BILL ANALYSIS SB 726 Page 1 SENATE THIRD READING SB 726 (Ashburn) As Amended August 20, 2009 Majority vote SENATE VOTE : 36-3 BUSINESS & PROFESSIONS 10-0 HEALTH 14-1 ----------------------------------------------------------------- |Ayes:|Hayashi, Emmerson, |Ayes:|Jones, Ammiano, Block, | | |Conway, Eng, | |Carter, Conway, De Leon, | | |Hernandez, Nava, Niello, | |Gaines, Hall, Hernandez, | | |Ruskin, | |Bonnie Lowenthal, | | |Smyth, Monning | |Nava, V. Manuel Perez, | | | | |Salas, | | | | |Audra Strickland | | | | | | |-----+--------------------------+-----+--------------------------| | | |Nays:|Adams | | | | | | ----------------------------------------------------------------- APPROPRIATIONS 15-1 ----------------------------------------------------------------- |Ayes:|De Leon, Ammiano, | | | | |Charles Calderon, Coto, | | | | |Davis, | | | | |Fuentes, Hall, Miller, | | | | |Nielsen, | | | | |John A. Perez, Skinner, | | | | |Solorio, Audra | | | | |Strickland, Torlakson, | | | | |Hill | | | | | | | | | | | | | |-----+--------------------------+-----+--------------------------| |Nays:|Harkey | | | | | | | | ----------------------------------------------------------------- SUMMARY : Revises an existing pilot project allowing qualified health care districts and qualified rural hospitals, as specified, to directly employ physicians and extends the sunset date for the pilot project from January 1, 2011, to January 1, 2018. SB 726 Page 2 Specifically, this bill : 1)States that, notwithstanding the bar on the corporate practice of medicine (CPM), a qualified health care district or a qualified rural hospital may employ a licensee, as specified, and may charge for professional services rendered by the licensee if the physician and surgeon approves the charges. However, the district or hospital shall not interfere with, control, or otherwise influence or direct the physician and surgeon's professional judgment in any manner prohibited by law. 2)Removes the 20 physician and surgeon limit on the pilot project. 3)Deletes prior provisions of the pilot project relating to: a) The hospital's net losses; and, b) The percentage of care a hospital provides to Medicare, Medi-Cal, and uninsured patients. 4)States that a "qualified health care district" (District) is a health care district organized and governed pursuant to the Local Health Care District Law. A District shall be eligible to employ physicians and surgeons, as specified, if all of the following requirements are met: a) The District health care facility at which the physician and surgeon will provide services meets both of the following requirements: i) Is operated by the district itself, and not by another entity; and, ii) Is located within a medically underserved population or medically underserved area, as specified, or within a federally designated Health Professional Shortage Area; b) The chief executive officer (CEO) of the District has provided certification to the Medical Board of California (MBC) that the district has been unsuccessful, using commercially reasonable efforts, in recruiting a physician and surgeon to provide services at the facility for at least 12 continuous months beginning on or after July 1, 2008; SB 726 Page 3 c) The District CEO certifies to MBC that the hiring of a physician and surgeon will not supplant physicians and surgeons with current privileges or contracts with the facility; d) The District enters into or renews a written employment contract with the physician and surgeon prior to December 31, 2017, for a term not to exceed 10 years. The contract shall provide for mandatory dispute resolution under the auspices of MBC for disputes directly relating to the physician and surgeon's clinical practice; e) The total number of physicians and surgeons employed by the District does not exceed two at any time. However, MBC shall authorize the District to hire up to three additional physicians and surgeons if the District makes a showing of clear need in the community following a public hearing duly noticed to all interested parties, including, but not limited to, those involved in the delivery of medical care; f) The District notifies MBC in writing that the district plans to enter into a written contract with the physician and surgeon, and MBC has confirmed that the physician and surgeon's employment is within the maximum number permitted by this section. MBC shall provide written confirmation to the District within five working days of receipt of the written notification to MBC; and, g) The District CEO certifies to MBC that the District did not actively recruit a physician and surgeon who, at the time, were employed by a federally qualified health center, a rural health center, or other community clinic not affiliated with the District. 5)Defines a "qualified rural hospital" (QRH) as any of the following: a) A general acute care hospital located in an area designated as nonurban by the United States Census Bureau; b) A general acute care hospital located in a rural-urban commuting area code of four or greater as designated by the United States Department of Agriculture; c) A small and rural hospital, as defined in the Health and SB 726 Page 4 Safety Code; or, d) A rural hospital located within a medically underserved population or medically underserved area, so designated by the federal government, or within a federally designated Health Professional Shortage Area. 6)Requires a QRH to meet all of the following requirements to be eligible to employ physicians and surgeons: a) The QRH CEO has provided certification to MBC that the QRH has been unsuccessful, using commercially reasonable efforts, in recruiting a physician and surgeon for at least 12 continuous months beginning on or after July 1, 2008; b) The QRH CEO certifies to MBC that the hiring of a physician and surgeon shall not supplant physicians and surgeons with current privileges or contracts with the QRH; c) The hospital enters into or renews a written employment contract with the physician and surgeon prior to December 31, 2017, for a term not in excess of 10 years. The contract shall provide for mandatory dispute resolution under