BILL ANALYSIS Ó
SB 1095
Page 1
Date of Hearing: June 12, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 1095 (Rubio) - As Introduced: February 16, 2012
SENATE VOTE : 35-0
SUBJECT : Pharmacy: clinics.
SUMMARY : Authorizes outpatient settings and ambulatory
surgical centers (ASCs) to purchase drugs at wholesale for
administering and dispensing to their patients. Specifically,
this bill :
1)Revises and recasts the authorization for the Board of
Pharmacy (Board) to issue a license for the wholesale purchase
of drugs to a "surgical clinic," to instead refer to the
license being issued to a "clinic," and defines "clinic" to
mean any of the following:
a) A surgical clinic licensed pursuant to state Health and
Safety Code;
b) An outpatient setting accredited by an accreditation
agency, as defined in state Health and Safety Code; or,
c) An ASC certified to participate in the Medicare Program
pursuant to federal law.
2)Deletes a provision stating that no clinic shall operate
without a license issued by the Board, but retains provisions
requiring a clinic to be licensed by the Board in order to be
entitled to purchase drugs at wholesale, and allowing the
Board to inspect those clinics at any time in order to
determine whether a clinic is operating in compliance with the
law.
3)Specifies that the provisions above shall not limit the
ability of a physician and surgeon or a group medical practice
to prescribe, dispense, administer, or furnish drugs at a
clinic, as specified.
4)Makes conforming changes.
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EXISTING LAW
1)Provides for the licensure and regulation of the practice of
pharmacy under the Pharmacy Law by the Board within the
Department of Consumer Affairs.
2)Authorizes the Board to issue a license to a surgical clinic
to purchase drugs to administer or dispense to the clinic's
patients, as specified.
3)Authorizes a licensed surgical clinic to purchase drugs at
wholesale prices to administer or dispense to patients
registered for care at the clinic and limits the
administration or dispensing of surgical clinic drugs to drugs
that control pain and nausea, and prohibits drugs from being
dispensed in amounts greater than that required to meet the
patient's needs for 72 hours.
4)Authorizes surgical clinics to purchase and distribute such
drugs only after being licensed to do so by the Board, as
specified, and requires surgical clinics to keep records as to
the kind and amount of drugs purchased, administered, and
dispensed, for at least three years.
5)Requires a surgical clinic that is licensed to purchase and
provide such drugs to notify the Board of any proposed changes
in ownership or beneficial interest, as specified.
6)Authorizes the Board to inspect a clinic at any time in order
to determine the clinic's compliance with the law.
7)Requires surgical clinics to be licensed and certified by the
Department of Public Health (DPH).
8)Defines a surgical clinic as a clinic that is not part of a
hospital, and that provides ambulatory surgical care for
patients who remain less than 24 hours.
9)Defines an outpatient setting as any facility, clinic, office,
or other setting that is not part of a general acute care
hospital, where anesthesia is used in compliance with the
community standard of practice.
10)Prohibits the operation of an outpatient setting, including a
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surgical clinic, unless the setting is licensed by DPH,
certified to participate in the Medicare program, as
specified, or accredited by an accreditation agency approved
by the Medical Board of California (MBC).
11)Requires the MBC to adopt standards for accreditation of
outpatient settings, as defined, and in approving
accreditation agencies to perform accreditation of outpatient
settings, ensure that the certification program shall, at a
minimum, include standards for specified aspects of settings'
operations.
12)Defines an ASC as an ambulatory surgical center certified to
participate in the Medicare Program under Title XVIII of the
federal Social Security Act.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author, "In 2007, the
California Court of Appeal ruled in Capen v. Shewry to prohibit
DPH from licensing ASCs that are either partially or fully owned
by a physician, even if the physician-owned ASC is properly
accredited and Medicare certified. Without proper licensure
from DPH, the Board cannot grant the ASC a license to purchase
medications wholesale.
"Current law is problematic because approximately 90% of ASCs
have some type of physician ownership. As a result of the Capen
v. Shewry decision, physicians that own ASCs incur a significant
liability by having to purchase drugs at retail prices. This
bill provides physician-owned ASCs the proper licensing
necessary to administer high quality care by allowing them to
purchase certain drugs wholesale and store them on site."
Background . ASCs are health care facilities that specialize in
providing surgery, pain management and certain diagnostic
services in an outpatient setting. Since the first ASC was
established in 1970, many procedures that used to be performed
exclusively in hospitals began taking place in ASCs, such as
knee, shoulder, eye, spine, and other surgeries. Most ASCs are
licensed, certified by Medicare and accredited by one of the
major health care accrediting organizations. Stand-alone ASCs
rarely have a single owner and most involve at least some
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physician ownership. Physician partners who perform surgeries
in the center will often own at least some part of the facility,
but ownership percentages vary considerably. Some ASCs are
entirely physician-owned and some have a development or
management company that owns a percentage of a center.
