BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 744
S
AUTHOR: Strickland
B
AMENDED: As Introduced
HEARING DATE: April 15, 2009
7
CONSULTANT:
4
Green/
4
SUBJECT
Clinical laboratories: public health laboratories
SUMMARY
Modifies the clinical laboratory licensing fee structure,
facilitates the use of private accrediting organizations to
inspect clinical laboratories, requires public health
laboratories to pay laboratory and personnel licensing
fees, and increases phlebotomy technician licensing fees.
CHANGES TO EXISTING LAW
Existing federal law:
Existing federal law, the Clinical Laboratory Improvement
Amendments of 1988 (CLIA), establishes various conditions
that laboratories must meet in order to be certified to
perform testing on human specimens. Laboratory standards
established under CLIA include standards for proficiency
testing, facility administration, personnel qualifications,
and quality control. CLIA standards apply to laboratory
testing in all states, and in all settings, including
commercial, hospital, or physician office laboratories.
CLIA authorizes the Centers for Medicare and Medicaid
Services (CMS), which is responsible for administering
Continued---
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 2
CLIA, to contract with other agencies to perform CLIA
certification for laboratories. In California, the
Department of Public Health (DPH) is the agency contracted
by CMS to perform CLIA certification.
Existing state law:
Existing state law defines a clinical laboratory as any
establishment or institution operated for the performance
of clinical laboratory tests or examinations, or the
practical application of clinical laboratory sciences.
Existing law requires a clinical laboratory that performs
tests that are of moderate or high complexity to be
licensed by DPH. Existing law requires a clinical
laboratory that performs tests that are of low complexity,
also referred to as "waived tests," or that perform
provider-performed microscopy (PPM), which is microscopic
analysis of a specimen by a health care provider such as a
physician, to be registered, rather than licensed, by DPH.
Under existing law, a laboratory that operates multiple
locations, must obtain a separate license or registration
for each laboratory location.
Under existing law, DPH may certify a clinical laboratory
that is accredited by a private, nonprofit organization as
having met state licensure or registration requirements,
provided that the accrediting organization is federally
approved under CLIA, has accreditation standards that are
equal to, or more stringent than, state licensure and
registration requirements, and allows DPH to randomly
inspect its accredited clinical laboratories for compliance
with state law. Additionally, accredited laboratories must
meet specified requirements in order to be certified,
including allowing the accrediting organization to provide
any records or other information about the laboratory
required by DPH.
Existing law requires clinical laboratories to pay fees, as
specified, to DPH for the purposes of initial and renewal
licensure, registration, or certification. Existing law
establishes the Clinical Laboratory Improvement Fund
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 3
(CLIF), into which these fees are deposited and used by DPH
for the purpose of licensing, registration, certification,
inspection, or other activities relating to the regulation
of clinical laboratories.
Existing law requires the services of a public health
laboratory be available to city or county local public
health departments, for the purpose of examining suspected
cases of infectious and environmental diseases, and to
assist in community disease surveillance. Existing law
requires any city or county public health laboratory, and
specified personnel, to be approved by DPH, and to comply
with all applicable CLIA requirements. Under existing law,
public health laboratories are exempt from licensure and
certification fees.
Existing law requires an unlicensed person employed by a
clinical laboratory whose job is to withdraw blood from a
patient to be certified as a phlebotomy technician.
Existing law requires an individual seeking phlebotomy
technician certification to pay a fee of $25 to DPH upon
initial application, and upon annual renewal.
This bill:
The bill would require a clinical laboratory applying for
licensure, or certification, to pay fees pursuant to a
sliding scale based on the number of tests performed by the
laboratory in one year. The fees would range from $270 for
laboratories that perform less than 2,001 tests per year,
to $5,260 for laboratories that perform over 1 million
tests per year, plus $350 for every 500,000 tests over that
million. The bill would also set a similar sliding scale
of fees for licensure and certification renewal, would
double laboratory registration fees for clinical laboratory
tests performing only waived tests, and/or
provider-performed microscopy, and would assess a fee of
$25 for the approval of each additional clinical laboratory
location requiring licensure or registration.
