BILL ANALYSIS ----------------------------------------------------------------------- |Hearing Date:July 6, 2009 |Bill No:AB | | |648 | ----------------------------------------------------------------------- SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Gloria Negrete McLeod, Chair Bill No: AB 648Author:Chesbro As Amended:May 28, 2009 Fiscal: Yes SUBJECT: Rural hospitals: physician services. SUMMARY: Establishes a demonstration project to permit rural hospitals, as defined, whose service area includes a medically underserved or federally designated shortage area and which meet certain specified requirements, to directly employ physicians and surgeons. Provides that the total number of licensees employed shall not exceed 10, unless the Medical Board of California (MBC) makes a determination that additional physicians and surgeons is deemed appropriate. Requires documentation and statements regarding the ability of physicians and surgeons to exercise his or her independent medical judgment in providing care to patients. Requires a report to be completed by MBC regarding the project and submitted to the Legislature by June 1, 2019. NOTE : This measure is before the Committee for reconsideration. This measure failed passage in Committee by a vote of 4-4 on June 29, 2009. Existing law: 1)Prohibits corporations and other artificial legal entities which are not owned by physicians from having any professional rights, privileges, or powers (known as the "prohibition against the corporate practice of medicine.") Provides that the Division of Licensing of the Medical Board of California (MBC) may, pursuant to regulations it has adopted, grant approval for the employment of physicians and surgeons on a salary basis by a licensed charitable institution, foundation, or clinic if no charge for professional services rendered to patients is made by that institution, foundation, or clinic. AB 648 Page 2 2)Exempts medical or podiatry professional corporations organized and practicing pursuant to the Moscone-Knox Professional Corporations Act (Corporations Codes Sections 13400 et seq.) and requires a majority of the owners or shareholders of the corporation to be licensed physicians and surgeons or podiatrists, respectively. 3)Exempts the following clinics from the prohibition against the corporate practice of medicine: a) Clinics operated primarily for the purpose of medical education by a public or private nonprofit university medical school to charge for professional services rendered to teaching patients by licensed physicians and surgeons who hold academic appointments on the faculty of the university if the charges are approved by the physician and surgeon in whose name the charges are made. b) Certain nonprofit clinics organized and operated exclusively for scientific and charitable purposes, that have been conducting research since before 1982, and that meet other specified requirements to employ physicians and surgeons and charge for professional services. Prohibits, however, these clinics from interfering with, controlling, or otherwise directing a physician's and surgeon's professional judgment in a manner prohibited by the corporate practice of medicine prohibition or any other provision of law. c) A narcotic treatment program regulated by the Department of Alcohol and Drug Programs to employ physicians and surgeons and charge for professional services rendered by those physicians and surgeons. Prohibits the narcotic clinic from interfering with, controlling, or otherwise directing a physician's and surgeon's professional judgment in a manner that is prohibited by the corporate practice of medicine prohibition or any other provision of law. 4)Finds and declares that a large number of communities are having great difficulty recruiting and retaining physicians and surgeons and that in order to provide the medically necessary services in rural and medically underserved communities that many district hospitals have no other alternative than to directly employ physicians and surgeons in order to provide economic security adequate for them to relocate and reside within their communities. AB 648 Page 3 5)Establishes a pilot project that allows district hospitals that are owned and operated by a health care district, as defined, to employ physicians and surgeons and charge for professional services rendered by those physicians and surgeons, notwithstanding the general prohibition against the practice of medicine by corporations or other artificial legal entities that are not professional medical corporations controlled by licensed physicians and surgeons. 6)Defines a qualified district hospital for purposes of the pilot project as one governed pursuant to the Local Health Care District Law; provides a percentage of care to Medicare, Medi-Cal and uninsured patients, as specified, and is located in a county with a total population of less than 750,000. 7)Prohibits district hospitals under the pilot project from interfering with, controlling, or otherwise directing a physician's and surgeon's professional judgment in a manner that is prohibited by the corporate practice of medicine prohibition or any other provision of law. 8)Allows qualified district hospitals under the pilot project to provide for the direct employment of a total of 20 physicians and surgeons and specifies that each qualified district hospital may employ up to 2 physicians and surgeons. 