BILL ANALYSIS Ó
SB 1095
Page 1
Date of Hearing: July 3, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 1095 (Rubio) - As Amended: June 25, 2012
SENATE VOTE : 35-0
SUBJECT : Pharmacy: clinics.
SUMMARY : Establishes the California Outpatient Pharmacy Patient
Safety and Improvement Act which expands existing authorization
for surgical clinics licensed by the Department of Public Health
(DPH) to purchase drugs at wholesale to include outpatient
settings that are accredited by an accreditation agency
(outpatient setting) approved by the Medical Board of California
(MBC), or an ambulatory surgical center (ASCs) certified to
participate in the Medicare program. Specifically, this bill :
1)Expands existing authorization for surgical clinics licensed
by DPH to purchase drugs at wholesale to include clinics that
are outpatient settings approved by the MBC or an ASC
certified to participate in the Medicare program, as
specified.
2)Applies the following existing law provisions to outpatient
settings and ASCs that purchase drugs at wholesale:
a) Drugs may be purchased at wholesale for administration
or dispensing, under the direction of a physician and
surgeon, to patients registered for care at the clinic, as
specified. Requires the clinics to keep records of the
kind and amounts of drugs purchased, administered,
dispensed, and the records to be made available and
maintained for a minimum of three years for inspection by
all properly authorized personnel.
b) The drug distribution service shall be limited to the
use of drugs for administration to the patients of the
clinic and to the dispensing of drugs for the control of
pain and nausea for patients of the clinic. Requires that
drugs not be dispensed in an amount greater than that
required to meet the patient's needs for 72 hours.
SB 1095
Page 2
Provides that drugs for administration shall be those drugs
directly applied, whether by injection, inhalation,
ingestion, or any other means, to the body of a patient for
his or her immediate needs.
c) Provides that no clinic shall purchase drugs at
wholesale until it has obtained a license from the Board of
Pharmacy (BOP). Requires a separate license for each
clinic location; and requires each clinic to notify the BOP
of any change in the clinic's address on a form furnished
by the BOP.
d) Specifies that if a clinic is licensed by the BOP, any
proposed change in ownership or beneficial interest in the
licensee shall be reported to the BOP, on a form to be
furnished by the BOP, at least 30 days prior to the
execution of any agreement to purchase, sell, exchange,
gift, or otherwise transfer any ownership or beneficial
interest or prior to any transfer of ownership or
beneficial interest, whichever occurs earlier.
3)States that nothing in 1) and 2) above shall 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)Provides that the BOP shall have the authority to inspect a
clinic that is licensed by the BOP to purchase drugs at
wholesale under this bill.
EXISTING LAW :
1)Establishes the BOP for the licensure and regulation of the
practice of pharmacy.
2)Establishes DPH to regulate and license clinics, and other
health care facilities.
3)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. Provides that a
surgical clinic does not include any place or establishment
owned or leased and operated as a clinic or office by one or
more physicians or dentists in individual or group practice,
regardless of the name used publicly to identify the place or
establishment, provided, however, that physicians or dentists
SB 1095
Page 3
may, at their option, apply for licensure.
4)Permits a surgical clinic, as defined in 3) above, and
licensed by DPH, to purchase drugs at wholesale for
administration or dispensing, under the direction of a
physician, to patients registered for care at the clinic.
Requires that a surgical clinic may purchase drugs at
wholesale only after it has obtained a license from the BOP.
Gives the BOP the authority to inspect a clinic at any time in
order to determine whether a clinic is, or is not, operating
in compliance with existing requirements. Specifies that a
separate license is required for each clinic location.
5)Specifies the following requirements for a surgical clinic
that is licensed by the BOP to purchase drugs at wholesale:
a) A surgical clinic must keep records of the kind and
amounts of drugs purchased, administered, and dispensed,
and the records shall be available and maintained for a
minimum of three years for inspection by all properly
authorized personnel.
b) The drug distribution service shall be limited to the
use of drugs for administration to the patients of the
surgical clinic and to the dispensing of drugs for the
control of pain and nausea for patients of the clinic.
Drugs shall not be dispensed in an amount greater than
required to meet the patient's needs for 72 hours. Drugs
for administration shall be those drugs directly applied
whether by injection, inhalation, ingestion, or any other
means, to the body of patient for his or her immediate
needs.
c) The dispensing of drugs is to be performed only by a
physician, pharmacist, or other person lawfully authorized
to dispense drugs, as specified.
6)Requires a surgical clinic that applies for a license from the
BOP to purchase drugs to show evidence that the professional
director is responsible for safe, orderly, and lawful
provision of pharmacy services.
