BILL ANALYSIS Ó ------------------------------------------------------------ |SENATE RULES COMMITTEE | SB 1095| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ UNFINISHED BUSINESS Bill No: SB 1095 Author: Rubio (D), et al. Amended: 8/6/12 Vote: 21 SENATE BUS., PROF. & ECON. DEV. COMMITTEE : 8-0, 4/9/12 AYES: Price, Emmerson, Corbett, Correa, Hernandez, Negrete McLeod, Strickland, Wyland NO VOTE RECORDED: Vargas SENATE APPROPRIATIONS COMMITTEE : 7-0, 4/30/12 AYES: Kehoe, Walters, Alquist, Dutton, Lieu, Price, Steinberg SENATE FLOOR : 35-0, 5/3/12 AYES: Alquist, Berryhill, Blakeslee, Calderon, Corbett, Correa, De León, DeSaulnier, Dutton, Emmerson, Evans, Fuller, Gaines, Hancock, Harman, Hernandez, Huff, Kehoe, La Malfa, Leno, Lieu, Liu, Lowenthal, Negrete McLeod, Pavley, Price, Rubio, Steinberg, Strickland, Vargas, Walters, Wolk, Wright, Wyland, Yee NO VOTE RECORDED: Anderson, Cannella, Padilla, Runner, Simitian ASSEMBLY FLOOR : 77-0, 8/21/12 - See last page for vote SUBJECT : Pharmacy: clinic SOURCE : California Ambulatory Surgery Association CONTINUED SB 1095 Page 2 DIGEST : This bill authorizes outpatient settings and ambulatory surgical centers (ASCs) to purchase drugs at wholesale for administering and dispensing to their patients. Assembly Amendments require agencies that accredit outpatient settings to provide specified information to the Board of Pharmacy (Board) within 10 days after the adoption of a plan of correction for a notice of deficiencies, and within 24 hours if an outpatient setting has been issued a reprimand, if the outpatient setting's certificate of accreditation has been suspended or revoked, or if the outpatient setting has been placed on probation; and 2) add Senator Wyland as a coauthor. ANALYSIS : Existing law, the Business and Professions Code: 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. SB 1095 Page 3 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. Existing law, the Health and Safety Code (HSC): 1. Requires surgical clinics to be licensed and certified by the Department of Public Health (DPH). 2. 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. 3. 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 4. Prohibits the operation of an outpatient setting, including a surgical clinic, unless the setting is licensed by the DPH, certified to participate in the Medicare program, as specified, or accredited by an accreditation agency approved by the Medical Board of California (MBC). 5. 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. 6. Defines an "ambulatory surgical center" as an ambulatory surgical center certified to participate in the Medicare Program under Title XVIII of the federal Social Security Act. This bill: 1.Revises and recasts the authorization for the Board to SB 1095 Page 4 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. 1.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. 2.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. 3.Requires agencies that accredit outpatient settings to provide specified information to the Board within 10 days after the adoption of a plan of correction for a notice of deficiencies, and within 24 hours if an outpatient setting has been issued a reprimand, if the outpatient setting's certificate of accreditation has been suspended or revoked, or if the outpatient setting has been placed on probation. 4.Makes conforming changes. Background Ambulatory Surgical Centers (ASC) . ASCs are health care facilities that specialize in providing surgery, pain management and certain diagnostic (e.g., colonoscopy) SB 1095 Page 5 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 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. Medicare Certification . 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 not requiring hospitalization. A surgical clinic may be either 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 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 non-hospital health care setting as a result of a particular procedure is not a covered surgical clinic procedure for Medicare beneficiaries. MBC Accreditation . Physicians are currently 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 SB 1095 Page 6 Medicare program and licensed surgical clinics. Physicians presently performing 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. Board Licensure Requirement . Under existing law, the surgical clinic, outpatient setting, or ASC is required to comply with all applicable laws and regulations enforced by the DPH and the Board, relating to drug distribution, in order 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 public. Capen v. Shewry . 