9)Requires MBC to report to the Legislature no later than October 8, 2008, on the effectiveness of the pilot project. 10)Sunsets this pilot project on January 1, 2011. 11)Defines a general acute care hospital as a health facility having a duly constituted governing body with overall administrative and professional responsibility and an organized medical staff that provides 24-hour inpatient care, including the following basic services: medical, nursing, surgical, anesthesia, laboratory, radiology, pharmacy, and dietary services. 12)Establishes under federal law criteria for the designation of Medically Underserved Areas (MUAs) and Medically Underserved Populations (MUPs). MUAs and MUPs identify areas or populations with a shortage of health care services. Documentation of medically underserved is based on four factors: health care provider to population ratio; infant mortality rate; AB 648 Page 4 percentage of population below 100% of the federal poverty rate; and percentage of population aged 65 or over. This bill: 1)Makes findings and declarations that many hospitals in the state are having great difficulty recruiting and retaining physicians and that there is a shortage of physicians in communities across California, particularly in rural areas, and this shortage limits access to health care for Californians in these communities states that allowing rural hospitals to directly employ physicians will allow rural hospitals to provide economic security adequate for a physician to relocate and reside in the communities service by the rural hospitals and will help rural hospitals recruit physicians to provide medically necessary services in these communities, it will also provide physicians with the opportunity to focus on the delivery of health services to patients without the burden of administrative, financial, and operational concerns associated with the establishment and maintenance of medical office, thereby giving physicians a reasonable professional and personal lifestyle. 2)Defines a "rural hospital" as : a) A general acute care hospital located in an area designated as non-urban by the United States Census Bureau. b) A general acute care hospital located in a rural-urban commuting area code of 4 or greater as designated by the United States Department of Agriculture. c) A rural general acute care hospital, as defined in Health and Safety Code 1250(a). 3)Establishes the Rural Hospital Physician and Surgeon Services Demonstration Project, which permits a rural hospital whose service area includes an MUA, an MUP, or that has been federally designated as an HPSA, to employ one or more physicians and surgeon, not to exceed 10 physicians and surgeons at one time, as specified, to provide medical services. 4)Permits the rural hospital to retain all or part of the income generated by the physician and surgeon for medical services billed and collected by the rural hospital, if the physicians and surgeon approves the charges. AB 648 Page 5 5)Permits a rural hospital to participate in the program if: a) The rural hospital can document that it has been unsuccessful in recruiting one or more primary care or specialty physicians for at least 12 continuous months beginning July 1, 2008; and, b) The chief executive officer of the rural hospital certifies to MBC that the inability to recruit primary care or specialty physicians has negatively impacted patient care in the community and that there is a critical unmet need in the community, based on a number of factors, including, but not limited to, the number of patients referred for care outside the community, the number of patients who experienced delays in treatment, and the length of the treatment delays. 6)States that the total number of licensees employed by the rural hospital at one time shall not exceed 10, unless the employment of additional physicians and surgeons is deemed appropriate by MBC on a case-by-case basis. 7)Requires a rural hospital employing a physician and surgeon pursuant to this project tol develop and implement a written policy to ensure that each employed physician and surgeon exercises his or her independent medical judgment in providing care to patients. 8)Requires each physician and surgeon employed by a rural hospital to sign a statement biennially indicating that the physicians and surgeons: a) Voluntarily desires to be employed by the hospital. b) Will exercise independent medical judgment in all matters relating to the provision of medical care to this or her patients. c) Will report immediately to MBC any action or event that the physician and surgeon reasonably and in good faith believes constitutes a compromise of his or her independent medical judgment in providing care to patients in a rural hospital or other health care facility owned or operated by the rural hospital. 9)Requires a rural hospital to retain the signed statement for at least three years and submit a copy of the signed statement to MBC within 10 working days after the statement is signed. AB 648 Page 6 10)Prohibits a rural hospital from interfering with, controlling, or directing a physician's and surgeon's exercise of his or her independent judgment in providing medical care to patients, and if MBC believes that a rural hospital has violated this prohibition, MBC shall refer the matter to the State Department of Public Health, which shall investigate the matter, as specified. 