7)Prohibits dispensing of Schedule II controlled substances in a
clinic that is licensed to purchase drugs, unless otherwise
specified.
SB 1095
Page 4
8)Requires a surgical clinic that is licensed to purchase and
provide such drugs to notify the BOP of any proposed changes
in ownership or beneficial interest, as specified.
9)Authorizes a physician and surgeon to prescribe for, or
dispense or administer to, a person under his or her treatment
for a medical condition dangerous drugs or prescription
controlled substances, as specified.
10)Prohibits the operation of an outpatient setting, including a
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 MBC.
11)Defines outpatient setting as any facility, clinic,
unlicensed clinic, center, office, or other setting that
is not part of a general acute care facility where
anesthesia is used.
12)Defines accreditation agency as a public or private
organization that is approved to issue certificates of
accreditation to outpatient settings by the MBC pursuant
to specified requirements.
13)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.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
1)Compliance inspection costs of estimated $164,000 in 2013-14
to the Pharmacy Board Contingent Fund, offset by clinic
licensing fees deposited in the Pharmacy Board Contingent
Fund; assuming inspections commence six months after the
effective date of the bill.
2)Similar compliance inspection costs in 2014-15, 2015-16,
2016-17; licensing revenue fee shortfall of estimated $63,000
annually.
SB 1095
Page 5
3)Potentially reduced compliance inspection activities in
2017-18 and ongoing, costs offset by fees.
COMMENTS :
1)PURPOSE OF THIS BILL . The California Ambulatory Surgery
Association is the sponsor of this bill. According to the
author, current law is problematic because approximately 90%
of ASCs have some type of physician ownership. As a result of
the Capen v. Shewry (2007) 147 Cal.App.4th 680 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.
2)BACKGROUND .
a) Surgical Clinics . Surgical clinics, ASCs or outpatient
settings are same day surgery centers that specialize in
surgeries that do not require an overnight hospital stay.
Since the first surgical clinic was established in 1970,
many procedures that used to be performed exclusively in
hospitals began taking place in these clinics such as knee,
shoulder, eye, spine, and other surgeries. Most surgical
clinics are licensed, certified by Medicare, and accredited
by one of the major health care accrediting organizations.
A surgical clinic that is certified to participate in the
Medicare Program, referred to as an ASC for purposes of
Medicare, must meet certain standards that are established
by the federal Centers for Medicare and Medicaid Services'
(CMS) Conditions of Participation and Conditions for
Coverage. Certification is limited to any distinct entity
that operates exclusively for purposes of providing
surgical services to patients not requiring
hospitalization. According to CMS, covered procedures
performed in certified ASCs are those that generally do not
exceed 90 minutes in length 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
SB 1095
Page 6
non-hospital health care setting as a result of a
particular procedure is not a covered surgical clinic
procedure for Medicare beneficiaries.
AB 595 (Speier), Chapter 1276, Statutes of 1994, established
a regulatory scheme for these clinics in California.
Referred to as outpatient settings, these clinics must be
accredited by an accreditation agency approved by the MBC
to operate. These accrediting agencies must ensure that
accreditation includes standards for the operation of
outpatient settings such as safety and emergency training
requirements, licensure or certification of allied health
staff, provision of onsite equipment, medication and
trained personnel in a medical emergency, permit surgery
only by a licensee who has admitting privileges at a local
accredited or licensed acute care hospital, as defined, and
a system for patient care and monitoring procedures The
four accrediting agencies approved by the MBC are the
American Association for Accreditation of Ambulatory
Surgery Facilities Inc., Accreditation Association for
Ambulatory Health Care, the Institute for Medical Quality
and the Joint Commission.
For purposes of regulatory authority, the Health and Safety
Code also makes a distinction between surgical clinics
licensed by DPH and outpatient settings under the oversight
of the MBC. Surgical clinics licensed by the DPH are
non-physician owned, while outpatient settings are
physician owned and operated. As part of their licensure,
surgical clinics under DPH's jurisdiction undergo
inspection and must have in place minimum standards of
safety and staffing.
b) Purchasing Drugs at Wholesale. A surgical clinic that
is licensed by the DPH is authorized to purchase drugs at
wholesale if the clinic obtains a license from the BOP.
