BILL ANALYSIS                                                                                                                                                                                                    Ó






                                 SENATE HEALTH
                               COMMITTEE ANALYSIS
                       Senator Ed Hernandez, O.D., Chair


          BILL NO:       AB 589                                      
          A
          AUTHOR:        Perea                                       
          B
          AMENDED:       May 27, 2011                                
          HEARING DATE:  July 6, 2011                                
          5
          CONSULTANT:                                                
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          Hansel                                                     
          9                                                          
                                        
                                     SUBJECT
                                         
                          Medical school scholarships
                                         

                                    SUMMARY  

          Establishes the Steven M. Thompson Medical School 
          Scholarship Program.  Provides that the program is open to 
          persons who agree in writing, prior to entering an 
          accredited medical or osteopathic school, to serve in an 
          eligible practice setting, as defined, for at least three 
          years.  


                             CHANGES TO EXISTING LAW  

          Existing law:
          Establishes the Health Professions Education Foundation 
          (Foundation) within the Office of Statewide Health Planning 
          and Development (OSHPD).  Requires the Foundation to 
          solicit and receive funds from foundations and other 
          private and public sources and to provide financial 
          assistance in the form of scholarships or loans to students 
          in the health professions who are from underrepresented 
          groups.  Provides that the Foundation is governed by a 
          board consisting of 13 members appointed by the Governor, 
          Speaker of the Assembly, and Senate Rules Committee.

                                                         Continued---



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          Establishes, under the Foundation, scholarship, loan, and 
          loan repayment programs for registered nurses, vocational 
          nurses, geriatric nurse practitioners, clinical nurse 
          specialists, and mental health professionals who agree to 
          practice for specified periods of time in underserved areas 
          and in designated practice settings, as specified.

          Also establishes, under the Foundation, the Steven M. 
          Thompson Physician Corps Loan Repayment Program (STPCLRP), 
          which provides for the repayment of educational loans for 
          licensed physicians and surgeons who practice in medically 
          underserved areas of the state, as defined.   The STPCLRP 
          is supported by a $25 licensure fee paid by physicians. 

          Requires the Foundation, in administering the STPCLRP, to 
          use and develop guidelines for applicants that give 
          preference to applicants who are best suited to meet the 
          cultural and linguistic needs of patients in medically 
          underserved populations, as specified, and who agree to 
          practice in geriatric care settings.  Also allows the 
          Foundation to appoint a selection committee to provide 
          policy direction and guidance to the Program.

          Requires funds for loan repayment under the STPCLRP to have 
          a funding match from a foundation or other private source.  
          Also limits loan repayment awards from exceeding $105,000 
          per individual physician.

          Establishes within OSHPD the Health Professions Education 
          Fund (Fund), to receive funds for scholarships and loans to 
          students from underrepresented groups who are enrolled in 
          or accepted to schools of medicine, dentistry, nursing, and 
          other health professions.  Provides that moneys in the Fund 
          are continuously appropriated.

          Establishes a Medically Underserved Account for Physicians 
          within the Fund, the primary purpose of which is to provide 
          funding for the STPCLRP.  

          Establishes the Song-Brown Health Care Workforce Training 
          Act of 1973 (Song-Brown Act), administered by OSHPD to 
          provide financial support to family practice residency 
          programs, nurse practitioner and physician assistant 
          programs, and registered nurse education programs to 
          increase the number of students and residents receiving 




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          education and training in family practice and nursing. The 
          Song-Brown Act also encourages universities and primary 
          care health professionals to provide health care in 
          medically underserved areas.  
          
          This bill:
          Establishes within the Foundation the Steven M. Thompson 
          Medical School Scholarship Program (Program).

          Provides that the Program is open to persons who agree in 
          writing, prior to entering an accredited medical or 
          osteopathic school, to serve in an eligible practice 
          setting, as defined, for at least three years.  Requires 
          participants to commit to three years of full-time 
          professional practice once they have achieved full 
          licensure.

          Defines an eligible practice setting as either:  (1) a 
          community clinic or clinic owned and operated by a public 
          hospital or hospital that contracts to provide services to 
          county indigent patients that is located in a medically 
          underserved area, at least 50 percent of whose patients are 
          from a medically underserved population, as defined; or (2) 
          a medical practice that is located in a medically 
          underserved area, at least 50 percent of whose patients are 
          from a medically underserved population.