11)States that nothing shall exempt a rural hospital from a reporting requirement or affect the authority of MBC to take action against a physician's and surgeon's license. 12)Requires MBC to report to the Legislature regarding the demonstration project no later than January 1, 2019. The report shall include an evaluation of the effectiveness of the demonstration project in improving access to health care in rural and medically underserved areas and the demonstration project's impact on consumer protection as it related to intrusions into the practice of medicine. 13)Sunsets the demonstration project on January 1, 2020. FISCAL EFFECT: The Assembly Appropriations Committee analysis dated May 20, 2009, indicates that there are no direct fiscal impacts to MBC to continue the oversight of physicians in California, the demonstration project, the Corporate Practice of Medicine prohibitions and exceptions, and to complete the report to the Legislature at the end of the 10-year period. COMMENTS: 1.Purpose. The California Hospital Association is the Sponsor of this measure. According to the Sponsor, the supply of physicians in California estimated from the MBC data is 17 percent lower than that estimated from the American Medical Association (AMA) Physician Masterfile data. Of the active physicians in California, primary care physicians represent 20 percent fewer than the national standard estimated from AMA data. The number of primary care physicians practicing in California is at the bottom end of the range of estimated needs and the supply of physicians is poorly distributed within 42 counties, primarily in rural areas, falling below the needed estimate. In addition to the low supply of physicians, the Author indicates that rural counties are also facing the additional problem of an aging physician primary care workforce, and significant difficulty recruiting and retaining younger physicians. This situation limits access to health care for Californians in these rural communities. AB 648 Page 7 The Sponsor argues that California is currently only one of five states in the nation which prohibits hospitals from directly employing physicians. The other states are Colorado, Iowa, Ohio and Texas. There is already an exception in California allowing University of California and public hospitals to directly hire physicians. The Sponsor further states that California's rural hospitals face significant obstacles attracting and retaining physicians. The reasons are varied but often include the higher Medicare/Medi-Cal payer mix in rural communities with the accompanying lower reimbursements. Rural areas tend to have higher proportions of low-income, uninsured and older patients. Hence, primary care physicians and specialists cannot generate sufficient income to sustain a rural practice. The Sponsor contends that if rural hospitals had the ability to directly hire physicians, they could provide the economic incentive to attract and retain these physicians resulting in increased access to quality health care services for millions of rural residents. 2.Background. a) Rural Hospitals and Rural Health Care in California. The 69 state and federally designated rural hospitals in California serve the health needs of 17% of California's residents who live in rural areas. There are 42 out of 58 counties with rural hospitals and hospitals vary in size with a range of 4 to 186 beds with the majority of hospitals having less than 44 beds. They not only provide health care, but often serve as the largest employer in the region impacting both the health care industry and the local economy. The rural health care system in California serves more than 800,000 patients in their emergency rooms each year and provides almost 1 million acute and skilled-nursing be days a year to rural communities. Rural hospitals are greatly dependent on Medicare and Medicaid reimbursements due to their patient demographics. Medicaid reimbursements in California are the lowest in the United States (25% less than the national average). Therefore rural hospitals are not able to afford operating costs as they are not reimbursed properly for care given. Additionally, the payer mix in rural communities is suboptimal for the financial success of rural hospitals. The patient bases of rural hospitals tend to be covered by Medi-Cal, Medicare or are uninsured. They are missing a high rate of private and employer based plans which would normally make up for some of the losses with increases in AB 648 Page 8 Medi-Cal and uninsured patients. Due to these challenges, 6 hospitals have closed in the past 4 years and 75% of remaining hospitals have had to reduce the range of their services. In addition to the economic stress of inadequate reimbursement and California's budget crisis, the state is also experiencing issues related to physician workforce recruitment in rural areas. While the number of physicians per 100,000 population has increased, there is a wide geographic and