The federal Centers for Medicare and Medicaid Services (CMS)
develops conditions of participation and conditions for
coverage, which are minimum standards a health care organization
must meet in order to participate in the Medicare and Medicaid
programs. Certification as a surgical clinic is limited to any
distinct entity that operates exclusively for purposes of
providing surgical services to patients who don't require
hospitalization. A surgical clinic can be hospital-operated or
independent. However, it must be physically and
administratively distinct from other operations of the hospital
and be able to identify its costs separately from other hospital
costs. According to CMS, covered procedures performed in
certified ASCs are those that generally do not exceed 90 minutes
and do not require more than four hours recovery or convalescent
time. The surgical clinic may not perform a surgical procedure
on a Medicare beneficiary when, before surgery, an overnight
hospital stay is anticipated. Anticipated extended care in a
non-hospital health care setting as a result of a particular
procedure is not a covered surgical clinic procedure for
Medicare beneficiaries.
Physicians are prohibited by law from performing specified
outpatient surgeries, unless they are performed in a licensed or
accredited setting. The law also specifies that certain
outpatient surgery settings are excluded from the accreditation
requirement, such as surgery clinics certified to participate in
the Medicare program and licensed surgical clinics. Physicians
who perform surgery under specified anesthesia levels in
unlicensed settings that are also not Medicare-certified, such
as their offices, must seek accreditation from one of the
accreditation agencies approved by MBC.
Under existing law, a surgical clinic must comply with all
applicable laws and regulations of the DPH and the Board
relating to drug distribution to ensure that inventories,
security procedures, training, protocol development,
recordkeeping, packaging, labeling, dispensing, and patient
consultation are carried out in a manner that is consistent with
the promotion and protection of the health and safety of the
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public.
In 2007, a California appellate court ruled that ASCs owned, in
whole or in part, by physicians would no longer be eligible for
licensure by the DPH. The court found, in part:
"The regulatory authority (of DPH) over licensed surgical
clinics extends to the establishment of minimum standards of
safety for the surgical clinic facility and its equipment and to
the setting of minimum standards of staffing?In 1994 the
Legislature delegated authority to the MBC to provide for the
accreditation and setting of standards for unlicensed surgical
clinics employing general anesthesia, including standards for
the safety of the facility and its equipment and the adequacy
and training of its personnel?It did so because it found 'that
in this state, significant surgeries are being performed in
unregulated out-of-hospital settings?'
"In this manner the Legislature divided the oversight of the
safety of surgical clinics between two different agencies of
government, primarily distinguished by the ownership and
operation of the clinic by one or more physicians since that is
the circumstance that excludes a clinic from licensing by DPH
and thereby makes possible regulation by MBC.
"Under our previous reading of (Health and Safety Code) section
1204 DPH's licensing authority was dependent on whether the
clinic was owned and operated by one, as distinguished from
more-than-one physician, in group practice. However, it makes
little policy sense to separate the regulation of physician
owned and operated clinics on that basis, given the MBC's
general jurisdiction over the practice of physicians and
specific jurisdiction over the safety of surgical clinics not
licensed by DPH. The simple interpretive policy we derive is
that physician owned and operated surgical clinics are to be
regulated by MBC and surgical clinics operated by non-physicians
are to be regulated by DPH, a determination involving the
statutory allocation of responsibility that is not within the
expertise of either agency.
"Accordingly, we resolve the ambiguity in section 1204,
subdivision (b)(1), by reading it to exclude physician owned and
operated surgical clinics from?licensing by DPH, leaving them,
when using general anesthesia, to accreditation and regulation
by MBC."
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As a result of this ruling, the DPH ceased licensure activities
of ASCs owned by physicians, although it continued to perform
Medicare certification for these facilities. Prior to the Capen
v. Shewry ruling, DPH interpreted the exemption from licensure
in law for physician-owned clinics to mean that each licensed
health care practitioner at the clinic had to have at least some
share in the ownership (or leasehold) and operation of the
clinic. The DPH interpreted the law in this way to ensure that
a practitioner at the clinic could not disclaim responsibility
for its operation should a problem arise. Since the ruling, DPH
is not renewing or granting any licenses to a surgical clinic
with any degree of physician ownership, but it continues to
certify these centers for Medicare purposes.