Drugs that are purchased are for administration or
dispensing, under the direction of a physician, to patients
registered for care at the clinic. The clinic is required
to keep records of the kind and amounts of drugs purchased,
administered, and dispensed, and the records shall be
available and maintained for a minimum of three years for
inspection. The drug distribution service is limited for
the administration to the patients of the clinic and to the
dispensing of drugs for control of pain and nausea. Drugs
SB 1095
Page 7
shall not be dispensed in an amount greater than that
required to meet the patient's needs for 72 hours. The BOP
is authorized to inspect a clinic at any time in order to
determine whether a clinic is, or is not, operating with
the specified requirements.
This bill will expand these provisions to also authorize
outpatient settings and ASCs to purchase drugs at
wholesale. According to information provided by the MBC to
staff, there are about 800 outpatient settings that are
accredited, and would be eligible to get a license to
purchase drugs at wholesale under this bill.
c) Capen v. Shewry . Prior to 2007, physicians that owned
clinics that administer anesthesia had the option to be
licensed by the DPH or accredited by an accrediting agency
approved by the MBC. In Capen v. Shewry the issue before
the court was whether a surgical clinic that is wholly
owned and operated by a licensed physician, in which
non-owner, non-licensee, physicians will practice, is
required to obtain a license from DPH. The facts of the
case reveal that the plaintiff, Dr. Capen, is a licensed
physician who is building a surgical clinic that he will
wholly own and operate, in which non-owner, non-licensee
physicians will practice. He was informed by DPH (then the
Department of Health Services or DHS) that a license is
required of the clinic because of the physicians who do not
share in its ownership and operation. Dr. Capen sued DHS
and argued that the existing law provisions governing the
authority of DHS to license facilities is ambiguous. At
issue in Capen was Section 1204 (b)(1) of the Health and
Safety Code which states that "a surgical clinic is a
clinic that is not part of a hospital and that provides
ambulatory surgical care for patients who remain less than
24 hours. A surgical clinic does not include any place or
establishment owned or leased and operated as a clinic or
office by one or more physicians or dentists in individual
or group practice, regardless of the name used publicly to
identify the place or establishment, provided; however,
that physicians or dentists may, at their option, apply for
licensure." The Court indicated that the provisions of
Section 1204(b)(1) where clinics "owned or leased by one or
more physicians in individual or group practice" was
ambiguous because it could be interpreted to require an
ownership or lease interest either by one physician in
SB 1095
Page 8
group practice or by all of the physicians in the group.
The Court concluded that physician-owned-and-operated
surgical clinics are not subject to licensing by DPH and
are to be regulated by the MBC.
After the Capen decision, DHS sent an all facilities letter
informing physician owned clinics that it will no longer
renew or grant any licenses to any surgical clinic that is
physician owned. As a result, since a clinic no longer has
the option to be licensed by DHS (now DPH), and must
instead be accredited by an accreditation agency, many
physician-owned clinics are now unable to purchase drugs
because the current authorization for a clinic to purchase
drugs at wholesale requires DPH licensure.
d) SB 100. The growing popularity of cosmetic surgery
being performed at outpatient settings by any physician who
may or may not be trained in cosmetic procedures, and
reports of patient deaths at these settings prompted a
review of the standards that apply to such settings. In
2011, SB 100 (Price), Chapter 645, Statutes of 2011,
strengthened the standards for outpatient settings, and
among other provisions, required the following:
i) An outpatient setting shall submit for approval by
an accrediting agency at the time of accreditation, a
detailed plan, standardized procedures and protocols to
be followed in the event of an emergency;
ii) Required inspections to be conducted no less than
once every three years by the accreditation agency and as
often as necessary by the MBC to ensure quality of care
provided; and outpatient settings that have multiple
service locations to have all sites inspected;
iii) Required an accrediting agency to report within 24
hours to the MBC if the outpatient setting has been
issued a reprimand or if the outpatient setting's
certification of accreditation has been suspended or
revoked or if the outpatient setting has been placed on
probation; and,
iv) Required the accrediting agency within 10 days after
the adoption of a plan of correction to send a list of
deficiencies and the corrective action to be taken by an
SB 1095
Page 9
outpatient setting to the MBC.
3)SUPPORT . The MBC states in support that 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 licensed from the BOP,
because they could no longer by licensed by the DPH. MBC
indicates that this bill will permit accredited surgery
centers to purchase medication at wholesale and safely store
the medication in a centralized location in the surgery
center.
The California Ambulatory Surgery Association, the sponsor of
this bill, and surgery centers such as Aspen Surgery Center,
Millennium Surgery Center, and Golden Triangle SurgiCenter
state that without adding an accredited outpatient setting and
Medicare certified ASCs to the list of facilities that can
obtain a limited pharmacy licensed from the BOP, individual
staff physicians are required to acquire and maintain on-hand
a myriad of medications to dispense at the point of care as
opposed to those medications simply being readily centralized
and available by the ASC.