demographic distribution of physicians. Specifically, there is a maldistribution of both specialists and primary care physicians in rural areas. b) Corporate Practice of Medicine (CPM) Ban. The law regarding the corporate practice of medicine generally prohibits corporations or other entities that are not controlled by physicians from practicing medicine to ensure that lay persons are not controlling or influencing the professional judgment and practice of medicine by licensed physicians and surgeons. California codifies this prohibition in Business and Professions Code Sections 2400, et seq. A study done by the California Research Bureau (CRB) in October of 2007, indicates, however, that although the CPM prohibition has an historical and legal basis, most states today, including California, allow a number of exemptions including those for health maintenance organizations, professional medical corporations, teaching hospitals and certain community clinics and non-profit organizations. The CRB calls into question the utility of the CPM doctrine and whether it makes sense in light of the statutes and regulations that directly address concerns raised by the doctrine regarding employment of physicians and surgeons and because of today's changing health care landscape. In 2008, Meritt, Hawkins & Associates (MHA) put out a report entitled, 2008 Review of Physician and CRNA Recruiting Incentives, and indicated that physician recruiting today is characterized by a strong demand for physicians in most specialties, coupled with a limited supply, "The nation continues to face a physician shortage," and that a recruiting pattern that has become apparent over the last three years is an increasing number of hospitals that are employing physicians. The new trend toward hospital employment of physicians, according to MHA, is different from the 1990's when physicians approached hospitals about employment opportunities rather than the reverse. Many physicians, specialists in particular, are seeking hospital employment to relieve them of the stress of high malpractice rates, the struggle for reimbursement, administrative duties and AB 648 Page 9 the general risks and hassles of private practice. Hospital employment is viewed favorably by many physicians today and, in their experience, hospitals offering employed positions may enjoy an advantage over those that do not. MHA further states that laws pertaining to physician recruitment can create scenarios where it is more practical for hospitals to employ physicians than to assist them in establishing independent practices. Employing physicians also represents one way that hospitals can address the issue of physician/hospital competition that may arise when physicians open their own specialty hospitals or surgery centers. c) Shortage of Qualified Physicians in California. According to a June 2009 report by the California HealthCare Foundation entitled, Fewer and More Specialized: A New Assessment of Physician Supply in California, the overall supply of physicians in the state is lower than previous estimates; actually 17 percent lower than estimated by the American Medical Association. The number of primary care physicians actively practicing in California is also at or below the estimated needs. There are only approximately 59 primary care physicians in active patient care per 100,000 population, when the needed estimate is at least 80. Only 16 of California's 58 counties are close to the needed estimate of primary care physicians. However, it was found that there is an abundance of specialists practicing in the state, with 115 per 100,000 population, but again only half the counties are above the estimated need for specialists. Finally, rural counties suffer from low physician practice rates, and from a diminishing supply of primary care physicians, and future erosion of the supply of physicians to these disadvantaged communities is texpected. One of the primary steps recommended for policymakers to take is to increase the number of primary care physicians needed in this state, especially in communities of need, and to provide greater financial incentives, especially in underserved areas. A report prepared by the National Health Foundation for the California Hospital Association titled, Physician Workforce Shortage Issues in California Rural Hospitals, found that: (1) Rural hospitals do not have sufficient physician coverage; specifically specialists and primary care physicians; (2) Rural location and the lack of spousal job opportunities deter physicians from practicing in rural areas; (3) Access to health care in the community is diminished due to the lack of adequate physician coverage; (4) In California, reimbursement from Medi-Cal is not adequate to cover patient care and the payer mix AB 648 Page 10 and population size in rural communities cannot support a specialists' practice; (5) Competition in the form of large medical groups and urban opportunities divert physicians from rural areas; (6) Rural hospitals use creative approaches to recruit and retain physicians. (7) The inability for rural hospitals to employ physicians serves as a barrier and roadblock that deters physicians from practicing in rural areas. A January 2007 report by the Advisory Council on