BILL ANALYSIS
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|Hearing Date:April 13, 2009 |Bill No:SB |
| |726 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC
DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: SB 726Author:Ashburn
As Introduced: February 27, 2009 Fiscal: Yes
SUBJECT: Hospitals: employment of physicians and surgeons.
SUMMARY: Revises and recasts 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; authorizes a qualified hospital
that meets specified requirements to employ an unlimited
number of physicians and surgeons during the term of the
pilot project, and charge for professional services
rendered by those physicians.
Existing law:
1)Business and Professions Code Sections 2400, et seq.,
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"). However, further 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.
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 that requires a majority of
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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:
3) 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.
3) 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.
3) 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, however, 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.
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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 the MBC to report to the Legislature not later
than October 8, 2008, on the effectiveness of the pilot
project.
10)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.
11)Establishes under federal law criteria for the
designation of Medically Underserved Areas (MUAs) and
Medically Underserved Populations (MUPs). MUAs and MUPs
to identify areas or populations with a shortage of
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health care services. Documentation of medical
underserved is based on four factors: health care
provider to population ratio; infant mortality rate;
percentage of population below 100% of the federal
poverty rate; and percentage of population aged 65 or
over.
This bill:
1)Revises and recasts 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.
2)Authorizes a pilot project that allows a qualified
hospital that meets specified requirements to employ an
unlimited number of physicians and surgeons, and charge
for professional services rendered by those physicians.
Requires the total number of licensees employed by the
qualified hospital not to exceed five at any time.
3)Defines a qualified hospital to meet both of the
following:
3) Is a general acute care hospital, as defined.
3) Is located within a MUP, MUA, or health professions
shortage area, as designated by the federal
government.
4)Deletes existing legal definition of district hospital as
one that is governed by the Local Health Care District
Law, provides a percentage of care to Medicare, Medi-Cal,
and uninsured patients, as specified, 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 to the Office of Statewide Health Planning and
Development.
5)Deletes existing legal provision limiting the number of
physicians and surgeons employed by qualified district
hospitals to 20.
6)Requires a licensee to enter into or renew a written
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employment contract with the qualified hospital prior to
December 31, 2011, for a term not in excess of four
years.
7)Requires the MBC to submit a report to the Legislature on
October 1, 2013 on the evaluation of the effectiveness of
the pilot project.
8)Sunsets the provisions of this bill to January 1, 2016.
9)Finds and declares that the Inland Empires, Central
Valley/Sierra Nevada, and South Valley/Sierra Nevada
regions have at least 30 percent fewer physicians than
the Los Angeles and San Francisco Bay area regions have.
FISCAL EFFECT: Unknown. This bill has been keyed "fiscal"
by Legislative Counsel.
COMMENTS:
1)Purpose. According to the Author, California is one of
the few remaining states that does not allow hospitals to
directly hire permanent staff doctors. The Author points
out that at a time where increasing access to health care
has been a top priority of the state's leadership, the
Legislature needs to revisit the exclusion against the
corporate practice of medicine. The Author states that
hospitals have asked repeatedly for the ability to
recruit and hire physicians directly. Further, the
Author states that there would be cost sharing advantages
for insurance premiums, facilities, billing, and other
perks, that would increase profits and provide incentives
for doctors to practice in areas where they would not
normally be inclined to practice medicine, but where the
need is great. This bill, according to the Author, will
address the shortage of physicians who practice in
medically underserved areas.
2)Background.
1) Corporate Practice of Medicine (CPM) Ban. 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
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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 HMOs, 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.
1) Health Care District Hospitals. Health care
districts operate roughly two-thirds of the public
hospitals in California. The vast majority of
facilities are located in rural California. Most of
these facilities are quite small, and tend to serve a
disproportionate percentage of uninsured and Medi-Cal
patients. In some cases, upwards of 50% of the
patients served by the health care districts and their
health facilities are insured by Medi-Cal. Health
care districts and their hospitals are formed,
operated and governed by Section 32000 of the Health
and Safety Code.
1) Shortage of Qualified Physicians in Rural Areas.
