BILL ANALYSIS Ó AB 684 Page 1 Date of Hearing: May 7, 2015 ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS Susan Bonilla, Chair AB 684 (Bonilla) - As Amended April 30, 2015 NOTE: This bill adds an urgency clause. SUBJECT: Healing arts: licensees: disciplinary actions. SUMMARY: Until January 1, 2017, prohibits a registered dispensing optician (RDO) or optometrist from any disciplinary action from the Medical Board of California (MBC), the Board of Optometry or any other state agency with enforcement authority when both an optometrist and optician practice in the same location. EXISTING LAW: 1)Establishes the MBC, within the Department of Consumer Affairs, to license RDOs and regulate their practice. (Business and Professions Code (BPC) § 2000 et seq.) 2)Establishes the Board of Optometry, within the Department of Consumer Affairs, to license optometrists and regulate the practice of optometry. (BPC § 3000 et seq.) AB 684 Page 2 3)Prohibits optometrists and RDOs from having any membership, proprietary interest, co-ownership, landlord-tenant relationship or any profit-sharing agreement with each other. (BPC § 655) 4)Prohibits optometrists from having any membership, proprietary interest, coownership, landlord-tenant relationship or any profit-sharing arrangement in any form, directly or indirectly, either by stock ownership, interlocking directors, trusteeship, mortgage, trust deed or otherwise with those who manufacture, sell, or distribute lenses, frames, optical supplies, optometric appliances or devices or kindred products to physicians and surgeons, optometrists, or dispensing opticians. (BPC § 655) 5)Provides that it is unlawful for RDOs to: (BPC § 2556) a) Advertise the furnishing of, or to furnish, the services of a refractionist, an optometrist or a physician and surgeon; b) Directly or indirectly employ or maintain on or near the premises used for optical dispensing, a refractionist, and optometrist, a physician and surgeon or a practitioner of any other profession for the purpose of any examination or treatment of the eyes; or, c) Duplicate or change lenses without a prescription or order from a person duly licensed to issue the same. THIS BILL: 1)Specifies that on or after January 1, 2016, and until January 1, 2017, no dispensing optician or optometrist shall be subject to discipline by the MBC, Board of Optometry or any other state agency with enforcement authority, for engaging in any business relationship prohibited by BPC §§ 655 and 2556. AB 684 Page 3 2)Declares that this is an urgency measure necessary for the immediate preservation of the public peace, health or safety and is needed in order to protect various businesses, opticians and optometrists who engage in a business relationship prohibited by BPC § 655. FISCAL EFFECT: Unknown. This bill is keyed fiscal by the Legislative Counsel. COMMENTS: Purpose. This bill is author sponsored. According to the author, "Co-located vision models have existed in California for nearly three decades. They serve millions of patients annually and employ thousands of optometrists and opticians. With the conclusion of legal suits over the last few years, the state is compelled to enforce a decades old law. AB 684 will provide a safe harbor as the Legislature, stakeholders and the Administration work toward statutory solutions that will maintain patient access to these models and ensure clinical independence for Optometrists." Background. In California, there are two eye care service models: an optometrist's private office and a "co-location" office, where an optical retail store is co-located with a Department of Managed Health Care (DMHC)-regulated health plan, also called a Knox-Keene plan, that provides optometry care. At co-location sites, patients receive an eye exam and can fill their prescription for corrective eyewear during the same visit at the co-located optical retail store [e.g. Walmart, LensCrafters]. At private optometrist offices, patients receive an eye exam and can take a prescription elsewhere or have the optometrist send it out for them. California law provides that prescriptions are mobile, so the patient is not required in either setting to have the AB 684 Page 4 prescription filled on site. Under BPC §§ 655 and 2556, optometrists and RDOs cannot have any membership, proprietary interest, co-ownership, landlord-tenant relationship or any profit-sharing agreement with each other. Optometrists also cannot have any membership, proprietary interest, co-ownership, landlord-tenant relationship or any profit-sharing arrangement in any form with those who manufacture, sell, or distribute lenses, frames, optical supplies, optometric appliances or devices or kindred products to physicians and surgeons, optometrists or RDOs. Under these code sections, it is also unlawful for RDOs to do any of the following: Advertise the furnishing of, or to furnish, the services of a refractionist, an optometrist or a physician and surgeon; Directly or indirectly employ or maintain on or near the premises used for optical dispensing, a refractionist, and optometrist, a physician and surgeon or a practitioner of any other profession for the purpose of any examination or treatment of the eyes; or, Duplicate or change lenses without a prescription or order from a person duly licensed to issue the same. The Pearle Case. In February of 2002, Attorney General (AG) Bill Lockyer brought suit against Pearle Vision, arguing that the company had violated the Optometry Practice Act. The AG challenged the business relationship between the Knox-Keene plan, Pearle VisionCare, and the optical sister company, Pearle Vision, as well as the ownership of the Knox-Keene plan AB 684 Page 5 by an optical company, claiming that such relationships violated BPC §§ 655 and 2556. The Snow Case. In March 2002, a private plaintiff brought suit against LensCrafters (the Snow case), raising some of the same business relationship issues as those raised in the Pearle case. LensCrafters and others subsequently filed a case in federal district court to defend their business operations in California, challenging the constitutionality of BPC §§ 655 and 2556. California Supreme Court Decision. On appeal, the Pearle case reached the California Supreme Court, which declared that the Knox-Keene Act does not create an exemption from restrictions that BPC §§ 655and 2556 impose on relationships between optometrists and optical companies for Knox-Keene plans that employ optometrists and affiliate with