BILL ANALYSIS Ó
AB 778
Page 1
Date of Hearing: May 3, 2011
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 778 (Atkins) - As Amended: April 27, 2011
SUBJECT : Health care service plans: vision care.
SUMMARY : Specifies the business relationships that are
permissible between a health care service plan (health plan)
that provides vision care, and an optician, an optical company,
optical manufacturers or distributors, or a non-optometric
corporation. Specifically, this bill :
1)Permits a registered dispensing optician (RDO), an optical
company, a manufacturer or distributor of optical goods, or a
non-optometric corporation to do all of the following:
a) Own a health plan that provides vision care services and
share its profits;
b) Contract for business services with, lease office space
or equipment to or from, or share office space with, a
health plan that provides vision care services; and,
c) Jointly advertise vision care services with a health
plan that provides vision care services.
2)Prohibits a RDO, an optical company, a manufacturer or
distributor of optical goods, or a non-optometric corporation
from engaging in conduct designed to influence or interfere
with the clinical decisions of an optometrist employed by, or
who has contracted with, a specialized vision care service
plan for fiscal or administrative reasons.
3)Requires the clinical decisions of an optometrist who is
employed by, or who has contracted with, a specialized vision
care service plan to be unhindered by fiscal and
administrative management, as specified.
4)Provides findings and declarations.
EXISTING LAW
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1)Provides for the regulation of health plans by the Department
of Managed Health Care (DMHC) under the Knox-Keene Health Care
Service Plan Act of 1975 (Knox-Keene Act).
2)Prohibits health plans from being deemed to be engaged in the
practice of a profession, and allows health plans to employ,
or contract with, any licensed health care professional to
deliver professional services, and directly own and directly
operate through its professional employees or contracted
licensed professionals, offices, and subsidiary corporations.
3)Prohibits licensed health care professionals from owning or
controlling offices or branch offices unless otherwise
expressly authorized.
4)Provides for the licensure and regulation of RDOs by the
Medical Board of California (MBC).
5)Provides for the licensure and regulation of optometrists by
the California Board of Optometry (CBO).
6)Pursuant to Business and Professions Code 655:
a) Prohibits optometrists and RDOs from having any
membership, proprietary interest, co-ownership,
landlord-tenant relationship, or any profit-sharing
agreement with each other; and,
b) Prohibits optometrists from having any membership,
proprietary interest, coownership, landlord-tenant
relationship, or any profit-sharing arrangement in any
form, directly or indirectly, either by stock ownership,
interlocking directors, trusteeship, mortgage, trust deed,
or otherwise with those who manufacture, sell, or
distribute lenses, frames, optical supplies, optometric
appliances or devices or kindred products to physicians and
surgeons, optometrists, or dispensing opticians.
7)Pursuant to Business and Professions Code 2556, provides that
it is unlawful for RDOs to:
a) Advertise the furnishing of, or to furnish, the services
of a refractionist, an optometrist, or a physician and
surgeon;
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b) Directly or indirectly employ or maintain on or near the
premises used for optical dispensing, a refractionist, and
optometrist, a physician and surgeon, or a practitioner of
any other profession for the purpose of any examination or
treatment of the eyes; or,
c) Duplicate or change lenses without a prescription or
order from a person duly licensed to issue the same.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "There
are over 100 EYEXAM of California locations throughout the state
where close to 400 optometrists are employed, serving their
community. EYEXAM of California was licensed in 1986 as a
specialized health care service plan providing vision services
to its members throughout the state. Regulated by the
Department of Managed Health Care, EYEXAM must meet all
regulatory requirements of a specialized managed care plan,
including quality, fiduciary and geographic requirements. Most
EYEXAM locations are within a LensCrafters store and have a
partnership with the store. Patients can purchase frames at
this location, or at any other eyewear location, should they
need prescription eyewear.
"Along with being regulated by DMHC, the optometrists in each
location are licensed by the Board of Optometry. In addition,
each LensCrafters store is regulated by the California Medical
Board as a registered dispensing optician. Current California
law does not prohibit a Knox-Keene plan from having a business
relationship with an optical dispenser. There is no statutory
language that specifically authorizes this relationship either,
the law is silent. Current California law does prohibit an
optometrist from being directly employed by an optical company,
however.
"Unfortunately, the Knox-Keene arrangement has been scrutinized
by the courts over the past decade? The proposed legislation
would provide a definitive model for optical companies to
co-locate (with Knox-Keene health plans)."
Background . In California, there are two eye care service
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models: an optometrist's private office and a "co-location"
office, where an optical retail store is co-located with a
DMHC-regulated health plan, also called a Knox-Keene plan, that
provides optometry care. At co-location sites, patients receive
an eye exam and can fill their prescription for corrective
eyewear during the same visit at the co-located optical retail
store. At private optometrist offices, patients receive an eye
exam and can take a prescription elsewhere or have the
optometrist send it out for them. California law provides that
prescriptions are mobile, so the patient is not required in
either setting to have the prescription filled on site.
All optometrists are licensed by CBO. In a co-location site,
the opticians working at the optical retail store are regulated
by MBC, and the optometry office is regulated by two entities:
DMHC regulates the Knox-Keene plan, and CBO regulates the
optometrists employed by the Knox-Keene plan.
According to CBO, there are approximately 8,000 active
optometrist licensees in California. According to information
provided by the sponsor of this bill, Californians for Healthy
Vision, four companies in California own both a Knox-Keene plan
and an optical company.