the auspices of the board for disputes directly relating to the physician and surgeon's clinical practice; d) The total number of physicians and surgeons employed by the QRH does not exceed two at any time. However, MBC shall authorize the hospital to hire up to three additional physicians and surgeons if the QRH makes a showing of clear need in the community following a public hearing duly noticed to all interested parties, including, but not limited to, those involved in the delivery of medical care; e) The QRH notifies MBC in writing that the QRH plans to enter into a written contract with the physician and surgeon, and the MBC has confirmed that the physician's and surgeon's employment is within the maximum number permitted by this section. MBC shall provide written confirmation to the QRH within five working days of receipt of the written notification to the MBC; and, f) The QRH CEO certifies to the MBC that the QRH did not actively recruit a physician and surgeon who, at the time, were SB 726 Page 5 employed by a federally qualified health center, a rural health center, or other community clinic not affiliated with the QRH. 7)Requires MBC to provide a preliminary report to the Legislature no later than July 1, 2013, and a final report no later than July 1, 2016, evaluating the effectiveness of the pilot project in improving access to health care in rural and medically underserved areas and the project's impact on consumer protection as it relates to intrusions into the practice of medicine. MBC shall include in the report an analysis of the impact of the pilot project on the ability of nonprofit community clinics and health centers located in close proximity to participating health care district facilities and participating rural hospitals to recruit and retain physicians and surgeons. 8)States that nothing in this bill shall exempt a District or QRH from any reporting requirements or affect MBC's authority to take action against a physician and surgeon's license. 9)Sunsets the pilot on January 1, 2018, and as of that date is repealed, unless a later enacted statute enacted before January 1, 2018, deletes or extends that date. 10)Makes legislative findings and declarations. FISCAL EFFECT : According to the Assembly Appropriations Committee, absorbable workload to the MBC to continue oversight of physicians practicing in California and to complete the impact report by 2016. COMMENTS : CPM is typically referred to in the context of a prohibition, banning hospitals from employing physicians. CPM evolved in the early 20th century when mining companies had to hire physicians directly to provide care for their employees in remote areas. However, problems arose when physicians' loyalty to the mining companies conflicted with patients' needs. Eventually, physicians, courts, and legislatures prohibited CPM in an effort to preserve physicians' autonomy and improve patient care. California's 75 HCDs are voter-created local government entities governed by publicly elected boards of trustees. HCDs currently operate 46 of California's 72 public hospitals, providing health care services to over 2 million Californians annually. HCDs are subject to California's CPM prohibition. This bill would enable 46 HCD hospitals and approximately 130 other public, independent SB 726 Page 6 community nonprofit hospitals and clinics to hire physicians directly. Advocates argue that physician recruitment is essential to the continued existence of HCDs. According to a 2007 California Medical Association report, the average age of physicians in rural and underserved urban communities is approaching 60, with many of those planning to retire in the next two years. Co-sponsors of this bill, the Association of California Healthcare Districts reports, "In their struggle to recruit and keep physicians, rural and underserved urban communities in California must compete with large physician groups, Kaiser, the state Department of Corrections, rural hospitals in almost every other state in the nation as well as other entities that may directly employ physicians." Proponents of this bill argue that exempting HCDs from the CPM ban will enable them to attract physicians by absorbing all of the overhead and administrative duties of establishing a medical practice, and providing a stable, competitive salary. Opponents argue that the bar on CPM is an important public policy provision to ensure physician independence and the ability to practice in the patient's best interests. Some argue that the difficulty in recruiting physicians in some parts of California is more likely the result of declining reimbursement than physicians' employment status. This decline in reimbursement is driven by the increased market dominance of large health care plans and insurers, which would in no way be affected by this bill. SB 326 (Chesbro) Chapter 411, Statutes of 2003, established a pilot project permitting district hospitals meeting specific requirements to hire and employ up to two physicians each, for a total of 20 physicians statewide, if the district hospital met the following conditions: 1)Operates in a county of 750,000 or less population; 2)Reported net operating losses in fiscal year 2000-01; and, 3)Has a patient base of at least 50% combined Medi-Cal, Medicare, and uninsured patients. SB 326 required the MBC to administer and evaluate the project prior to its sunset on January 1, 2011. In its 2008 report, the MBC SB 726 Page 7 stated that it was "challenged in evaluating the program and preparing this report because the low number of participants did not afford us sufficient information to prepare a valid analysis of the pilot. ?[W]hile the Board supports the ban on the corporate practice of medicine, it also believes there may be justification to extend the pilot so that a better evaluation can be made. "However, until there is sufficient data to perform a full analysis of an expanded pilot, the Board contends that the statutes governing the corporate practice of medicine should not be amended as a solution to solve the problem of access to healthcare." Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301 FN: 0002575