Future Growth in the Health Professions , from the Office of Health Affairs of the University of California, titled, A Compelling Case for Growth, indicated that organization including the American Medical Association, Council on Graduate Medical Education, Association of American Medical Colleges, American College of Physicians, and the U.S. Bureau of Health Professions have predicted an impending shortage of U.S. physicians. In California, two studies issued in 2004 project statewide shortages and severe unmet regional needs within a decade. One of these studies projects a statewide shortage of nearly 17,000 doctors (15.9 percent) by 2015. In January 2007, the California Medical Association (CMA) also stated in a fact sheet that in the next two decades California's population is projected to increase by 10 million people. By 2030 the number of seniors will double, and 1 in 6 Californians will be over 65 years old. As people age, their demand for physician services increases. This increasing need for doctors, an aging physicians workforce, changing physician practice patterns, and inadequate medical education capacity suggest that California and the nation will see significant doctor shortages in the near future. Also, CMA indicated that most California counties have so few physicians that they are classified as HPSAs and that roughly two-thirds of HPSAs are in rural areas, and the remaining third are in very urban areas. According to an October 2006 report by the U.S. Department of Health and Human Services, entitled, Physician Supply and Demand: Projections to 2020, was estimated that approximately 7,000 additional primary care physicians are currently needed in underserved areas to federally-designated shortage areas, and that there will likely be little change in market pressure to improve the undersupply of primary care physicians in rural and other underserved communities. It is estimated that between 2005 and 2020, demand for primary and non-primary care physicians will grow faster than supply, as well as for individual physician specialities. AB 648 Page 11 According to a 2001 report by the Center for Health Professions entitled The Practice of Medicine in California: A Profile of the Physician Workforce, Californians face substantially unequal access to physicians, depending on geography. The report points out that the ratio of total physicians to population ranged from a high of 238 physicians per 100,000 population in the Bay Area to a low of 120 physicians per 100,000 population in the South Valley/Sierra. Regions within the state's largest metropolitan areas (Bay Area and Los Angeles) have the most robust supplies of physicians, with physicians even more likely than the general population to choose these urban areas. Three regions composed of a mix of rural areas and small- to medium- sized metropolitan areas (Central Valley/Sierra, Inland Empire and South Valley/Sierra) have the lowest amount of physicians. d) MBC Report to the Legislature on the Effectiveness of the Pilot Project. SB 376 (Chesbro) Chapter 411, Statutes of 2003, which established the pilot project allowing hospitals that are owned and operated by a health care district to employ 20 physicians and surgeons and charge for professional services rendered by those physicians, required MBC to report to the Legislature no later than October 1, 2008 on the evaluation of the effectiveness of the pilot project in improving access to health care in rural and MUAs and the project's impact on consumer protection as it relates to intrusions into the practice of medicine. In the report, MBC estimated that a total of 20 physician participants were needed to conduct a valid analysis of the project. Only six physicians were hired by eligible hospitals. Further, MBC had difficulty gathering information from the participants on the success of the plan. Only three of the five participating hospitals and five of the six participating doctors responded to MBC's inquires. MBC stated that it regrets the lack of participation in the project. According to the report, MBC held discussions with numerous interested parties, even beyond those participating in the project and found widespread concern over the lack of physicians in rural areas. MBC stated that due to the "limited extent" of participation, it was unable to fully evaluate the project. In the report, MBC stated that it does not support the complete removal of the limitations on the corporate practice of medicine, but concluded that there may be justification to continue the project. MBC stated that it might be appropriate to expand the pilot project to allow more hospitals to participate; but until more information is available it does not recommend amending the statues that govern the corporate practice of medicine. AB 648 Page 12 e) Prior Legislation. SB 1640 (Ashburn, 2008) which is substantially similar to the provisions of this bill, would have revised existing law establishing a pilot project that permits a hospital that is owned and operated by a health care district, as defined, to employ physicians and surgeons; authorized a qualified hospital that meets specified requirements to employ an unlimited number of physicians and surgeons, and allowed the qualified hospital to