The bill would require a clinical laboratory that requests
a reinspection by DPH to ensure compliance with licensure
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 4
requirements, to pay for the reinspection at an additional
cost in an amount equal to the laboratory's initial
application licensing fee. The bill would also require
clinical laboratories to pay a delinquency fee equal to 25
percent of the annual renewal fee, if the laboratory's
license or registration is not renewed prior to its
expiration date, and would increase phlebotomy technician
certification fees from $25 to $100.
This bill would facilitate the use of private, nonprofit
accrediting organizations to conduct inspections of
accredited clinical laboratories, in lieu of state
inspectors. The bill would impose additional requirements
an accrediting organization must meet in order for its
accredited laboratories to be certified, including a
detailed description of its processes for inspections,
proficiency testing, and monitoring of deficiency
corrections; a list of all current accredited California
laboratories, as well as the expiration date of their
accreditation; and, procedures for making proficiency
testing information available upon public request.
Accrediting organizations would be required to conduct
laboratory inspections in a way that determines compliance
with both federal, and California laws to the extent that
California laws are more stringent.
In order to be certified by DPH, the bill would require
accredited laboratories to allow specified information to
be given to the department by its accrediting organization,
including proficiency test results, information regarding
violations, and notice of withdrawal of accreditation. The
bill would specify that a clinical laboratory that has had
its accreditation withdrawn or revoked, would retain its
certification with DPH for 45 days, as specified. The bill
would specify that DPH may implement the provisions
relating to accreditating organizations via All Clinical
Laboratory Letters (ACLL), and would require DPH to post
the ACLL on its web site, as specified.
This bill would require public health laboratories to pay
certification fees under a similar fee structure set for
clinical laboratories. Additionally, the bill would set
registration fees for public health laboratories that only
perform waived tests, and/or provider-performed microscopy.
The bill would require public health microbiologists and
public health laboratory directors to pay fees for initial
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 5
and renewal certification. As a condition of certification
renewal, the bill would require public health
microbiologists and public health laboratory directors to
complete 12 hours of continuing education. Additionally,
the bill would authorize DPH to issue certificates to
public health microbiologists and public health laboratory
directors who have passed certification examinations
offered by a national accrediting board, as specified.
This bill would specify that the fees imposed by its
provisions would be deposited into, and continuously
appropriated from, the CLIF to be expended for the purposes
of clinical and public health laboratory licensing
activities, and would declare that its provisions would
take immediate effect as an urgency statute.
FISCAL IMPACT
According to DPH, this bill would generate approximately $5
million to support laboratory licensing and enforcement
activities.
BACKGROUND AND DISCUSSION
According to the author, DPH's Laboratory Field Services
(LFS), which is responsible for the oversight of clinical
laboratories, is unable to adequately enforce state laws
and regulations regarding licensing, certification and
registration of clinical laboratories, because of a lack of
sufficient funding. The author states that, this funding
shortage has resulted in an inability for LFS to conduct
inspections, investigate complaints, promptly process
licensure applications, and take enforcement action when
needed. The author states that the provisions in this bill
will help address this problem, by adjusting and imposing
new fees for facility and personnel licensure and
certification, charging for re-inspections of laboratories,
fining for delinquent laboratory license renewals, and
charging fees for licensure of multiple laboratory
locations. The author also states that, in order to
improve LFS inspection activities, this bill implements a
recommendation by the California State Auditor to leverage
accrediting organizations for the purposes of clinical
laboratory inspections. The author states that a strong
clinical laboratory oversight program is necessary to
protect public health, and that this bill would provide
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 6
additional resources for the laboratory oversight program
within DPH.
Clinical laboratories
According to DPH, there are currently approximately 19,000
clinical laboratories in California, 3,000 of which are
licensed labs performing moderate and/or high complexity
testing. The remaining 12,000 are registered labs
performing waived tests and/or provider-performed
microscopy.
Clinical laboratory oversight
California clinical laboratories are subject to both
federal and state oversight. Federal CLIA requirements
establish standards for laboratories to ensure the
accuracy, reliability, and timeliness of patient test
results, and specify numerous quality standards, including
those for facility administration, personnel
qualifications, quality control, and proficiency testing, a
process used by laboratories to verify the accuracy and
reliability of their test results. CLIA standards apply to
laboratory testing in all states, and in all settings,
including commercial, hospital, or physician office
laboratories.
