BILL ANALYSIS Ó
SB 1274
Page 1
Date of Hearing: June 12, 2012
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
SB 1274 (Wolk) - As Amended: April 26, 2012
SENATE VOTE : 36-0
SUBJECT : Healing arts: hospitals: employment.
SUMMARY : Provides an exemption from the prohibition against
the corporate practice of medicine (CPM) to allow a hospital
that is owned and operated by a charitable organization and
offers only pediatric subspecialty care to bill health carriers
for physician services rendered. Specifically, this bill :
1)Allows a hospital that meets all of the following conditions
to charge for professional services rendered to patients
beginning January 1, 2013:
a) Is owned and operated by a licensed charitable
organization;
b) Offers only pediatric subspecialty care;
c) Employed licensees on a salary basis before January 1,
2012; and,
d) Has not charged for professional services rendered to
patients.
2)Allows the provision described above, provided the following
conditions are met:
a) The hospital does not increase the number of salaried
licensees by more than five licensees each year;
b) The hospital does not expand its scope of services
beyond pediatric subspecialty care;
c) The hospital accepts each patient needing its scope of
services regardless of his or her ability to pay, including
whether the patient has any form of health care coverage;
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d) The medical staff concur by an affirmative vote that the
licensee's employment is in the best interest of the
communities served by the hospital; and,
e) The hospital does not interfere with, control, or
otherwise direct a physician and surgeon's professional
judgment in a manner prohibited by existing law, as
specified.
EXISTING LAW
1)Prohibits corporations and other artificial legal entities
from having any professional rights, privileges, or powers to
practice medicine (known as the prohibition against CPM).
However, the Division of Licensing of the Medical Board of
California (MBC) may, pursuant to regulations it has adopted,
grant approval for the employment of physicians on a salary
basis by licensed charitable institutions, foundations, or
clinics if no charge for professional services rendered to
patients is made by any such institution, foundation, or
clinic.
2)Exempts the following clinics from the prohibition
against CPM:
a) Clinics operated primarily for the purpose of
medical education by a public or private nonprofit
university medical school approved by the MBC or the
Osteopathic Medical Board, which may charge for
professional services rendered to teaching patients by
licensed physicians and surgeons who hold academic
appointments on the faculty of the university if the
charges are approved by the physician and surgeon in
whose name the charges are made;
b) Certain nonprofit clinics organized and operated
exclusively for scientific and charitable purposes,
that have been conducting research since before 1982,
and that meet other specified requirements to employ
physicians and surgeons and charge for professional
services. These clinics must not interfere with,
control, or otherwise direct a physician and surgeon's
professional judgment in a manner prohibited by the
CPM prohibition or any other provision of law; and,
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c) A narcotic treatment program regulated by the
Department of Alcohol and Drug Programs, which may
employ physicians and surgeons and charge for
professional services rendered by those physicians and
surgeons. These programs must not interfere with,
control, or otherwise direct a physician and surgeon's
professional judgment in a manner prohibited by the
CPM prohibition or any other provision of law.
3)Exempts medical or podiatry professional corporations
organized and practicing pursuant to the Moscone-Knox
Professional Corporations Act from the CPM prohibition,
providing that a majority of the owners or shareholders of the
corporation are licensed physicians or podiatrists,
respectively.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS :
Purpose of this bill . According to the author, "The Shriners
Endowment Fund has fully supported the operations of the
Shriners hospitals since its inception in 1923. The Endowment
Fund incurred a very significant decrease in value as a result
of the economic downturn in FY 2008-09. Shriners has continued
to serve children and their families through deficit spending,
which is an unsustainable financial model. SB 1274 would allow
Shriners to recoup some of its costs by billing insurers for
physician services, so the hospital can continue to focus on its
mission to serve as many children with specialized medical needs
as possible. The bill also specifies the hospital must continue
to accept each patient in need of care within its scope of
services regardless of his or her ability to pay."
Background . The CPM is typically referred to in the context of
a prohibition, banning hospitals from employing physicians. CPM
evolved in the early 20th century when mining companies had to
hire 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 CPM
in an effort to preserve physicians' autonomy and improve
patient care.
