BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 726|
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UNFINISHED BUSINESS
Bill No: SB 726
Author: Ashburn (R), et al
Amended: 8/20/09
Vote: 21
SENATE BUS., PROF. & ECON. DEVEL. COMMITTEE : 6-2, 4/27/09
AYES: Negrete McLeod, Corbett, Correa, Florez, Oropeza,
Yee
NOES: Aanestad, Walters
NO VOTE RECORDED: Wyland, Romero
SENATE HEALTH COMMITTEE : 10-0, 4/29/09
AYES: Alquist, Strickland, Cedillo, Cox, DeSaulnier, Leno,
Maldonado, Negrete McLeod, Pavley, Wolk
NO VOTE RECORDED: Aanestad
SENATE APPROPRIATIONS COMMITTEE : 11-1, 5/26/09
AYES: Kehoe, Cox, Corbett, Denham, DeSaulnier, Hancock,
Leno, Oropeza, Runner, Wolk, Yee
NOES: Walters
NO VOTE RECORDED: Wyland
SENATE FLOOR : 36-3, 6/1/09
AYES: Alquist, Ashburn, Benoit, Calderon, Cedillo,
Cogdill, Corbett, Correa, Cox, Denham, DeSaulnier,
Ducheny, Dutton, Florez, Hancock, Harman, Hollingsworth,
Huff, Kehoe, Leno, Liu, Lowenthal, Maldonado, Negrete
McLeod, Oropeza, Padilla, Pavley, Romero, Runner,
Simitian, Steinberg, Strickland, Wiggins, Wolk, Wright,
Yee
NOES: Aanestad, Walters, Wyland
NO VOTE RECORDED: Vacancy
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ASSEMBLY FLOOR : 43-24, 6/28/10 - See last page for vote
SUBJECT : Hospitals: employment of physicians and
surgeons
SOURCE : Author
DIGEST : This bill 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.
Assembly Amendments revise the pilot program by allowing
qualified health care districts, as defined, and qualified
rural hospitals, as defined, to participate in the pilot
program, and revise the requirements a qualified health
care district and qualified rural hospital must meet in
order to employ physicians and surgeons pursuant to the
pilot program.
ANALYSIS : Existing law prohibits corporations and other
artificial legal entities from having professional rights,
privileges, or powers in relation to the practice of
medicine. Under the Corporate Practice of Medicine (CPM)
doctrine, the state prohibits hospitals and other entities
from employing physicians to provide professional services.
Existing law establishes exemptions from the CPM
restriction for:
1. 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.
2. Clinics operated primarily for the purpose of medical
education by a public or private nonprofit university
medical school.
3. Narcotic treatment programs operated under, and
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regulated by, the State Department of Alcohol and Drug
Programs.
4. Medical or podiatry professional corporations organized
and practicing pursuant to the Moscone-Knox Professional
Corporations Act, that require a majority of
shareholders of the corporation to be licensed
physicians, surgeons, or podiatrists.
Existing law establishes, until 2011, a pilot program that
establishes an exemption from the CPM prohibition for
qualified district hospitals, enabling them to directly
employ physicians and surgeons, if they meet several
requirements. To be eligible to participate in the pilot
project, the district hospital must provide at least 50
percent of its patient days to Medicare, Medi-Cal, and
uninsured patients, must be located in a county with a
total population of less than 750,000 persons, and must
have reported net losses from operations in fiscal year
2000-01, as specified.
Existing law limits the total number of physicians that may
be employed under the pilot project to 20 statewide, and
limits the total number that may be employed at any given
hospital to two. In addition, under the pilot an
employment contract may not exceed four years.
Existing law requires the Medical Board of California (MBC)
to report to the Legislature no later than October 1, 2008,
on the effectiveness of the pilot project.
Existing state law defines rural hospitals as those that
fall within certain peer groupings, based on their
characteristics and size.
This bill:
1. States that, notwithstanding the bar on the 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
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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:
(1) Is operated by the district itself, and not
by another entity.
(2) 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 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.
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
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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.
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.
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C. A small and rural hospital, as defined in the
Health and Safety Code.
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
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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.
F. The QRH CEO certifies to the MBC that the QRH 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 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.