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. As a result, the DPH ceased licensure activities of ASCs owned by physicians, although it continued to perform Medicare certification for those facilities. Prior to the Capen v. Shewry ruling, the DPH interpreted the exemption from licensure in law for physician-owned clinics to mean that each licensed health 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. Although following Capen v. Shewry , the DPH is not renewing or granting any licenses to a surgical clinic with any degree of physician ownership, it continues to certify these centers for Medicare purposes. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: 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 SB 1095 Page 7 after the effective date of the bill. Similar compliance inspection costs in 2014-15, 2015-16, 2016-17; licensing revenue fee shortfall of estimated $63,000 annually. Potentially reduced compliance inspection activities in 2017-18 and ongoing, costs offset by fees. SUPPORT : (Verified 5/1/12) California Ambulatory Surgery Association (source) Advanced Eye Surgery Center Airport Endoscopy Center AmSurg Corp Antelope Valley Surgery Center ASD Management Aspen Surgery Center Brentwood Surgery Center Carlsbad Surgery Center Central California Endoscopy Center Coast Surgery Center East Bay Endosurgery El Camino Surgery Center Glendale Eye Surgery Center Glendora Digestive Disease Institute Golden Triangle Surgicenter Hacienda Surgery Center Hope Square Surgical Center Inland Surgery Center La Jolla Endoscopy Center Millennium Surgery Center Monterey Peninsula Surgery Centers Monterey Peninsula Surgery Centers National Surgical Hospitals North Coast Surgery Center Oasis Surgery Center Orthopaedic Surgery Center OtayLakes Surgery Center Outpatient Surgery Center of La Jolla Pain Diagnostic and Treatment Center Parkway Endoscopy Center Physicians Plaza Surgical Center Pleasanton Surgery Center SB 1095 Page 8 Rancho Bernardo Surgery Center Redding Endoscopy Center Riverside Surgery Center Roseville Surgery Center San Luis Obispo Surgery Center San Mateo Surgery Center Skyway Surgery Center Southwest Surgical Center Surgery Center of Santa Monica Surgery Center of the Pacific Surgical Care Affiliates Temecula Valley Endoscopy Center Templeton Endoscopy Center The Oaks Surgery Center The Surgery Center of Santa Rosa United Surgical Partners Valley Digestive Health Center ARGUMENTS IN SUPPORT : According to the author's office, in 2007, the California Court of Appeal ruled in Capen v. Shewry to prohibit the 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 the DPH, the Board cannot grant the ASC a license to purchase medications wholesale. Existing law is problematic because approximately 90 percent of ASCs have some type of physician ownership, according to the author's office. 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. The author's office states that this bill provides physician-owned ASCs the proper licensing necessary to administer high quality care by allowing them to purchase certain drugs wholesale and storing them on site. ASSEMBLY FLOOR : 77-0, 8/21/12 AYES: Achadjian, Alejo, Allen, Ammiano, Atkins, Beall, Bill Berryhill, Block, Blumenfield, Bonilla, Bradford, Brownley, Buchanan, Butler, Charles Calderon, Campos, Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson, Donnelly, Eng, Feuer, Fletcher, Fong, Fuentes, Furutani, SB 1095 Page 9 Beth Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove, Hagman, Halderman, Hall, Harkey, Hayashi, Hill, Huber, Hueso, Huffman, Jeffries, Jones, Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor, Mendoza, Miller, Mitchell, Monning, Morrell, Nestande, Norby, Olsen, Pan, Perea, V. Manuel Pérez, Portantino, Silva, Skinner, Smyth, Solorio, Swanson, Torres, Wagner, Wieckowski, Williams, Yamada, John A. Pérez NO VOTE RECORDED: Roger Hernández, Nielsen, Valadao JJA:dn 8/21/12 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END ****