charge for professional services rendered by those physicians. SB 1640 failed passage in this Committee. SB 1294 (Ducheny, 2008) would have extended a pilot project that permits a hospital that is owned and operated by a health care district, as defined, to employ physicians and surgeons and charge for professional services rendered by those physicians. Changes the definition of a qualified district hospital, and revises the pilot project to allow an unlimited number of physicians and surgeons to be employed by all of the district hospitals and for an individual district hospital to employ up to five licensees at a time. SB 1294 failed passage in the Assembly Appropriations Committee. AB 1944 (Swanson, 2008) would have deleted the pilot project for the current hospital districts and instead would authorize a health care district, as defined, to employ a physician and surgeon if specified requirements are met and the district does not interfere with, control, or otherwise direct the professional judgment of the physician and surgeon. AB 1944 failed passage in the Senate Health Committee. SB 376 (Chesbro, Chapter 411, Statutes of 2003) established a pilot project that permits a hospital that is owned and operated by a health care district, as defined, to employ 20 physicians and surgeons and charge for professional services rendered by those physicians. This bill sunsets these provisions on January 1, 2011. 3.Similar Legislation this Session. SB 726 (Ashburn) revises and expands the current pilot project to authorize the direct employment by qualified district hospitals, as defined, of an unlimited number of physicians and surgeons under the pilot project, and authorizes such hospital to employ up to 5 licensees at a time if certain requirements are met. It also revises the definition of a qualified hospital to mean a hospital that, among other things, is operated by the health care district itself and is either a small and rural AB 648 Page 13 hospital, as defined, or is located within a MUA, as specified. SB 726 would further revise the pilot project to authorize a qualified district hospital to directly employ a physician and surgeon specializing in family practice, internal medicine, general surgery, or obstetrics and gynecology, and would authorize the hospital to request permission from MBC to employ a physician and surgeon specializing in a different field if certain requirements are met. This measure would limit the term of a contract to 10 years and extend the pilot project until January 1, 2018. This measure passed out of this Committee by a vote of 6 to 2, and is now in the Assembly and has been referred to Assembly Business and Professions Committee and the Assembly Health Committee. AB 646 (Swanson) revises and expands the existing pilot project to allow for health care districts, as defined, whose service area includes a medically underserved or federally designated shortage area and which meet certain specified requirements, to employ up to 5 physicians and surgeons within each district and to provide employment contracts of up to 10 years, and to allow employment contracts to be renewed or extended to December 31, 2020. Requires a study to be completed regarding the program and submitted to the Legislature by June 1, 2018. This measure is scheduled to be heard on June 29, 2009, in this Committee. 4.Important Differences Between AB 646 (Swanson), AB 648 (Chesbro) and SB 726 (Ashburn) and the Current Pilot Project. a) All measures expand the number of hospitals that may participate. The current pilot project is very restrictive in the number of hospitals that can participate in the program. It specifies that a "qualified district hospital" was one which is a district hospital organized and governed pursuant to the Local Health Care District Law, provides a percentage of care to Medicare, Medi-Cal and uninsured patients that exceeds 50 percent of patient days, is located in a county with a total population of less than 750,000, and has net losses from operations in fiscal year 2000-01, as reported by OSHPD. AB 646 will allow health care district hospitals that serve in an MUA or an MUP, or in a federally designated HPSA to recruit primary or specialty care physicians to employ at their facility; however, the chief executive officer of the health care district must show to MBC that they have tried to actively recruit a doctor for a 12-month period and have been unable to do so and that the employment of the physician would meet an unmet need in the community based AB 648 Page 14 upon a number of factors. It is unclear how many hospitals could participate, but health care district hospitals and their clinics in both urban and rural settings that meet the requirements would qualify. AB 648 will allow a rural hospital that also serves similar areas as in AB 646 to recruit primary or specialty care physicians, and like AB 646 the chief executive officer of the rural hospital would certify to MBC that they have tried to actively recruit a doctor for a 12-month period and have been unable to do so and that the employment of the physician would meet an unmet need in the community based upon a number of factors. SB 726 would allow a district hospital organized and governed pursuant to the