Background
Health Care District Hospital Pilot Project . The district
hospital pilot project was established to address the
problem of recruiting and retaining physicians in rural and
underserved communities. The premise behind the pilot
project was that many district hospitals lack viable
alternatives to attract physicians to their staff, and that
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direct employment may offer a better incentive to encourage
physicians to relocate to or remain in rural and
underserved areas.
While it was expected that the maximum allowed number of 20
physicians would end up being employed under the pilot
project, according to MBC's report to the Legislature in
October 2008, due to a number of constraints, only six
physicians have been employed (by five qualifying
hospitals) under the pilot. Of the six, only one
represented a physician who came from outside of the area
of the hospital; the remaining five were in practice in the
areas served by the hospital prior to their employment. In
the report, the MBC notes that due to the limited
participation in the pilot, and the limited responses from
hospitals that elected and decided not to participate in
the pilot, it is difficult to draw conclusions regarding
the effectiveness of the pilot. However, the MBC states
that it believes there may be justification to extend the
pilot so that a better evaluation of direct employment of
physicians can be made, and recommends broadening the pilot
to include more hospitals, while maintaining limits on the
number of physicians employed under the pilot and while
maintaining the general prohibition on the corporate
practice of medicine.
Health Care Districts . Health care districts operate
roughly two-thirds of the public hospitals in California.
The vast majority of facilities are located in rural parts
of California. Most of these facilities are quite small,
and tend to serve a disproportionate percentage of
uninsured and Medi-Cal patients. In many cases, 50 percent
or more of the patients served by the health care districts
and their health facilities are insured by Medi-Cal and
Medicare.
Medically underserved areas and populations and health
professions shortage areas . Several types of medically
underserved areas are designated by the federal Health
Resources and Services Administration, including the four
types that are targeted by this bill: (1) a primary care
health professional shortage area generally must have a
population to physician ratio 3,500 to 1 or greater (an
area with a ratio of 3,000 to 1 that has "unusually high
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need" may also qualify) and have a lack of access to health
care in surrounding areas because of excessive distance,
over-utilization, or access barriers; (2) a mental health
professional shortage area must have a population to mental
health professional ratio of 6,000 to 1 or greater and a
population to psychiatrist ratio of 20,000 to 1 or greater,
or a 9,000 to 1 ratio for mental health professionals
solely, or a 30,000 to 1 ratio for psychiatrists solely;
(3) a dental health professional shortage area must have a
population to dentist ratio of 5,000 to 1, or have a ratio
of 4,000 to 1 and be an area of "unusually high need" and
have a lack of access to dental care in surrounding areas
because of distance, overutilization, or access barriers;
and (4) medically underserved areas and populations must
meet an index that takes into account four criteria of
medical need: (1) percentage of population below 100
percent of the federal poverty level (FPL); (2) percentage
of population age 65 and over; (3) infant mortality rate;
and 4) primary care physicians per 1,000 population.
Health care providers providing services in health
professional shortage areas qualify for student loan
repayment programs and placement through the National
Health Service Corps, and in some cases enhanced Medicare
reimbursement.
Prior Legislation
SB 1294 (Ducheny), of 2007 , which died in the Assembly
Appropriations Committee revised the pilot project to allow
the employment of more than 20 physicians and surgeons, at
the discretion of the MBC, and allowed the total number of
physicians employed by a qualified district hospital to
exceed two, if deemed appropriate by the MBC on a
case-by-case basis, revised the definition of a qualified
hospital to a district hospital that is located in a
medically underserved area that had net losses in the most
recent fiscal year, extended the pilot project until
January 1, 2017 and made other conforming changes.
SB 1640 (Ashburn), of 2007 , would have revised the district
hospital pilot project to allow general acute care
hospitals that meet specified requirements to directly
employ up to five physicians each and collectively to
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employ an unlimited number of physicians statewide. Would
have extended the pilot project until January 1, 2016, and
required MBC to report to the Legislature no later than
October 1, 2013, on the evaluation of the effectiveness of
the pilot project. Failed passage in the Senate Business,
Professions, and Economic Development Committee.
AB 1944 (Swanson), of 2007 , would have eliminated the
district hospital pilot project and instead authorized such
hospitals to directly employ physicians to primarily treat
Medi-Cal patients without limits, if specified requirements
are met. Failed passage in the Senate Health Committee.