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According to their website, Shriners is a system of 22 hospitals
with a mission to provide the highest care to children with
neuromusculoskeletal conditions, burn injuries and other special
health care needs within a compassionate, family-centered and
collaborative environment; provide for the education of
physicians and other health care professionals; and conduct
research to discover new knowledge that improves the quality of
care and quantity of life of children and families. Shiners
states that this mission is carried out without regard to the
ability of a patient or family to pay.
According to the author of this bill, the Shriners Endowment
Fund has fully supported the operations of the Shriners
hospitals since its inception, but has lost significant value
since the economic downturn in fiscal year 2008-09 that has
threatened the organization's ability to fulfill its mission.
In 2009, USA Today reported that, according to Shriners
officials, the Shriners Endowment Fund had fallen to $5 billion
from $8 billion in less than a year because of the sputtering
stock market and a charitable-giving slump that hurt
philanthropies nationwide.
Two Shiners facilities are located in California, in Los Angeles
and Sacramento. According to the author, the CPM exemption in
this bill has been crafted in cooperation with the California
Medical Association to apply exclusively to these two Shriners
hospitals, the only pediatric subspecialty care hospitals in
California that employ their own physicians. The author
maintains that the bill is intended to mainly affect the
Sacramento hospital, since the Los Angeles hospital serves fewer
people over a much smaller geographic range and is transitioning
to an outpatient model. The Shriners facility in Sacramento,
according to its 2012 fact sheet, specializes in orthopedics,
burns, specialized plastic surgery, spinal cord injuries, and
cleft lips and palates, and receives 21,000 patient visits
annually.
Support . Shriners Hospitals for Children writes, "This bill
would only apply to Shriners and ensures they will continue to
care for patients regardless of their insurance coverage or
ability to pay for medical services?SB 1274 narrowly expands the
CPM exemption to allow Shriners to recoup some of the patient
care costs so that it does not have to limit the services it
provides. This change will allow Shriners to continue to focus
its mission of serving as many children as possible with highly
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specialized medical care needs."
Previous legislation .
AB 824 (Chesbro) of 2011 establishes a pilot project permitting
certain rural hospitals to directly employ physicians and
surgeons. This bill was held in Assembly Health Committee.
AB 926 (Hayashi) of 2011 establishes, until January 1, 2022, a
pilot project to provide for the direct employment of a total of
50 physicians and surgeons by qualified district hospitals in
rural and other medically underserved areas. This bill was held
in Assembly Business and Professions Committee.
AB 1360 (Swanson) of 2011 allows, until December 31, 2022, a
health care district (HCD) to employ physicians and surgeons and
charge for their professional services. This bill was held in
Assembly Health Committee.
AB 646 (Swanson) of 2009 permits HCDs and certain public
hospitals, independent community nonprofit hospitals, and
clinics, as specified, to directly employ physicians and
surgeons, as specified. This bill was held in Senate Business,
Professions and Economic Development Committee.
SB 726 (Ashburn) of 2009 revises the pilot project allowing
qualified HCDs and qualified rural hospitals, as specified, to
directly employ physicians and extends the sunset date for the
pilot project from January 1, 2011, to January 1, 2018. This
bill was held in Senate Business, Professions and Economic
Development Committee.
AB 648 (Chesbro) of 2009 establishes a pilot project to permit
certain rural hospitals to directly employ physicians and
surgeons. This bill was held in Senate Business, Professions,
and Economic Development Committee.
AB 1944 (Swanson) of 2008 allows HCDs to employ a physician and
surgeon. This bill was held in Senate Health Committee.
SB 1294 (Ducheny) of 2008 expands the pilot project enabling
HCDs to directly employ physicians. This bill was held in
Assembly Appropriations Committee.
SB 1640 (Ashburn) of 2008 expands the pilot project enabling
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HCDs to directly employ physicians. This bill was held in
Senate Business, Professions, and Economic Development
Committee.
SB 376 (Chesbro) Chapter 411, Statutes of 2003, establishes a
pilot project permitting HCD hospitals meeting specific
requirements to hire and employ up to two physicians each, for a
total of 20 physicians statewide, if the HCD hospital meets
specified conditions.
Double referred . This bill is double-referred to Assembly
Health Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
Shriners Hospitals for Children (sponsor)
Medical Board of California
Opposition
None on file.
Analysis Prepared by : Angela Mapp / B.,P. & C.P. / (916)
319-3301