BILL ANALYSIS
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|Hearing Date:August 25, 2010 |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 Amended: August 20, 2009 Fiscal: Yes
SUBJECT: Health care districts: rural hospitals: employment of
physicians and surgeons.
SUMMARY: Revises and expands an existing pilot project which
authorized a qualified health care district, as defined, to directly
employ a limited number of physicians and surgeons, as specified, and
instead allows for qualified health care districts and rural
hospitals, as defined, which meet certain requirements, to employ up
to two physicians and surgeons within each district or rural hospital
and to hire three additional physicians and surgeons if they can show
a clear need in the community to the Medical Board of California
(MBC). The district or rural hospital would be able to enter into a
written employment contract with a physician and surgeon prior to
December 31, 2017, for a term not to exceed 10 years. Requires the
MBC to submit a preliminary report evaluating the effectiveness of the
pilot project, as specified, not later than July 1, 2013, and a final
report not later than July 1, 2016, and provides for a sunset of the
program by January 1, 2018.
NOTE : This measure was amended in the Assembly and has been referred
by the Senate Rules Committee pursuant to Rule 29.10 to this
Committee for consideration. Because the amendments in the Assembly
made a change of major policy significance, the Committee may by a
vote of the majority either: (1) hold the bill, (2) return the bill
to the Senate Floor for consideration of the bill, or (3) rerefer the
bill to fiscal committee pursuant to Joint Rule 10.5.
Existing law, the Health and Safety Code:
1)Provides that the Local Hospital District Law shall be deemed a
reference to the Local Health Care District Law and that any
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reference to a local hospital district shall mean a health care
district.
2)Provides that a local hospital district may be organized,
incorporated and managed, as specified, and may be a territory
in any one or more counties, either incorporated or
unincorporated.
3)Provides that that the manner of formation of local hospital
districts shall be done pursuant to a hospital district
election, as specified, and after receipt of comments and
recommendations of the Office of Statewide Health Planning and
Development and each area health planning agency within the
proposed district, and after a hearing upon the petition to form
a hospital district by the supervising authority of the county.
4)Provides that a "small and rural hospital" means an acute care
hospital that meets either of the following criteria:
a) Meets the criteria for designation within peer group six
or eight, as defined in the report entitled "Hospital Peer
Grouping for Efficiency Comparison, dated December 20, 1982.
b) Meets the criteria for designation within peer group five
or seven and has no more than 76 acute care beds and is
located in an incorporated place or census designated place
of 15,000 or less population according to the 1980 federal
census.
Existing law, the Business and Professions Code:
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.
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
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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.
5)Establishes a pilot project that allows district hospitals that
are owned and operated by a health care district , as defined, to
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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 and 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 and sunsets
this pilot project on January 1, 2011 .
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)Defines Medically Underserved Area as an area as defined in
Federal Regulations or an area of the state where unmet priority
needs for physicians exist as determined by the California
Healthcare Workforce Policy Commission, as specified. Defines
"Medically Underserved Population" as the Medi-Cal, Healthy
Families and uninsured population.
12)Establishes under the Federal Regulations criteria for the
designation of Medically Underserved Areas (MUAs) and Medically
Underserved Populations (MUPs). MUAs and MUPs identify areas or
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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; percentage of population below 100% of the federal poverty
rate; and percentage of population aged 65 or over.
This bill:
1)Revises and expands the existing pilot project and authorizes
qualified health care districts, as defined, and qualified rural
hospitals, as defined, that meet specified requirements to
employ an unlimited number of physicians and surgeons, and
charge for professional services rendered by those physicians
and surgeons. Requires, however, that the total number of
licensees employed by a qualified health care district or a
qualified rural hospital shall not exceed more than two at any
time unless the health care district or rural hospital can show
a clear need to the Board, following a pubic hearing, that
additional physicians and surgeons are needed in the community.
However, no more than three additional physicians and surgeons
may be employed by the health care district or rural hospital.