4)RELATED LEGISLATION . SB 100, among other provisions, makes a
number of changes regarding the approval, oversight and
inspection of outpatient settings, and in developing a plan of
corrective action for any deficiencies found by the
accreditation agencies or the MBC during inspections, or
otherwise; and revises the existing definition of outpatient
settings to include fertility clinics that offer in vitro
fertilization.
AB 847 (Lowenthal) of 2011 was substantially identical to this
bill. AB 847 died in this Committee without being heard.
5)PRIOR LEGISLATION . AB 2292 (Lowenthal) of 2010, is
substantially similar to the provisions of this bill and would
have permitted BOP 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 for administration or
dispensing to clinic patients for pain and nausea under the
direction of a physician. AB 2292 died on the Assembly
Appropriations Committee suspense file.
SB 1095
Page 10
AB 832 (Jones) of 2009 would have required the DPH to convene a
workgroup to develop recommendations regarding the oversight
of ASCs to address issues raised in Capen v. Shewry . AB 832
died on the Assembly Appropriations Committee suspense file.
AB 1574 (Plescia) of 2008 contained similar provisions to those
proposed in AB 2292 of 2010 and would have required the BOP to
inspect outpatient settings and ASCs within 120 days of
issuing a clinic license and then at least annually
thereafter. The bill was vetoed by the Governor stating: "The
bill failed to address the larger issue concerning the Capen
v. Shewry ruling."
AB 2122 (Plescia) of 2008 would have required surgical clinics
to meet licensing requirements, including compliance with
Medicare conditions of participation; contained provisions
nearly identical to those proposed in AB 1574. AB 2122 died
in the Assembly Appropriations Committee.
AB 543 (Plescia) of 2007 would have required surgical clinics to
meet specified operating and staffing standards, to limit
surgical procedures, as specified, and to develop and
implement policies and procedures consistent with Medicare
conditions of participation, including interpretive
guidelines. AB 543 was vetoed by the Governor stating that
the bill did not establish appropriate time limits for
performing surgery under general anesthesia, and
inappropriately restricted administrative flexibility, and
created fiscal pressure during ongoing budget challenges.
AB 2308 (Plescia) of 2006 would have required the DHS to convene
a workgroup to develop licensing criteria to protect surgical
clinic patients, and to submit the workgroup conclusions and
recommendations to the Legislature by March 1, 2007. AB 2308
would have replaced the term "licensed surgical clinic" with
"ambulatory surgical centers." AB 2308 was vetoed by the
Governor stating, "The bill did not establish clear licensing
standards for surgical clinics."
6)DOUBLE REFERRAL . This bill is double referred and was heard
in the Assembly Business, Professions & Consumer Protection
Committee and passed out on a vote of 9-0 on June 12, 2012.
7)SUGGESTED AMENDMENTS .
SB 1095
Page 11
a) Corrective Action Plan and Deficiencies . Existing law
requires accrediting agencies approved by the MBC to send a
list of deficiencies and the corrective action to be taken
by an outpatient setting to the MBC. To ensure that the
BOP is made aware of any deficiency or corrective action
for an outpatient setting that is also licensed to purchase
drugs at wholesale, this bill should be amended to require
an accrediting agency to send the list of deficiencies and
corrective action plan to the BOP but only for clinics that
are licensed by the BOP to purchase drugs.
b) Suspension or Revocation . Existing law also requires an
accreditation agency, within 24 hours, to report to the MBC
if an outpatient setting has been issued a reprimand or if
the outpatient setting's certification of accreditation has
been suspended or revoked or if the outpatient setting has
been placed on probation. This bill should be amended to
indicate that if an outpatient setting has been issued a
license by the BOP to purchase drugs, the accreditation
agency shall also send this report to the BOP within 24
hours.
c) Technical Amendments . It is unclear why it is necessary
to include the terms "group medical practice" on page 3,
line 30 of this bill since the code sections referenced in
the subdivision apply only to physicians and surgeons. The
Committee recommends that the terms "group medical
practice" be deleted.
REGISTERED SUPPORT / OPPOSITION :
Support
California Ambulatory Surgery Association (sponsor)
Aspen Surgery Center
Golden Triangle SurgiCenter
Medical Board of California
Millennium Surgery Center, Inc.
Physicians Plaza Surgical Center
Southwest Surgical Center
Surgical Care Affiliates
Opposition
None on file.
SB 1095
Page 12
Analysis Prepared by : Rosielyn Pulmano / HEALTH / (916)
319-2097