CLIA standards are based on the complexity of the testing
(waived, moderate, or high complexity). To become
certified under CLIA, a clinical laboratory must pay
applicable fees, meet all applicable standards, and be
surveyed biennially. In California, DPH is contracted by
CMS to conduct the biennial CLIA survey on behalf of the
federal government. CLIA fees are based on the type of
certification sought by a laboratory, and the annual volume
and types of testing performed.
In addition to CLIA standards, California clinical
laboratories must meet state licensure requirements in
order to operate. Similar to CLIA, state licensing law
requires biennial surveys, proficiency testing, and
specified personnel requirements. However, state clinical
laboratory licensing law establishes certain standards that
differ with, or exceed, CLIA standards. For example, state
law requires LFS to investigate complaints made against
clinical laboratories.
State law requires clinical laboratories to pay annual fees
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 7
to DPH in order to be licensed or registered. Fee amounts
for the 2008-2009 fiscal year for initial licensure are
$1,023, and $952 for renewal. Fees for initial and renewal
registration are $62 for labs performing waived tests, and
$92 for labs performing provider-performed microscopy.
Some clinical laboratories voluntarily seek accreditation
from accrediting organizations, which are private,
nonprofit organizations approved by CMS to provide
laboratory oversight. Accrediting organizations set forth
their own standards and requirements for clinical
laboratories. CLIA allows CMS to deem a laboratory as
having met federal requirements through accreditation by
one of these organizations, as long as the standards of the
organization meet or exceed those in federal regulations.
California law also requires DPH to deem accredited
clinical laboratories as having met state licensure or
registration requirements if the organization allows DPH to
inspect its accredited labs at random, and the organization
has been approved by CMS.
Accreditation is optional, and clinical laboratories that
seek accreditation pay fees to the accrediting
organization, in addition to fees for CLIA certification
and state licensure. There are currently six accrediting
organizations approved by CMS, including the College of
American Pathologists, and the Joint Commission.
State Auditor report
In 2008, the California State Auditor published a report
concluding that LFS had not provided the clinical
laboratory oversight mandated by state law and regulations.
Major findings of the report revealed that LFS was not
inspecting laboratories every two years, as required,
inconsistently monitored laboratory proficiency testing,
closed many complaints without taking action, sporadically
imposed sanctions against laboratories for violations, and,
in three instances since fiscal year 2003-04, and
incorrectly adjusted licensing fees resulting in more than
$1,000,000 in lost revenue.
In light of these findings, the Auditor proposed a number
of recommendations to leverage existing resources to
improve oversight of clinical laboratories, including a
recommendation for DPH to approve accrediting organizations
to conduct clinical laboratory inspections. The Auditor
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 8
stated in the report that DPH had not approved any
accreditation organizations to perform such activities, and
reported that LFS had expressed concern over the quality of
the inspections conducted by accrediting organizations.
The Auditor pointed out that LFS would need to approve
accrediting organizations and monitor their compliance, so
LFS would have the tools to address these concerns.
In response to the audit report, DPH generally concurred
with the Auditor's findings, and attributed much of its
inability to meet its mandated responsibilities to a lack
of staffing resources. DPH stated that LFS would take
steps to determine how to maximize the use of existing
resources, as well as assess how many additional resources
would be needed. DPH stated that licensing revenues would
likely be increased to cover costs associated with state
oversight mandates. DPH also stated that it would explore
the use of accrediting organization inspectors to conduct
inspections for compliance with state law, and that it
would work with the appropriate parties to ensure that
clinical laboratory licensing fees are properly adjusted in
accordance with the Budget Act.
Public health laboratories
There are currently 38 public health laboratories located
in California that are administered locally by city or
county public health departments. Local public health
laboratories provide services relating to the examination
of specimens from suspected cases of infectious and
environmental diseases, including specimens from humans,
milk, water, food, vectors, and the environment. While
public health laboratories may conduct patient diagnostic
testing, they differ from clinical laboratories in that the
scope of their work, including their patient diagnostic
testing, revolves around the prevention and control of
communicable disease, community surveillance of infectious
or communicable disease, and promoting and maintaining
public health.