2)Makes findings of the Legislature regarding the uninsured and
underinsured population of California, the difficulty that rural
and medically underserved communities have in recruiting
physicians and surgeons and a viable approach is the ability to
employ physicians and surgeons.
3)Provides that it is the intent of the Legislature that a
qualified health care district or a qualified rural hospital, in
meeting the requirements of this measure, be able to employ
physicians and surgeons directly and to charge for their
professional services.
4)States that the Legislature reaffirms that the Medical Practice
Act provides an increasingly important protection for patients
and physicians and surgeons from inappropriate intrusions into
the practice of medicine, and that the Legislature further
intends that a qualified health care district or qualified rural
hospital not interfere with, control, or otherwise direct a
physician and surgeon's professional judgment.
5)Establishes a pilot project for the direct employment of
physicians and surgeons by qualified health care districts and
qualified rural hospitals in order to improve the recruitment
and retention of physicians and surgeons in rural and other
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medically underserved areas.
6)Provides that a "qualified health care district" is a district
that is organized and governed by the Local Health Care District
Law.
7)Provides that a qualified health care district shall be eligible
to employ physicians and surgeons if all of the following
requirements are met::
a) The district health care facility at which the physicians
and surgeon will provide services meets both of the following
requirements:
i) Is operated by the district itself, and not by another
entity.
ii) Is located within a medically underserved population
or medically underserved area, so designated by the federal
law and regulations, or within a federally designated
Health Professional Shortage Area.
b) The chief executive officer 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 provided services at
the facility for at least 12 continuous months beginning on
or after July 1, 2008. This certification shall specify the
commercially reasonable efforts and shall specify the reasons
for lack of success, if known. In providing a certification
to the MBC, the chief executive officer need not provide
confidential information regarding specific contract offers
or individualized recruitment incentives.
c) The chief executive officer of the district certifies to
the MBC that the hiring of a physician and surgeon shall not
supplant physicians and surgeons with current privileges or
contracts with a district health care 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 in excess of 10 years and that 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.
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e) The total number of physicians and surgeons employed by
the district does not exceed two any time. However, the MBC
shall authorize the district to hire not more than 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 the MBC in writing that the district
plans to enter into a written contract with the physicians
and surgeon, and the MBC has confirmed that the physician and
surgeon's employment is within the maximum number permitted.
g) The chief executive officer of the district certifies to
the MBC that the district did not actively recruit a
physician and surgeon who, at the time, was employed by a
federally qualified health center, a rural health center, or
other community clinic affiliated with the district.
8)Provides that a "qualified rural hospital" means 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. (See above,
Existing law, Health and Safety Code, Item #4.)
d) A rural hospital located within a medically underserved
population or medically underserved area, so designated by
the federal law and regulations, or within a federally
designated Health Professional Shortage Area.
9)Provides that a qualified rural hospital shall be eligible to
employ physicians and surgeons if they meet all the requirements
similar to those for qualified health care districts.
10)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
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operations in fiscal year 2000-01, as reported to the Office of
Statewide Health Planning and Development (OSHPD).
11)Deletes existing legal provision limiting the number of
physicians and surgeons employed by qualified district hospitals
to 20.
12)Requires the MBC to submit a preliminary report to the
Legislature not later than July 1, 2013, and a final report not
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. The 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.
13)Provides that a qualified health care district or qualified
rural hospitals shall not be exempt from any reporting
requirements or affect the MBC's authority to take action
against a physician and surgeon's license.
14)Sunsets the provisions of this bill on January 1, 2018.
Assembly Amendments :
1)Expands the number of health care district hospitals and clinics
which may participate in the pilot project by including those
hospitals and clinics that are not only owned and operated by a
health care district, but are also organized and governed by the
Local Health Care District Law and which are located within a
federally designated Health Professional Shortage Area. This
could include both urban and rural hospitals and clinics which
are part of a local health care district.