SB 376 (Chesbro), Chapter 411, Statutes of 2003 ,
establishes a pilot project in which qualified healthcare
district hospitals may employ physicians, and charge for
professional services rendered by the physician. Limits
the number of physicians employed by all qualified district
hospitals in the state to 20, and also limits each district
hospital to two employed physicians or surgeons. Sunsets
the pilot project in 2011, and requires submitting report
to the Legislature by October 2008 on the effectiveness of
the pilot project.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 6/29/10)
American Association for Retired Persons
American Federation of State, County and Municipal
Employees Association of California Healthcare Districts
Latino Mayors and Elected Officials Coalition California
Professional Firefighters California School Employees
Association Equality California Alliance of Catholic Health
Care Regional Council of Rural Counties Service Employees
International Union California Hospital Association
Antelope Valley Hospital
Bakersfield Memorial Hospital
Beach Cities Health District
Cactus Flower Florist, Yucca Valley, Ca.
California Association of Rural Health Clinics
California Church Impact
California Commission on Aging
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California Farm Bureau Federation
California Labor Federation
California State Association of Counties
Californian Alliance of Retired Americans
Camarillo Health Care District
Catholic Healthcare West
Congress of California Seniors
Disability Rights California
Dolores C. Huerta Foundation
Eastern Plumas Health Care
Fallbrook Healthcare District
Francis A. Quinn / Bishop Emeritus of Sacramento
Health Access
Hi Desert Memorial Health Care District
Insure the Uninsured Project
JC Fremont Health Care District
JERICHO
Mammoth / Southern Mono Health Care District
Medical Board of California
Morongo Basin Broadcasting Corporation, Joshua Tree, Ca.
Mountains Community Hospital
North Kern - South Tulare Hospital District
North Sonoma County Hospital District
Northern Inyo Hospital
Oak Valley Healthcare District
Palm Drive Hospital
Pioneers Memorial Healthcare District
Poland Construction, Joshua Tree, Ca.
Sacramento Area Congregations Together
Salinas Valley Memorial Healthcare System
Sierra Kings Health Care District
Sierra View District Hospital
Soledad Community Health Care District
Sonoma County Democratic Central Committee
Sonoma County Democratic Central Committee
Sonoma Valley Hospital
Tehachapi Valley Healthcare District
West Contra Costa Healthcare District
OPPOSITION : (Verified 6/29/10)
Alameda-Contra Costa Medical Association
American Society for Dermatologic Surgery
Association of California Neurologists
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California Medical Association
California Primary Care Association
Fresno-Madera Medical Society
Los Angeles County Medical Association
North Valley Medical Association
Santa Barbara County Medical Society
Santa Cruz Medical Society
Stanislaus Medical Society
Tulare County Medical Society
ARGUMENTS IN SUPPORT : According to the author's office,
California is one of a small number of states that do not
allow hospitals to directly hire permanent staff doctors.
The author's office points out that at a time when
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's office states that small and rural hospitals
have asked repeatedly for authority to recruit and hire
physicians directly. According to the author's office,
this bill will address the shortage of physicians who
practice in medically underserved areas. Specifically, the
author's office states that there will be advantages for
physicians who enter into employment contracts under the
bill, including lower overhead costs and employment
benefits that attract doctors to areas where they are not
normally be inclined to practice, but where the need is
great.
ASSEMBLY FLOOR :
AYES: Ammiano, Bass, Beall, Tom Berryhill, Block,
Blumenfield, Bradford, Brownley, Caballero, Charles
Calderon, Carter, Chesbro, Coto, Davis, De Leon, Eng,
Evans, Feuer, Fong, Furutani, Gatto, Gilmore, Hall,
Hernandez, Hill, Huber, Jones, Lieu, Bonnie Lowenthal,
Ma, Mendoza, Nava, Niello, Norby, Portantino, Ruskin,
Saldana, Skinner, Audra Strickland, Swanson, Torlakson,
Torres, John A. Perez
NOES: Adams, Anderson, Arambula, Bill Berryhill,
Blakeslee, Buchanan, Conway, De La Torre, Fletcher,
Fuller, Gaines, Harkey, Hayashi, Huffman, Miller,
Monning, Nestande, Nielsen, Salas, Silva, Smyth, Tran,
Villines, Yamada
NO VOTE RECORDED: Cook, DeVore, Fuentes, Galgiani, Garrick,
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Hagman, Jeffries, Knight, Logue, V. Manuel Perez,
Solorio, Torrico, Vacancy
JJA:do 6/29/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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