Local public health laboratories are approved by DPH,
meaning that they are certified to meet state and federal
law and regulations. DPH also certifies public health
microbiologists and public health laboratory directors to
ensure that they meet all educational and training
requirements required by state regulations. Existing state
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 9
regulations set forth specific requirements and standards
public health laboratories must meet, including
requirements pertaining to personnel, reporting, and safety
procedures and precautions. Existing regulations require a
public health laboratory microbiologist, and a public
health laboratory director to meet specified education and
training requirements, and to be certified by DPH.
Local public health laboratories currently do not pay fees
to DPH for laboratory or personnel certification. With
regard to public health microbiologists and laboratory
directors, DPH issues a lifelong certificate at no charge,
with no renewal requirements.
Prior legislation
SB 113 (Maddy), Chapter 510, Statutes of 1995, conformed
state laboratory licensing law to federal CLIA law as a
precursor for the state to seek CLIA exemption.
Arguments in support
DPH, the bill's sponsor, states that it is responsible for
oversight of clinical laboratories, but that due to a lack
of adequate funding, it is unable to adequately enforce
state laws and regulations regarding licensing,
certification, and registration of clinical laboratories.
DPH states that this bill would allow DPH to adopt a
sliding fee schedule based on the annual volume of tests
performed, which will reduce fees assessed for small
laboratories, and increase fees for laboratories performing
millions of tests yearly. DPH states that this fee
structure will also allow DPH to hire needed staff at
competitive salaries to carry out its duties. DPH also
states that through this bill, it plans to implement a
recommendation by the State Auditor to use inspectors from
accrediting organizations as an alternative to using
state-employed inspectors, thereby allowing the department
to augment its inspections of clinical laboratories by
using accrediting organization inspections in lieu of state
inspections.
The California Society of Pathologists (CSP) would support
the bill if amended to cap licensure fees at the amount
necessary to conduct the program, ensure that all fees
collected are used only for the purposes of laboratory
licensure and enforcement activities. CSP states that
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 10
existing law allows DPH to assess an additional fee to
clinical laboratories that perform cytology services, in
order to provide funding for special inspections and the
development of a proficiency testing program for cytology
services. CSP states that although these clinical
laboratories have been paying this additional fee since
1992, the cytology services program was never developed,
and requests that the bill be amended to eliminate the
additional cytology services fees.
The California Medical Association (CMA) would support the
bill if amended to add intent language to reflect DPH's
intent to seek federal CLIA exemption, insert contingency
language so that the bill would sunset on January 1, 2013,
if federal CLIA exemption has not been achieved, insert
contingency language that the provisions of this bill would
be repealed if federal CLIA exemption is achieved, but not
subsequently maintained, and change the annual fee and
licensing requirement to a bi-annual requirement, rather
than an annual requirement, which would be consistent with
CLIA and less burdensome on physician-owned laboratories.
Arguments in opposition
The California Association of Public Health Laboratory
Directors (CAPHLD) opposes this bill unless amended to
eliminate the proposed requirements pertaining to public
health laboratories. The CAPHLD states that public health
laboratories are an extension of the state's authority to
protect public health, are non-profit governmental
entities, and have a different function and mission than
the clinical laboratories addressed by this bill. The
CAPHLD opposes the bill's provisions that establish
licensing fees for public health laboratory facilities and
personnel, and states that the bill would undermine
existing personnel standards by allowing DPH to issue
public health microbiologist certification based on passage
of national accrediting board examinations, which have less
stringent standards than the state's existing certification
process, and which do not generally cover training,
testing, and handling of the type of specimens handled by
public health laboratory personnel. CAPHLD states that
there is no shortage of public health microbiologists in
California, and thus no need to use national accreditation
in lieu of state certification.
The Health Officers Association of California (HOAC)
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 11
opposes the bill stating that public health laboratories
should be exempt from the bill's proposed fees, as these
labs perform a public service, and do not operate for
profit. HOAC also opposes the proposed process to certify
public health microbiologists through the use of a national
accrediting board examination.