2)Expands the number of rural hospitals which may participate in
the pilot project by including those hospitals which are not
only defined as small and rural, but also includes those that
are general acute care hospitals located in an area designated
as nonurban by the U.S. Census Bureau and those located in a
rural-urban commuting area code of four or greater as designated
by the U.S. Department of Agriculture. Also includes a rural
hospital located within a medically underserved population or
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medically underserved area, so designated by the federal law and
regulations, or within a federally designated Health
Professional Shortage Area.
3)Specifies that rural hospitals shall be eligible to employ
physicians and surgeons if they meet all the requirements
similar to those for qualified health care districts.
4)Deletes requirement that hospitals could only recruit "core
physicians and surgeons" which included those specializing in
family practice, internal medicine, general surgery, or
obstetrics and gynecology, and could hire a physician and
surgeon in another specialized field only if certain
requirements were met.
5)Deletes requirement that the medical staff of the hospital shall
concur by an affirmative vote that employment of the physician
and surgeon is in the best interest of the communities served by
the hospital.
6)Requires that the chief executive officer of the health care
district or the rural hospital certify to the MBC that the
district or rural hospital did not actively recruit a physician
and surgeon who, at the time, was employed by a federally
qualified health center, a rural health center, or other
community clinic affiliated with the district.
7)Requires the MBC as part of its report to the Legislature to
include 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.
FISCAL EFFECT: According to the Assembly Appropriations Committee
analysis, dated August 27, 2009, there would be absorbable
workload to the MBC to continue oversight of physicians practicing
in California and to complete the impact report by 2016.
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
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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.
a) 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
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employment to relieve them of the stress of high malpractice
rates, the struggle for reimbursement, administrative duties
and 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.
b) Areas Designated as HPSA, MUA or MUP. The Health Resources
and Services Administration Shortage Designation Branch, of the
U.S. Department of Health and Human Services, develops shortage
designation criteria and uses them to decide whether or not a
geographic area, population group or facility is a Health
Professional Shortage Area (HPSA) or a Medically Underserved Area
(MUA) or Population (MUP). HPSAs may be designated as having a
shortage of primary medical care, dental or mental health
providers. They may be urban or rural areas, population groups
or medical or other public facilities. The criteria for
determining primary medical care HPSAs of greatest shortage is
based on a number of factors: population-to-provider ratio,
poverty rate, and travel distance/time to nearest accessible
source of care. There are additional factors such as infant
mortality/low birth weight rates for primary care. A scale is
developed for scoring of each factor and relative weights for the
various factors are used. As of September 30, 2009, there are
6,204 primary care HPSAs nationwide with 65 million people living
in them. It would take 16,643 practitioners to meet their need
for primary care providers (a population to practitioner ratio of
2,000:1).
Under the federal requirements, an MUA may be a whole county or a
group of contiguous counties, a group of county or civil
divisions or a group of urban census tracts in which residents
have a shortage of personal health services. The criteria for
MUA designation involves application of the Index of Medical
Underservice (IMU) to obtain a score for the area. The IMU
involves four variables: ratio of primary medical care
physicians per 1,000 population, infant mortality rate,
percentage of the population with incomes below the poverty
level, and percentage of the population age 65 or over.
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Generally any area which has an IMU score of 62.0 or less
qualifies for designation as an MUA. The MUP designation again
involves the application of the IMU to data on an underserved
population which includes such factors as low-income or
Medicaid-eligible populations, or cultural and/or linguistic
access barriers to primary care services.
The only difference for California is that an MUA may also be
designated by the California Healthcare Workforce Policy
Commission in determining that there are unmet needs for a
specific area and that MUPs also include Medi-Cal, Health
Families and uninsured populations. The Shortage Designation
Program of the Healthcare Workforce Development Division of the
Office of Statewide Health Planning and Development provides
technical assistance to clinics, health care districts and other
primary care providers seeking recognition as an HPSA or MUA or
MUP.
c) Health Care District Hospitals. Health care districts operate
roughly two-thirds of the public hospitals in California. There
are 75 health care districts that are voter-created local
government entities governed by publicly elected boards of
trustee. Health care districts currently operate 46 of
California's 72 public hospitals, providing health care services
to over 2 million Californians annually; 31 of the hospitals
owned and operated by health care districts are designated
"rural" hospitals. 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 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. It has been indicated that this measure would
enable approximately 46 health care district hospitals and
approximately 130 other public, independent community nonprofit
hospitals and clinics to hire physicians and surgeons directly
since they serve in areas designated as MUA, MUP or HPSA.
d) 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
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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 expected. 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 and
population size in rural communities cannot support a
specialist's 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 recent 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 organizations 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
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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 one in six 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, it 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 specialties.
