BILL ANALYSIS Ó AB 1548 Page 1 Date of Hearing: March 27, 2012 ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER PROTECTION Mary Hayashi, Chair AB 1548 (Carter) - As Amended: March 22, 2012 SUBJECT : Practice of medicine: cosmetic surgery: employment of physicians and surgeons. SUMMARY : Makes it unlawful for a business organization to violate the prohibition against the corporate practice of medicine (CPM), if that organization is in the business of outpatient elective cosmetic medical procedures or treatments. Specifically, this bill : 1)Provides that a business organization that offers to provide, or provides, outpatient elective cosmetic medical procedures or treatments, that is owned or operated in violation of the CPM, and that contracts with, or otherwise employs, a physician and surgeon to facilitate its offers to provide, or the provision of, outpatient elective cosmetic medical procedures or treatments that may be provided only by the holder of a valid physician's and surgeon's certificate is guilty of knowingly making or causing to be made a false or fraudulent claim for payment of a health care benefit. States that this provision is declaratory of existing law. 2)Defines "outpatient elective cosmetic medical procedures or treatments" to mean medical procedures or treatments that are performed to alter or reshape normal structures of the body solely in order to improve appearance. 3)Provides that nothing in this bill shall be construed to alter or apply to arrangements currently authorized by law, as specified. 4)States legislative findings and declarations. EXISTING LAW 1)Requires, under the Medical Practice Act (MPA), any person who practices medicine to hold a valid certificate to practice medicine. Establishes the Medical Board of California (MBC) to license and certify physicians and surgeons. AB 1548 Page 2 2)Prohibits corporations and other artificial legal entities from having any medical professional rights, privileges, or powers (known as the prohibition against the CPM). However, existing law further provides that the 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. Provides other certain exceptions to the prohibition against the CPM. 3)Makes it unprofessional conduct for any licensee to violate, or attempt to violate, assist in, or abet the violation of, or to conspire to violate the prohibition against the CPM. Requires the MBC to take action against any licensee who is charged with unprofessional conduct. Specifies the types of actions that constitute unprofessional conduct. 4)Makes it unlawful to knowingly make or cause to be made any false or fraudulent claim for payment of a health care benefit. Specifies that any person who violates this provision is guilty of a public offense and provides for the following penalties: a) When the claim or amount at issue exceeds $950, the offense is punishable by imprisonment in the state prison for two, three, or five years, or by a fine not to exceed $50,000 or double the amount of the fraud, whichever is greater, or by both that imprisonment and fine, or by imprisonment in a county jail not to exceed one year, by a fine of not more than $10,000, or by both that imprisonment and fine; or, b) When the claim or amount at issue is $950 or less, the offense is punishable by imprisonment in a county jail not to exceed six months, or by a fine of not more than $1,000 or by both, unless the aggregate amount of the claims or amount at issue exceeds $950 in any 12-consecutive-month period, in which case the claims or amounts may be charged as in item a), above. 5)Defines cosmetic surgery for purposes of health insurance and health plan coverage as any surgery that is performed to alter or reshape normal structures of the body in order to improve AB 1548 Page 3 the patient's appearance. FISCAL EFFECT : Unknown COMMENTS : Purpose of this bill . According to the author, "Several large, corporate laser and medi-spa chains operate in flagrant violation of the law because current penalties are minor in costs compared to business profits. Alternative patient treatment sites, often called "medi-spas" have become a major and often misleading presence in the medical cosmetic skin care field. Medical spas are marketing vehicles for medical procedures. The use of the term "medi-spa" is for advertising purposes to make the procedures seem more appealing. In reality, however, it is the practice of medicine." Background . The CPM is typically referred to in the context of a prohibition, banning hospitals from employing physicians. The CPM evolved in the early 20th century when mining companies hired physicians directly to provide care for their employees in remote areas. However, problems arose when physicians' loyalty to the mining companies conflicted with patients' needs. Eventually, physicians, courts, and legislatures prohibited the CPM in an effort to preserve physicians' autonomy and improve patient care. The Attorney General's (AG's) office states, "In a professional corporation, it is not always possible to divide the 'business' side of the corporation from the part which renders professional services; the subject is treated as a whole." Existing state law generally mirrors the principles described above against CPM, with specific exceptions. The policy is intended to prevent persons