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 with 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
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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.
2)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 the 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, the 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, the 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 the MBC's inquires. The MBC stated
that it regrets the lack of participation in the project.
According to the report, the 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. The
MBC stated that due to the "limited extent" of
participation, it was unable to fully evaluate the
project. In the report, the 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. The 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.
3)Similar Legislation this Session. AB 646 (Swanson)
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deletes the existing pilot project allowing district
hospitals in rural areas to employs physicians and
surgeons, as specified, and would and authorize a public
or nonprofit hospital or clinic located in a health care
district serving medically underserved urban populations
and communities, to employ physicians and surgeons if
specified requirements are met. AB 646 is pending in the
Assembly Business and Professions Committee.
AB 648 (Chesbro) authorizes a rural hospital, as defined,
to employ a physician to provide medical services at the
rural hospital or other health facility that the rural
hospital owns or operates and retain all or part of the
income generated by the physician for these medical
services and billed and collected by the rural hospital.
AB 648 also requires a rural hospital that employs a
physician and surgeon pursuant to develop and implement a
policy regarding the independent medical judgment of the
physician, and makes declarations on the shortage of
physicians in certain regions of California.
AB 648 is pending in the Assembly Business and Professions
Committee.
4)Prior Legislation. SB 1640 (Ashburn) of 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) of 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
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Committee.
AB 1944 (Swanson) of 2008 would have deleted the pilot
project for the current hospital districts and would
instead authorized 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.
Sunsets these provisions on January 1, 2011.
5)This Measure Increases the Number of Hospitals that Could
Employ Physicians and Surgeons. Existing law establishes
a pilot project allowing a district hospital to employ
physicians and surgeons if they meet the following
requirements: a) they are governed pursuant to the Local
Health Care District Law; b) provide a percentage of care
to Medicare, Medi-Cal and uninsured patients; c) are
located in a county with a total population of less than
750,000; and, d) have net losses from operations in
fiscal year 2000-2001, as specified. AB 646 (Swanson),
which is pending in the Assembly Business and Professions
Committee, would eliminate the pilot program and would
allow a hospital in a rural hospital district, as
defined, to directly employee physicians. Further AB 646
would allow an urban public or non-profit hospital to
directly employee physicians. AB 648 (Chesbro), which is
also pending in the Assembly Business and Professions
Committee, would allow rural hospitals, as defined, to
employ a physician at its hospital or other facility it
operates provided the hospital implements a policy to
ensure the physician is able to exercise medical
judgment. The MBC would be tasked with regulating
hospitals operating under the exception. Compared to AB
646 and AB 648 , this measure revises and expands the
pilot program and authorizes hospitals in both rural and
urban medically underserved areas, as defined, to
participate in the pilot program and charges the MBC with
reporting to the Legislature on the program's
effectiveness.
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6)Policy Issues. As indicated, this bill allows any
general acute care hospital that is located in an MUA or
MUP to employ an unlimited number of physicians and
surgeons during the term of the pilot project, and charge
for professional services rendered by those physicians.
However, the legislature has consistently indicated its
intent that physicians, and not corporations, be
responsible for patient care decisions. It is unclear if
this bill strikes the right balance between physician's
patient care responsibilities and responding to the
current physician shortage in rural and medically
underserved communities. Moreover, with the findings of
the MBC that there is insufficient information to
properly analyze the effects of the pilot project, it is
not apparent if this bill will achieve the goal of
recruiting and retaining physicians in medically
underserved communities.
7)Arguments in Support. According to the Regional Council
of Rural Countie s, rural communities have a tremendous
difficulty recruiting and retaining physician which
threatens public health, medical access, and the
operational stability of medical facilities, and supports
this bill to allow rural and other qualified medical
providers to directly employ physicians.
8)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. The CMA also states that this bill will
not lead to increased numbers of physicians practicing in
rural or underserved communities but will have the
opposite effect because it will give an "unfair
advantage" to hospitals.
NOTE : Double-referral to Health Committee second.
Support:
Regional Council of Rural Counties
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Opposition:
California Medical Association
Consultant: Michael Stanley