          Limits the maximum amount per scholarship to $105,000.  
          Requires the funds to be distributed over the course of a 
          standard medical school curriculum, in increasing amounts 
          over the course of the curriculum, to ensure that at least 
          45 percent of the total scholarship award is distributed 
          upon commencement of the final year of school.

          Provides that in the event the participant does not 
          complete the minimum three years of service, pursuant to 
          the contractual agreement, OSHPD shall recover the funds 
          plus maximum allowable interest.  

          Requires the selection committee that supports the STPCLRP 
          to use guidelines for selecting applicants that give 
          priority to applicants who speak a Medi-Cal threshold 
          language, come from an economically disadvantaged 
          background, have experience working in medically 
          underserved areas or with medically underserved 




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          populations, and commit to practice primary care.

          Establishes the Steven M. Thompson Medical School 
          Scholarship Account within the Fund for the purpose of 
          receiving federal or private funds.  Provides that funds in 
          the account are subject to appropriation by the 
          Legislature.  

          Limits the costs of administering the program to five 
          percent of total appropriations for the Program.

          Provides that the bill shall be implemented only to the 
          extent that sufficient funds exist in the Account as 
          determined by the Foundation.

          Directs the Foundation and OSHPD to provide the ongoing 
          program management for the Program.
          

                                  FISCAL IMPACT  

          According to the Assembly Appropriations Committee 
          analysis, AB 589 would impose negligible direct state 
          costs.


                            BACKGROUND AND DISCUSSION  

          According to the author, AB 589 seeks to address the 
          problem of shortages of primary care physicians in over 200 
          regions of California that are identified as medically 
          underserved areas.  The bill also aims to make medical 
          school more financially accessible for students who are 
          willing to pursue careers in primary care, particularly 
          economically disadvantaged students.  The author argues 
          that there is a growing geographical disparity in access to 
          physicians that AB 589 would help to address.
          
          Current health workforce shortages
          Statewide shortages of health providers currently exist in 
          several major health professions, such as nursing, primary 
          care providers, and allied health. (Allied health 
          professions are clinical health care professions distinct 
          from medicine, dentistry, and nursing.)  Health care 
          workforce needs are projected to increase dramatically due 




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          to the aging of the population and the state's increasing 
          diversity.  In February of 2009, the Senate Health 
          Committee held a hearing on California's health care 
          workforce.  The background paper, prepared by the Senate 
          Office of Research (SOR), stated that the health care 
          worker shortage is defined in many ways, citing the 
          following:
          § The state will face a shortage of up to 17,000 physicians 
            by 2015. 
          § The Center for California Health Workforce Studies 
            researchers indicate that the registered nurse shortage 
            is between 7,000 and 21,000. This shortage is expected to 
            grow due to both the aging of the general population and 
            the nursing workforce. 
          § It is projected that California will need a 26.1 percent 
            growth in the number of pharmacists from 2006 to 2016.
          § Fifty percent of the public health workforce and seventy 
            percent of community clinic administrators will retire in 
            the next five to ten years.
          § Seventy-six percent of clinics report a staffing shortage 
            of allied health workers.

          In addition to the shortages of certain health 
          professionals, SOR stated that California's health 
          professions workforce does not reflect the state's 
          demographic racial and ethnic composition and language 
          proficiency. According to research conducted by the Public 
          Health Institute and UC Berkeley's School of Public Health, 
          California's emerging populations are underrepresented in 
          all health professions and in the health professions 
          pipeline.  A recent report by the Institute of Medicine 
          links poorer health outcomes for minorities to the shortage 
          of minority health care providers. One reason for this is 
          that persons of color are less likely than whites to 
          receive needed services due to cultural or linguistic 
          barriers between the health care provider and the patient. 
          