who are not medical professionals from interfering with or influencing the physician's professional judgment. In an attempt to circumvent this legal prohibition, some individuals have created business and management schemes that violate the spirit of the law by providing management services, franchises, or participating in other models that result in the potential for unlicensed persons or entities to influence or make medical decisions in violation of the law. Physicians who are employees of non-physician owned spas are in AB 1548 Page 4 violation of the CPM prohibition and may be disciplined for unprofessional conduct. Medical practice models . The MBC has published guidance on the CPM for physicians on its website, which states that the following business or management decisions should be made by a licensed physician and surgeon: 1)Selection, hiring, and firing (as it relates to clinical competency or proficiency) of physicians, allied health staff and medical assistants; 2)Setting the parameters under which the physician will enter into contractual relationships with third-party payers; 3)Decisions regarding coding and billing procedures for patient care services; and, 4)Approving of the selection of medical equipment and medical supplies for the medical practice. While a physician may consult with unlicensed persons in making the "business" or "management" decisions described above, the physician must retain the ultimate responsibility for, or approval of, these decisions. The following types of medical practice ownership and operating structures are prohibited: 1)Non-physicians owning or operating a business that offers patient evaluation, diagnosis, care and/or treatment; 2)Physician(s) operating a medical practice as a limited liability company, a limited liability partnership, or a general corporation; 3)Management service organizations arranging for, advertising, or providing medical services rather than only providing administrative staff and services for a physician's medical practice (non-physician exercising controls over a physician's medical practice, even where physicians own and operate the business); and, 4)A physician acting as "medical director" when the physician does not own the practice. For example, a business offering AB 1548 Page 5 spa treatments that include medical procedures such as Botox injections, laser hair removal, and medical microdermabrasion, that contracts with or hires a physician as its "medical director." This bill would enhance the penalty for "medi-spa" corporations violating the ban on the CPM to a public offense, punishable by imprisonment for six months to five years, or by a fine of up to $50,000 or double the amount of the fraud, whichever is greater, or by both the imprisonment and fine. Current law states that a violation of the MPA is punishable as a misdemeanor and/or a fine of up to $1,200 and imprisonment for up to 180 days. Previous legislation . AB 2566 (Carter) of 2010 was identical to this bill. The bill was vetoed by the Governor, who stated, "Existing law already addresses the issues highlighted by the sponsors and author. The real problem is that the sponsors want enforcement of this issue moved up on the prioritization of enforcement issues pending with the MBC. California currently ranks 41st in the county for taking serious disciplinary action against doctors and this bill attempts to move those serious disciplinary actions behind businesses that operate "medi-spas" providing skin peels, dermabrasion and laser hair removal. Good doctors are the backbone of our health delivery system. I believe the members of the Board want to protect patients. I just don't agree that the Board's time is better spent on medi-spa enforcement when other physicians should be more quickly investigated and prohibited from practicing medicine when they have caused serious patient harm or death." AB 252 (Carter) of 2009 authorizes the revocation of a license of a physician and surgeon who provides elective cosmetic medical procedures or treatments in violation of the prohibition against CPM. This bill was vetoed by the Governor, who stated, "This bill is duplicative of existing law and unnecessary. MBC already has significant legal authority to take action against physicians that violate the MPA." AB 2398 (Nakanishi) of 2008 contains provisions identical to this bill. The bill also authorizes the revocation of the license of a physician and surgeon who practices medicine with a business organization that provides outpatient elective cosmetic medical procedures or treatments, knowing that the practice is owned or operated in violation of the prohibition against CPM. This bill was held on the Senate floor. AB 1548 Page 6 REGISTERED SUPPORT / OPPOSITION : Support American Society for Dermatologic Surgery Association (sponsor) California Society of Dermatology and Dermatologic Surgery (sponsor) American Academy of Dermatology Association American Academy of Facial Plastic and Reconstructive Surgery American Academy of Otolaryngology-Head and Neck Surgery American Medical Association American Society of Ophthalmic Plastic and Reconstructive Surgery, Inc. California Society of Plastic Surgeons Medical Board of California Opposition None on file. Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916) 319-3301