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 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.
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e) 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.
f) Prior Legislation. SB 1640 (Ashburn, 2008) which is 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
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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.
Also, it would have changed the definition of a qualified
district hospital, and revised 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 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, 2009-2010. AB 646 (Swanson)
Revises and expands an existing pilot project which authorized
qualified health care district hospitals, as defined, to directly
employ a limited number of physicians and surgeons, as specified,
and instead allows for health care districts, as defined, which meet
certain requirements including conducting a public hearing and
adopting a specified resolution declaring the need for the health
care district to recruit and directly employ one or more physicians
and surgeons, to employ up to ten physicians and surgeons within
each health care district, as defined. The health care districts
permitted to employ physicians and surgeons would be those whose
service area includes an MUA, an MUP, or that has been federally
designated as an HPSA, 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, and provides for a sunset of the program by January 1, 2021.
This measure failed in this Committee on June 28, 2010, by a vote of
4 to 2.
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AB 648 (Chesbro) establishes the Rural Hospital Physician and Surgeon
Services Demonstration Project, which permits a rural hospital, as
defined, whose service area includes an MUA, an MUP, or that has
been federally designated as an HPSA, to employ one or more
physicians and surgeons, not to exceed 10 physicians and surgeons at
one time, as specified, to provide medical services. However, the
bill permits the hospital to exceed 10 physicians if MBC deems
appropriate. Allows for a rural hospital to participate in the
program if they meet specified requirements. Provides that a rural
hospital that employs a physician and surgeon shall 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. Also provides that a rural hospital
shall not interfere with, control, or direct a physician's and
surgeon's exercise of his or her independent medical judgment in
providing medical care to patients, and if MBC believes a rural
hospital has violated this prohibition, then MBC may refer the
matter to the Department of Public Health (DPH) to investigate and
DPH may assess a civil penalty, as specified. Provides MBC shall
provide an evaluation report to the Legislature by January 1, 2019,
and provides for a sunset of the Demonstration Project by January 1,
2020. This measure failed passage in this Committee by a vote of
4-4 on June 29, 2009, and was granted reconsideration.
4)Important Differences Between SB 726 (Ashburn), AB 646 (Swanson) and
AB 648 (Chesbro) 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 a MUA or an MUP, or
in a federally designated HPSA to recruit primary or specialty
care physicians to employ at their facility; however, the
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
upon a number of factors. It is unclear how many hospitals could
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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
serve an unmet need in the community based upon a number of
factors. SB 726 would allow a qualified health care district
located within a federally designated MUP, MUA or HPSA, or a
qualified rural hospital that is located within a federally
designated MUP, MUA or HPSA, or is designated in specified ways
by the U.S. Census Bureau or the U.S. Dept. of Agriculture as a
rural community, to recruit and employ physicians and surgeons,
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. Like
AB 646, 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.
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 health district or rural hospital may
employ an "unlimited number" of physicians and surgeons, but that
the total number of physicians and surgeons employed by a
particular 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
requirements of the hospital makes a showing of clear need and
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there is concurrence of the medical staff of the hospital.