          Current health workforce development programs
          The state currently operates a number of programs designed 
          to increase the number of health care professionals 
          practicing in medically underserved areas:
          
           Health Professions Education Foundation.  The Health 
            Professions Education Foundation, located in OSHPD, 
            provides scholarships and loan repayments to aspiring and 




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            practicing health professionals who agree to practice in 
            a medically underserved area.  Scholarships are offered 
            to health professional students who are attending a 
            California accredited college or university.  Loan 
            repayment programs are offered to graduates who are 
            pursuing a health professional career to assist in the 
            repayment of education debt.  Scholarships are offered to 
            students and graduates in several allied health 
            professions, nursing, mental health, dentistry, and 
            medicine.  In exchange for financial assistance, awardees 
            are required to provide direct patient care in a 
            medically underserved area.  Service obligations are 
            typically one to four years, and vary depending on the 
            program.  One of the programs offered under the 
            Foundation is the STPCLRP, which provides assistance with 
            the repayment of educational loans for licensed 
            physicians and surgeons who practice in medically 
            underserved areas of the state.
          
           California State Loan Repayment Program.  The California 
            State Loan Repayment Program (CSLRP) provides educational 
            loan repayment assistance to primary healthcare 
            professionals who provide healthcare services in 
            federally designated Health Professional Shortage Areas 
            (HPSAs).  Eligible health professionals include 
            physicians specializing in primary care fields, nurse 
            practitioners, certified nurse-midwives, general practice 
            dentists, dental hygienists, clinical or counseling 
            psychologists, clinical social workers, licensed 
            counselors, psychiatric nurse specialists, and marriage 
            and family therapists.  Eligible health professionals 
            also must be employed, or have accepted employment, at an 
            eligible site (which includes county facilities, rural 
            health clinics, community health clinics, and federally 
            qualified health centers) and must commit to providing 
            full-time primary care services in a HPSA for a minimum 
            of two years.  Health professionals may receive $60,000 
            in exchange for a two-year service obligation, $100,000 
            for a three-year service obligation, and up to $170,000 
            over five years, the cost of which is divided between 
            state award amounts and matching funds from the site in 
            which the health professional will be practicing.  The 
            CSLRP is funded through a grant from the Bureau of Health 
            Professions, National Health Service Corps and is 
            administered by OSHPD.




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           Song-Brown Program.  The Song-Brown Health Care Workforce 
            Training Act was established in 1973 to address the 
            shortage of physicians engaged in family practice in 
            California by providing financial support to family 
            practice residency, nurse practitioner, physician 
            assistant, and registered nurse education programs 
            throughout California. It also encourages universities 
            and primary care health professionals to provide health 
            care in medically underserved areas.  The Song-Brown 
            program currently funds 27 California family practice 
            residency programs, 16 physician assistant/nurse 
            practitioner programs, and 34 registered nurse education 
            programs.  Total funding proposed for the Song-Brown 
            program in the Governor's 2011-12 budget is $7.1 million.

          Related bills
          SB 635 (Hernandez) requires funds deposited in the Managed 
          Care Administrative Fines and Penalties Fund in excess of 
          $1,000,000 be transferred each year to OSHPD for the 
          purposes of the Song-Brown Program.  Currently in Assembly 
          Health Committee.

          Prior legislation
          AB 2551 (Hernandez) of 2010 would have established the 
          Health Workforce
          Development Fund, consisting of moneys received from 
          federal and private sources, as specified.  Would have 
          authorized the Fund to be used, upon appropriation by the 
          Legislature, for prescribed purposes relating to health 
          workforce development, and required the California 
          Workforce Investment Board and the Office of Statewide 
          Health Planning and Development to report specified 
          information to the Legislature annually as specified.  
          Failed passage on the Senate floor.
          
          AB 657 (Hernandez) of 2009 - 2010 Session, would have 
          required OSHPD, in collaboration with the California 
          Workforce Investment Board, to establish the Health
          Professions Workforce Task Force composed of specified 
          members, to assist in the development of a health 
          professions workforce master plan for the state, and would 
          prescribe the functions and duties of the task force in 
          that regard.  Vetoed by the Governor, who stated in his 
          veto message that he thought the bill was unnecessary and 




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          duplicative of efforts already underway.
          
          AB 2375 (Hernandez) of 2007 - 2008 Session, would have 
          required OSHPD to establish the Health Professions 
          Workforce Task Force, as specified, to assist in the 
          development of a health professions workforce master plan.  
          Held in Senate Appropriations Committee.