Concerns
The California Clinical Laboratory Association (CCLA)
recommends various amendments to this bill, including
amendments similar to those proposed by CSP, as well as
amendments to delete the authority for DPH to implement the
bill's provisions via ACLLs, and to cap the amount of fees
collected from any single laboratory.
COMMENTS
1. Fee amounts not capped. According to DPH, the fee
amounts set forth in this bill are based on an assessment
of the amount of resources LFS needs to conduct licensing
and enforcement responsibilities. However, the fee amounts
for large labs performing over 1,000,000 tests per year are
not capped, and without a cap, LFS could possibly raise
revenues in an amount that exceeds what it necessary to
conduct its program. The bill should ensure that the
revenues raised from the licensing fees are limited to an
amount that provides enough resources to cover the costs of
the licensing program.
Proposed amendments:
a. Page 18, after line 12, insert:
(u) The total fees collected shall not exceed the costs
incurred by the department for licensing, certification,
inspection, or other activities relating to the regulation
of clinical laboratories.
b. Page 22, after line 5, insert:
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 12
(e) The total fees collected shall not exceed the costs
incurred by the department for certification, registration,
inspection, or other activities relating to the regulation
of public health laboratories.
2. Use of fees should be limited only to laboratory
licensing and oversight activities. While the bill states
that revenues generated from the fees paid by clinical and
public health laboratories shall be used to fund licensing,
certification, and registration activities, it should be
clear that the revenues may not be redirected for any other
use.
Proposed amendment:
Page 19, lines 17-29:
(b) All fees established under this chapter and, Chapter 4
(commencing with Section 1600) of Division 2 of the Health
and Safety Code, and Article 5 (commencing with Section
101150) of Chapter 2 of Part 3 of Division 101 of the
Health and Safety Code,
shall be collected by and paid to the department, and shall
be deposited by the department in the Clinical Laboratory
Improvement Fund, along with any other moneys received by
the department for the purpose of licensing, certification,
inspection, proficiency testing, or other regulation of
clinical laboratories, public health laboratories, blood
banks, or clinical or public health laboratory personnel ,
and shall not be redirected for any other purpose.
Notwithstanding Section 16305.7 of the Government Code, all
interest earned on moneys deposited in the fund shall be
maintained in the fund.
3. Bill's provisions pertaining to delinquency fees may
conflict with existing law. The bill would impose a
delinquency fee on a clinical laboratory that does not
renew its license or registration prior to the expiration
of its license or registration, in an amount equal to 25
percent of the annual renewal fee. This provision appears
to conflict with another provision of existing law that
establishes a delinquency fee in an amount equal to the
entire annual renewal fee. The scope of the delinquency
fee in existing law is unclear, and may apply not only to
licensure and registration, but also to licensing fees for
specified laboratory personnel. The author should work
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 13
with DPH to determine the scope of the existing delinquency
fee, and rectify this conflict in the bill.
4. CLIA exemption. According to DPH, California clinical
laboratories currently pay approximately $6.5 million to
the federal government in CLIA fees. However, the state
receives only $1.5 million in federal funding to administer
CLIA oversight. Some laboratory stakeholders have
expressed the view that the state should seek exemption
from CLIA in order to eliminate the need for laboratories
to pay fees to both state and federal governments for
oversight. Federal law allows states to seek an exemption
from CLIA, which would result in laboratories having to
meet state requirements only, and, in theory, eliminating
federal CLIA fees. According to DPH, the state would
currently be required to pay $5 million in administrative
fees to the federal government if it is granted an
exemption from CLIA, which would result in clinical
laboratories paying the same amount of fees to the federal
government regardless of whether it is exempt from CLIA or
not.
5. Proposed clarifying amendments:
a. Page 18, lines 5-7:
(s) The costs of the department to conduct any
reinspections to ensure compliance of a laboratory applying
for initial licensure shall be paid by the laboratory?
b. Page 20, line 25:
(1) Pays the fees required under subdivision (c) (d).
POSITIONS
Support: California Department of Public Health (sponsor)
Blood Centers of California
California Medical Association (unless amended)
California Society of Pathologists (unless
amended)
Oppose: California Association of Public Health
Laboratory Directors (unless amended)
Health Officers Association of California
STAFF ANALYSIS OF SENATE BILL SB 744 (Strickland)Page 14
-- END --