c) All measures increase the length of employment contracts 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 four 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. According to the AFSCME , this measure would
only be of benefit to small, independent community based hospitals,
such as those owned and operated by health care districts. It would
give health care districts the same authority as all other public
health care agencies in California; those operated by the federal
government, state and counties which are all exempt from the
physician hiring ban. There are more than 3,000 employed doctors
working for these entities in the state. Most states allow the
employment of physicians by hospitals and other heath care
facilities, and it is a common practice nationally, and AFSCME
argues that the current physician hiring ban has become a
significant barrier to the recruitment of doctors in rural and
underserved urban communities. AFSCME indicates that this measure
builds on the pilot program by authorizing all communities in need
to employ the physicians through health care districts. Many of
these communities have suffered from a chronic, severe shortage of
doctors for over a decade; worst in California's rural and
underserved inner-city areas where Medi-Cal and Medicare are the
primary payors for health care services. The majority of doctors in
California do not accept Medi-Cal patients. This measure is an
important step towards comprehensive health care reform, and it is
one that has no direct state cost. It will provide these
communities in need with a powerful physician recruitment tool, by
giving doctors the financial security they need to live and work in
our communities.
According to the Regional Council of Rural Counties , rural communities
have tremendous difficulty recruiting and retaining physicians.
They argue that the result is a shortage of physicians in rural
communities which threatens public health, medical access, and the
operational stability of medical facilities. The Regional Council
of Rural Counties supports this bill to allow rural and other
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qualified medical providers to directly employ physicians.
6)Arguments in Opposition. The California Medical Association
(CMA) opposes this bill and states that physicians must retain
the independent practice of medicine in order to provide the
highest quality of care for patients and that this bill is
simply too broad to be considered a pilot project and
essentially ends the ban on the corporate practice of medicine
for the majority of facilities in the state. CMA argues that
this measure could actually 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." CMA further argues that in states that
don't have the protection of the corporate bar, hospitals have
aggressively begun to purchase physician practices and are
seeking to eliminate competition from better performing surgery
centers and instead centralize services within facilities and
labs that are controlled by the hospital to benefit their
corporate bottom line. In addition, CMA indicates that the bill
requires substantial workload and costs for the MBC. They are
required to verify a minimum of four reports from hospital CEO's
for every physician hired, create a mandatory dispute resolution
process and make an arbitrary decision whether sufficient public
need has been proven opening it to lawsuit. CMA concludes that
they have worked extensively on trying to assure physician
services are available in physician shortage areas and that the
bar against the corporate practice of medicine must be preserved
as it has since 1938, so that hospitals are not in a position to
intervene on physician independence otherwise quality of care
suffers.
The Children's Specialty Care Coalition (CACC), representing 2,000
pediatric subspecialists in California, is opposed to this
measure. CACC argues that this bill would eliminate important
legal protections for patients by allowing hospitals to directly
employ physicians and create a fundamental conflict of interest
on the part of physicians whose primary loyalty should be to the
patient. CACC further argues that allowing hospitals to employ
physicians will not solve the access problem in Medi-Cal, and
that access to care, in particular for children, is compromised
due to chronic underfunding of Medi-Cal physician services not
because hospitals are unable to employ physicians.
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7)Policy Issue : Should the Medical Board be involved in making
determinations about the unmet medical needs of communities or the
need for physicians and surgeons in these areas? MBC is primarily a
licensing agency and 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
Author 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 in the future, or for
the MBC to at least consult with OSHPD on these decisions.
Support: (Verified by Office of Senate Floor Analyses on June 29,
2010)
Alliance of Catholic Health Care Regional Council of Rural Counties
American Association for Retired Persons
American Federation of State, County and Municipal Employees
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
California Farm Bureau Federation
California Hospital Association
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
Employees Association of California Healthcare Districts
Equality California
Fallbrook Healthcare District
Francis A. Quinn / Bishop Emeritus of Sacramento
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Health Access
Hi Desert Memorial Health Care District
Insure the Uninsured Project
JC Fremont Health Care District
JERICHO
Latino Mayors and Elected Officials Coalition California
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.
Professional Firefighters California
Regional Council of Rural Counties
Sacramento Area Congregations Together
Salinas Valley Memorial Healthcare System
School Employees Association
Service Employees International Union
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 by Office of Senate Floor Analyses on June
29, 2010)
Alameda-Contra Costa Medical Association
American Society for Dermatologic Surgery
Association of California Neurologists
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
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Tulare County Medical Society
Consultant: Bill Gage