Local Health Care District Law that is located within an MUP or MUA, so designated by the federal government, or is a small or rural hospital to recruit primary or specialty care physicians, and like AB 646 and AB 648, the chief executive officer of the hospital would certify to MBC that they have tried to actively recruit a doctor for a 12-month period and have been unable to do so and that the employment of the physician would meet an unmet need in the community based upon a number of factors. A major restriction for SB 726 is that the hospital is limited to recruiting a "core physician" which is defined as one specializing in family practice, internal medicine, general surgery, or obstetrics and gynecology. The hospital may request permission from MBC to hire a physician in a another field of practice but only demonstrating that recruiting efforts have failed and the hospital can show they have a pervasive need for a physician in that specialty. b) All measures expand the number of physicians and surgeons able to participate. The current pilot project limits each hospital to no more than 2 participating physicians and no more than 20 physicians for all participating hospitals. MBC was critical of this limitation in trying to evaluate the success of this program. AB 646 only limits the number of physicians who may be employed by each hospital to 5, but it also allows MBC to provide up to 5 additional primary or specialty care physicians and surgeons (a total of 10) once MBC approves certification by the hospital of the need for additional physicians and surgeons. AB 648 provides that the total number of physicians and surgeons employed by the rural hospital at one time shall not exceed 10, unless the employment of additional physicians and surgeons is deemed appropriate by MBC on a case-by-case basis. SB 726 provides that the total number of physicians and surgeons employed by the hospital shall not exceed 2 at any time, but that MBC may authorize the hospital to hire no more that 3 additional physicians and surgeons (for a total of 5) if certain specified AB 648 Page 15 requirements of the hospital makes a showing of clear need and there is concurrence of the medical staff of the hospital. c) Increases length of employment contract for physicians and surgeons. The current pilot project restricts the period of the employment contract with the physician and surgeon for a term not to exceed 4 years. AB 646 provides that employment contracts shall be for a period of not more than 10 years, but may be renewed or extended until December 31, 2020. AB 648 provides for no limitation on the period of the employment contract with the physician and surgeon. SB 726 provides similar to AB 646 that the term of the contract shall not be in excess of 10 years. 5.Arguments in Support. The California Association of Rural Health Clinics (CARHC) is in support of this measure and indicates that nearly half of California's rural health clinics (RHCs) are owned and operated by rural hospitals, and many rural hospitals operate RHCs. RHCs serve mostly low-income patients, although in some cases they are the only primary care provider in the community. The CARHC argues that having to make contracts with physicians and being unable to offer them benefits like health insurance and retirement puts hospital-based RHCs at a distinct disadvantage when it comes to recruiting and retaining doctors. According to the CARHC, most physicians nowadays are looking for a situation that mimics a position with Kaiser or some other HMO; clearly defined hours, benefits, minimal after-hours calls. The CARHC states that it is especially hard for rural facilities to compete in this situation; not only does the doctor need to work as an independent contractor but our communities don't always have everything that they want for their families (cultural events, shopping, appropriate work for physicians' partners, etc.). The CARHC believes that creating a pilot project to test the workability of allowing rural hospitals to employ physicians will be a great first step in resolving the issues that have prevented this from happening in our state so far. The Regional Council of Rural Counties (RCRC) is also in support of this measure and indicates that rural communities throughout California have had tremendous difficulty recruiting and retaining physicians, threatening the public health, medical access and the operational stability of these facilities. Given the dominant mix of Medi-Cal and uninsured patients, the establishment of independent physician and surgeon practices in these rural areas is fiscally problematic. The RCRC argues that the wiser choice is to allow our rural hospitals to hire physicians and surgeons directly, providing an attractive alternative to the creation of a private practice in a sparsely populated region. The RCRC states that the enactment of AB 648 Page 16 this measure would be an excellent recruitment and retention tool for rural hospitals, and it would further enhance the health of our communities and strengthen the viability of these critical facilities. 