importance to the health and welfare of the people of the state. (b) Many full-service California hospitals are facing financial challenges that threaten their ability to serve their essential role in the health care delivery system, including providing care to Medi-Cal beneficiaries and uninsured patients. (c) California hospitals that provide multiple services to their communities are often only able to do so because other departments of the hospital, such as cardiac surgery, orthopedics, and other surgery programs, operate at a financial gain, offsetting the sometimes significant losses incurred by nonsurgical programs. (d) The ability of a hospital to continue to provide all services to California's insured and uninsured patients is threatened by so-called "boutique hospitals." These are hospitals that offer only services that are profitable, such as open-heart surgery and orthopedic surgery, and do not offer services that operate at a loss, such as emergency services or maternity services. (e) If full-service hospitals lose a substantial percentage of their revenue-generating programs to "boutique hospitals," the general medical and emergency services that communities depend on will cease to be financially viable, causing the further erosion of the health care safety net in California, with disastrous results for the public's health. SEC. 2. Article 4 (commencing with Section 127450) is added to Chapter 2 of Part 2 of Division 107 of the Health and Safety Code, to read: Article 4. Boutique Hospital Impacts 127450. (a) For purposes of this section, "boutique hospital" means any general acute care hospital to which either or both of the following applies: (1) Not less than two-thirds of the inpatient discharges are classified in not more than three major diagnosis categories. (2) Not less than two-thirds of the inpatient discharges are for surgical diagnosis-related groups, as defined by the federal Centers for Medicare and Medicaid Services. (b) Every boutique hospital shall, prior to the commencement of operations and every three years thereafter, contract with an independent consultant to perform a study of the impact of the hospital on the health of the community health care system, focusing particularly on the financial impact on hospitals in the area served by the boutique hospital. All costs associated with the study shall be borne by the boutique hospital. (c) The consultant performing the independent health care impact study shall meet with the appropriate impacted groups to gather necessary information to complete the study. (d) The independent health care impact study shall include, but is not limited to, all of the following: (1) An assessment of the effects of the boutique hospital on emergency services and any other health care services that surrounding hospitals are providing. (2) An assessment of the effects of the boutique hospital on the level and type of charity care that surrounding hospitals have historically provided. (3) An assessment of the effects of the boutique hospital on the provision of health care services to Medi-Cal patients, county indigent patients, and any other class of patients by surrounding hospitals. (4) An assessment of the effects of the boutique hospital on any significant community benefit program that the surrounding hospitals have funded or operated within the preceding year. (5) An assessment of the effects of the boutique hospital on surrounding hospitals staffing for patient care areas as it may affect availability of care and on the likely retention of employees and physicians as it may affect continuity of care. (6) An assessment of the financial effect of the boutique hospital on surrounding hospitals. (e) The independent health care impact study shall, where applicable, quantify the effects of the boutique hospital's operations in dollars and clearly document the study methodology and assumptions. (f) Every boutique hospital shall file its independent health care impact study with the Office of Statewide Health Planning and Development and the board of supervisors of the county in which the boutique hospital is located. Every boutique hospital shall also make the study available to the public upon request. (g) This section shall not apply to a general acute care hospital that is an eleemosynary institution that does not bill patients for services provided, or that specializes in pediatrics or physical rehabilitation.