Under Business and Professions Code Sections 655 and 2556 (B&P
655/2556), optometrists and RDOs cannot have any membership,
proprietary interest, co-ownership, landlord-tenant
relationship, or any profit-sharing agreement with each other.
Optometrists also cannot have any membership, proprietary
interest, coownership, landlord-tenant relationship, or any
profit-sharing arrangement in any form, as specified, with those
who manufacture, sell, or distribute lenses, frames, optical
supplies, optometric appliances or devices or kindred products
to physicians and surgeons, optometrists, or dispensing
opticians.
Under these code sections, it is also unlawful for RDOs to do
any of the following:
Advertise the furnishing of, or to furnish, the services
of a refractionist, an optometrist, or a physician and
surgeon;
Directly or indirectly employ or maintain on or near the
premises used for optical dispensing, a refractionist, and
optometrist, a physician and surgeon, or a practitioner of
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any other profession for the purpose of any examination or
treatment of the eyes; or,
Duplicate or change lenses without a prescription or
order from a person duly licensed to issue the same.
In February of 2002, Attorney General (AG) Bill Lockyer brought
suit against Pearle Vision (the Pearle case), arguing that the
company had violated the Optometry Practice Act. The AG
challenged the business relationship between the Knox-Keene
plan, Pearle VisionCare, and the optical sister company, Pearle
Vision, as well as the ownership of the Knox-Keene plan by an
optical company, claiming that such relationships violated B&P
655/2556.
In March 2002, a private plaintiff brought suit against
LensCrafters (the Snow case), raising some of the same business
relationship issues as those raised in the Pearle case.
LensCrafters and others subsequently filed a case in federal
district court (the federal case) to defend their business
operations in California, challenging the constitutionality of
B&P 655/2556.
On appeal, the Pearle case reached the California Supreme Court,
which declared that the Knox-Keene Act does not create an
exemption from restrictions that B&P 655/2556 impose on
relationships between optometrists and optical companies for
Knox-Keene plans that employ optometrists and affiliate with
optical companies. The Supreme Court remanded the case to trial
court for determination of whether relationships involved in
Pearle Vision's Knox-Keene arrangement violate B&P 655/2556.
The Pearle case ultimately settled, with no determination on the
Knox-Keene/optical company co-location issue. The Snow case
also settled, without a determination on the Knox-Keene/optical
company co-location issue.
According to information provided by the sponsor, the federal
court in December 2006 struck down B&P 655/2556 as
unconstitutional, interpreting the California Supreme Court's
ruling in the Pearle case as a bar to LensCrafters' Knox-Keene
plan arrangement. The federal court determined that "the
challenged laws substantially effect and discriminate against
interstate commerce." The Court also held that "Ýa]lthough
California has legitimate interests in regulating the provision
of health services, defendants have failed to meet its burden of
showing that it has no other means to advance its legitimate
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interests." The Court noted that the Knox-Keene plan
arrangement, if permitted by law, would be a viable means for
the State to achieve its legitimate interests with less impact
on interstate commerce.
According to the sponsor, although the AG attempted to show that
restrictions on co-location were necessary to protect the
independent professional judgment of optometrists from the lay
control of RDOs and thus to protect patient care, the federal
district court judge also found there was no evidence of harm
caused during the twenty years that co-location has operated in
California.
The federal case has been appealed and remanded back to district
court. The sponsor asserts that the federal case could take
another two years to conclude and, if LensCrafters loses,
another three to five years of litigation could ensue to
determine if the co-location model violates prohibitions of B&P
655/2556.
Support . According to LensCrafters, "AB 778?will codify the
current business practices of the co-location model. The
Legislation will specifically allow a specialty health care plan
to have business relationships with an optical dispenser. This
solution is needed in order to provide statutory clarity and
stability. AB 778 will not create a new type of business
practice or interfere with current business models. The
legislation will simply codify the current model used by optical
companies and Knox-Keene plans in the state that is regulated by
the Department of Managed Health Care (DMHC). All existing
regulatory structures will remain intact and in force.
Additionally, the legislative solution we are seeking will not
allow an optical company to hire an optometrist or
ophthalmologist. This proposal is limited to defining rights
for licensed Knox-Keene plans.""
Opposition . The California Optometric Association writes,
"California has a long history of protecting the independence of
optometrists and physicians from lay control. This proposed
legislation is contrary to that policy. LensCrafters claims
this legislation would only maintain the status quo, but we are
concerned about complaints that were included in the lawsuit
that LensCrafters has been asserting unlawful control over their
affiliated doctors' professional judgment. Long standing Knox
Keene regulations prohibiting interference in professional
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judgment was not sufficient to prevent LensCrafters from
dictating a doctor's appointment schedule, establishing quotas,
the use of LensCrafters employees on both the sales and health
care side that share patient information, the mandating of how
optometric care and appliances are prescribed and establishing
an environment where sales are prioritized over patient care.
We strongly believe (that) the legal process should be allowed
to run its course and, at the conclusion of the litigation,
Luxottica/LensCrafters must comply with the law."
REGISTERED SUPPORT / OPPOSITION :
Support
Californians for Healthy Vision (sponsor)
California Black Chamber of Commerce
California Hispanic Chamber of Commerce
California Retailers Association
EYEXAM of California
LensCrafters
Numerous individuals
Opposition
California Optometric Association
United Nurses Associations of California/Union of Health Care
Professionals
VSP Vision Care (VSP)
Several individuals
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301