6.Arguments in Opposition. The California Medical Association (CMA) opposes this bill and states that the prohibition on the corporate practice of medicine is vital to ensuring physician independence and protecting patient health. They argue that if hospitals are allowed to directly employ and charge for physician services, quality of care suffers due to the fact that hospitals derive income from more tests being performed and patient beds being filled. CMA agrees that access to physician services is essential and that, in some areas, there are physician shortages. However, violating the corporate bard is not the answer to solve the question of access. CMA has been very supportive of measures to deal with physician supply problems, including advocating for increased slots for medical training in California and supporting the development of a medical school at UC Merced. In fact, CMA has worked extensively to establish stable funding for the Steve Thompson Loan Repayment Program to place physicians in underserved communities. CMA states that this measure would result in reduced access and increased costs. Hospital employment of physicians eliminates competition and patient choice by forcing all care to be delivered through the hospital. As hospitals gain market share in small communities, physicians not employed will likely be forced out of business. This results in increased costs and reduces the ability of patients to choose where they wish to receive health care. The Central Valley Health Network , a non-profit membership organization comprised of 124 federally qualified health centers, is opposed to this measure and asserts that once health care districts are given the authority to directly hire and bill for physician services, it will create an environment where federally qualified health centers, which provide linguistically and culturally sensitive care, will no longer be able to compete, in regards to the recruitment and retention of qualified physicians. "Thus the impact of this bill could have a detrimental effect on the ability of federally qualified health centers to meet the growing health care demands of their patients, which consists of the Central Valley and Inland Empire's underserved and uninsured populations." The California Primary Care Association (CPCA) has an "oppose unless amended" position on this measure. CPCA is concerned over the possible impact of this bill could have on California's clinic safety-net and believes this bill could severely limit rural AB 648 Page 17 Community Clinics and Health Centers (CCHCs) ability to recruit and hire physicians, largely because they cannot offer as competitive a salary and benefits package as hospitals and their affiliates. Currently CCHCs are exempt from the Corporate Practice of Medicine Act, which mitigates the economic disadvantage by allowing the CCHC to bear the administrative burden involved with billing and liability on behalf of the physician. Currently, physicians contracting with hospitals manage the administrative elements of their own. If this bill passes, argues CPCA, it would disrupt a level playing field thereby making it nearly impossible for CCHCs to recruit and retain physicians. CPCA indicates that they have provided amendments to the Author which address their concerns. 7.Policy Issue : Should the Medical Board be involved in making determinations about the unmet medical needs of communities or the need for primary or specialty physicians and surgeons in these areas? MBC is primarily a licensing agency and an enforcement agency with the primary mission to protect consumers and patients and to take necessary licensing actions against physicians and surgeons for violation(s) of the Medical Practices Act. The role of making determinations about the unmet medical needs of communities in California and to what extent additional physicians and surgeons are needed in these communities would seem more appropriate for an agency such as OSHPD. The Committee may want to give serious consideration to directing the Authors of AB 646 (Swanson), AB 648 (Chesbro) and SB 726 (Ashburn) to contact the Healthcare Workforce Policy Commission under OSHPD to determine whether this would be a more appropriate agency and governing body to make such determinations. 8.Author's Amendments : The Author has agreed to take the following amendments in Senate Health Committee: a) To prohibit a rural hospital from hiring a physician employed by a clinic b) To add whistle blower protection for physicians who file a complaint about a hospital interfering with their independent medical judgment. NOTE : Double-referral to Senate Health Committee (second). SUPPORT AND OPPOSITION: AB 648 Page 18 Support: California Hospital Association (Sponsor) California Association of Rural Health Clinics California Commission on Aging California Healthcare West Coalinga Regional Medical Center Colusa Regional Medical Center Mayers Memorial Hospital District Mercy Medical Center Mt. Shasta Mercy Medical Center Redding Regional Council of Rural Counties St. Elizabeth Community Hospital Sutter Coast Hospital Oppose Unless Amended: California Primary Care Association Opposition: California Medical Association Central Valley Health Network Darin M. Camarena Health Centers Los Angeles County Medical Association California Radiological Society California Society of Pathologists National Health Services, Inc. Consultant:Bill Gage