Support . The Medical Board of California states, "This bill
would resolve an unintended consequence created by a 2007 court
decision that resulted in physician owned outpatient settings
not being eligible to obtain a limited license from the Board of
Pharmacy, because they could no longer be licensed by DPH. This
bill would allow accredited and certified surgery centers to
obtain a license from the Board of Pharmacy, which will permit
accredited surgery centers to purchase medication at wholesale
and safely store the medication in a centralized location in the
surgery center."
Opposition . The California State Board of Pharmacy has offered
amendments that "would ensure adequate regulatory oversight of
comingled drug stocks at these clinics, and would authorize the
Board to inspect a clinic to determine compliance with
applicable laws, whether or not the clinic is licensed by the
Board."
Previous legislation .
SB 100 (Price), Chapter 645, Statutes of 2011, requires MBC to
adopt regulations on physician availability within clinics using
laser or intense pulse light devices for elective cosmetic
surgery, makes a number of changes regarding the approval,
oversight and inspection of "outpatient settings," and revises
the existing definition of "outpatient settings" to include
fertility clinics that offer in vitro fertilization.
AB 847 (Bonnie Lowenthal) of 2011 was substantially identical to
SB 1095. This bill was held in Assembly Health Committee.
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AB 2292 (Bonnie Lowenthal) of 2010 allows the Board to grant a
limited license to a clinic that is certified as an ASC for
participation in the Medicare program or accredited as an
outpatient setting to allow them to purchase drugs at wholesale,
as specified. This bill was held in Assembly Appropriations
Committee.
AB 832 (Jones) of 2009 requires DPH to convene a workgroup to
develop recommendations regarding the oversight of ASCs to
address issues raised in Capen v. Shewry. This bill was held in
Assembly Appropriations Committee.
AB 1574 (Plescia) of 2008 contains similar provisions to those
proposed in AB 2292 and requires the Board to inspect outpatient
settings and ASCs within 120 days of issuing a clinic license
and at least annually thereafter. This bill was vetoed by the
Governor, who stated, "The bill failed to address the larger
issue concerning the Capen v. Shewry ruling."
AB 2122 (Plescia) of 2008 requires surgical clinics to meet
specified licensing requirements, including compliance with
Medicare conditions of participation and contains provisions
nearly identical to those proposed in AB 1574. This bill was
held in Assembly Appropriations Committee.
AB 543 (Plescia) of 2007 requires surgical clinics to meet
specified operating and staffing standards, limit surgical
procedures, and develop and implement policies and procedures
consistent with Medicare conditions of participation, including
interpretive guidelines. This bill was vetoed by the Governor,
who stated that the bill did not establish appropriate time
limits for performing surgery under general anesthesia,
inappropriately restricted administrative flexibility, and
created fiscal pressure during ongoing budget challenges.
AB 2308 (Plescia) of 2006 requires DPH to convene a workgroup to
develop licensing criteria to protect surgical clinic patients,
and replaces the term "licensed surgical clinic" with
"ambulatory surgical centers." This bill was vetoed by the
Governor, who stated, "The bill did not establish clear
licensing standards for surgical clinics."
AB 595 (Speier), Chapter 1276, Statutes of 1994, requires that
certain outpatient settings, including surgical clinics, be
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licensed by the state, be Medicare certified, or be accredited
by an agency approved by the MBC.
Double referred . This bill is double-referred to Assembly
Health Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
California Ambulatory Surgery Association (sponsor)
Advanced Eye Surgery Center
Airport Endoscopy Center
AmSurg Corp
Aspen Surgery Center
Brentwood Surgery Center
Carlsbad Surgery Center
Coast Surgery Center
Endoscopy Center of the Central Coast
Glendora Digestive Disease Institute
Golden Triangle Surgicenter
Hacienda Surgery Center
Hope Square Surgical Center
La Jolla Endoscopy Center
La Jolla Orthopaedic Surgery Center
Lynn Eye Surgery Center
Medical Board of California
Millennium Surgery Center
Mission Valley Heights Surgery Center
Oasis Surgery Center
OtayLakes Surgery Center
Pacific Hills Surgery Center
Peninsula Eye Surgery Center
Physicians Plaza Surgical Center
Pleasanton Surgery Center
Providence Summit Surgery Center
Redding Endoscopy Center
Southwest Surgical Center
Surgical Care Affiliates
Sutter Alhambra Surgery Center
Sutter Health Surgery Center Division
Torrance Surgery Center
United Surgical Partners
Westlake Eye Surgery Center
One individual
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Opposition
California State Board of Pharmacy
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301