          AB 2439 (De La Torre), Chapter 640, Statutes of 2008, 
          requires the Medical Board of California (MBC) to assess an 
          additional $25 fee for the initial license and license
          renewal of a physician or surgeon to support the STPCLRP.  
          Requires up to 15 percent of the funds collected from the 
          additional $25 fee to be dedicated to loan assistance for
          physicians who agree to practice in geriatric care 
          settings, as specified.
          
          AB 327 (De La Torre), Chapter 293, Statutes of 2005, 
          requires the MBC to assess an applicant a $50 fee for the 
          issuance and renewal of a physician and surgeon's 
          certificate. Specifies that payment of the fee is voluntary 
          and directs the fees to the Medically Underserved Account 
          for the STPCLRP.
          
          AB 920 (Aghazarian), Chapter 317, Statutes of 2005 provides 
          for the transfer of the
          STPCLRP and the Physician Volunteer Program from the MBC to 
          the California Physician Corps Program within the Health 
          Professions Education Foundation, effective July 1, 2006.

          AB 1403 (Nunez), Chapter 367, Statutes of 200, renames the 
          California Physician Corps Loan Repayment Program of 2002 
          as the STPCLRP.
          
          AB 982 (Firebaugh), Chapter 1131, Statutes of 2002, creates 
          the California Physician Corps Loan Repayment Program of 
          2002.  This program is administered by the Division of 
          Licensing of MBC for the purpose of granting loan repayment 
          awards to physicians and surgeons working in medically 
          underserved communities.
          
          Arguments in support
          The California Medical Association states that the most 
          conservative projections of the need for physicians in 
          California project a shortage of 17,000 physicians by 2015, 




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          which does not take into account the increase in newly 
          insured persons due to federal health care reform.  
          Exacerbating this problem is the extremely high debt 
          medical students incur, which now averages $150,000 for 
          graduating medical students.  AB 589 will supplement the 
          STPCLRP and allow the state to address both the problem of 
          insufficient numbers of physicians and the high cost of 
          medical education.

          The MBC states that AB 589 will help make medical school 
          more affordable for students willing to pursue careers in 
          primary care, as well as help to address the geographical 
          disparity of physician supply in California.
          
          
                                  PRIOR ACTIONS

           Assembly Business, Professions and Consumer Protection:6- 3
          Assembly Appropriations:                12- 5
          Assembly Floor:                         63- 10


                                     COMMENTS
           
          1.  Funds for loan repayment program should be preserved 
          for that purpose.  AB 589 would establish a new account to 
          receive federal and private funds for medical school 
          scholarships, separate from the account that currently 
          supports the STPCLRP.  A suggested amendment would be to 
          clarify that funds for the loan repayment program shall not 
          be used for purposes of the scholarship program.

          2.  Scholarships versus loan repayment.  AB 589 would 
          supplement the state's programs for primary care workforce 
          development by creating a new scholarship program for 
          medical school students who commit to serve in underserved 
          areas of the state.  Generally, loan repayment programs are 
          more cost effective to administer and more able to be 
          geographically targeted than scholarship programs.  OSHPD 
          reports that scholarship programs typically have a higher 
          breach rate, i.e. a higher percentage of recipients fail to 
          provide their obligated service and the must repay the 
          loans.  In addition, it is easier to ensure geographic 
          diversity through loan repayment programs, because they 
          apply to licensed physicians who are locating their 




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          practice, instead of still in school.  

          3.  Short-term impact of federal health care reform.  
          Beginning in 2014, over 3 million additional Californians 
          are expected to be insured, which will exacerbate the 
          state's shortage of physicians and other primary care 
          providers.  While a medical school scholarship program 
          could help address the state's long-term need for 
          physicians, putting more resources into physician and other 
          primary care provider loan repayment programs could have a 
          greater immediate impact in helping the state meet the 
          increase in demand that is expected to occur beginning in 
          2014.


                                    POSITIONS  
                                        
          Support:  California Medical Association (sponsor)
                    Association of California Healthcare Districts
                    California Primary Care Association
                    Children's Hospital Central California
                    City of Kernan
                    Community Clinic Association of Los Angeles 
                    County 
                    Medical Board of California

          Oppose:None received


                                   -- END --