optical companies. The Supreme Court remanded the case to trial court for determination of whether relationships involved in Pearle Vision's Knox-Keene arrangement violate BPC §§ 655 and 2556. The Pearle case ultimately settled, with no determination on the Knox-Keene/optical company co-location issue. The Snow case also settled, without a determination on the Knox-Keene/optical company co-location issue. Federal Court Decision. The federal court, in December 2006, struck down BPC §§ 655 and 2556 as unconstitutional, interpreting the California Supreme Court's ruling in the Pearle case as a bar to LensCrafters' Knox-Keene plan arrangement (National Association of Optometrists & Opticians v. Lockyer, 463 F.Supp.2d 1116 (E.D.Cal.2006). The federal court determined, "the challenged laws substantially effect and discriminate against interstate commerce." The Court also held that "[a]lthough California has legitimate interests in regulating the provision of health services, defendants have failed to meet its burden of showing that it has no other AB 684 Page 6 means to advance its legitimate interests." The Court noted that the Knox-Keene plan arrangement, if permitted by law, would be a viable means for the State to achieve its legitimate interests with less impact on interstate commerce. Ninth Circuit Court of Appeals Decision. On June 13, 2012, BPC § 655 was upheld as constitutional by the Ninth Circuit Court of Appeals in National Association of Optometrists & Opticians v. Harris, 682 F.3d 1144 (9th Cir.2012). The optical industry plaintiffs then petitioned the Supreme Court of the United States for certiorari review, but on February 19, 2013, the U.S. Supreme Court declined to hear the case, and the Ninth Circuit decision upholding the law became final. Other States. There are 14 U.S. jurisdictions that allow direct employment of optometrists by optical companies. Direct landlord-tenant relationships are permitted in 47 states. Additionally, 49 states allow optical companies to franchise to optometrists. Need for This Legislation. Given the complexities of the issue and the multiple regulatory bodies involved including the Board of Optometry, the MBC, the AG and other interested stakeholders, additional time is necessary to develop a comprehensive legislative solution that includes statutory language to provide clarity to all parties, including regulatory bodies. Without the safe harbor provisions proposed in this bill, the state may be compelled to take enforcement action against licensed optometrists who practice in co-located models which serve to expand patient choice. These locations also offer choices for optometrists who may seek to serve patients who may not traditionally have access to care. Additionally, AB 684 Page 7 according to the Board of Optometry, "Retail optical practices are becoming increasingly popular for both new graduates and established Optometrists due to the level of income they provide, low risk, flexibility they can offer, and the ability to focus more on the clinical side of the practice rather than the business operations" (Business Models of Optometry, Agenda Item 11, California Board of Optometry Memo, June 21, 2011). According to the author, the evolution of healthcare, evidenced by the rise of health maintenance organizations, proliferation of convenient care and co-located healthcare clinics and changing provider relationships, requires that California law and policy also evolve to effectuate the state's goals of increased access to quality affordable care. This bill proposes a safe harbor provision until January 1, 2017, that will allow for constructive dialogue between stakeholders and regulatory entities. The goal is to create a comprehensive legislative solution that protects patient access to care, respects optometrists' clinical judgment and professional choice and provides regulatory entities with clear direction. Current Related Legislation. AB 595 (Alejo) of the current legislative session, prohibits a licensed registered dispensing optician or a manufacturer or distributor of optical goods that is renting or leasing office space to or from, sharing office space with, or receiving space from an optometrist from engaging in conduct that would influence or interfere with the clinical decisions, as defined, of that optometrist, as specified. STATUS: This bill is in the Assembly Committee on Business and Professions. Prior Related Legislation. AB 778 (Atkins) of 2011, would have specifically permitted a licensed vision health plan, who is owned by an optical manufacturer, to locate next to a registered dispensing optician. NOTE: This bill was never set for hearing in the Senate Committee on Business, Professions and Economic AB 684 Page 8 Development. ARGUMENTS IN SUPPORT: The National Association of Optometrists and Opticians support the bill and write in their letter, "Ambiguity in current law has created confusion about whether vision care centers can continue to operate in California; years of past litigation have not resolved this ambiguity?It is critically important that the state guarantees uninterrupted vision care for the working families that depend on optometrists who work at vision care centers." Sears Optical also supports the bill. They write, "Sears Optical is pleased to write in support of AB 684, which will protect vision care access for working Californians while the state deliberates the best way to bring clarity to outdated laws governing how and where optometrists can provide eye care services in the state." Walmart Inc., on behalf of Walmart Vision Centers and Sam's Club Opticals , U.S. Vision, owner of JCPenney Optical, National Vision Inc. , LensCrafters , Eyexam and For Eyes Opticals, supports the bill and writes, "[We] have been a part of a stakeholder process that includes out industry partners, the Attorney General's office and the Governor's office designed to put this issue to rest once and for all. As we continue these productive conversations, it critically important that Californians continue to have access to the high-quality care provided by optometrists and support employees who work at these locations. AB 684 guarantees uninterrupted vision care for the patients that depend on the Doctors practicing at our Walmart and Sam's Club locations. This bill provides the Doctors and patients assurance that they can continue providing and receiving high quality care as the state continues working AB 684 Page 9 toward a collaborative, comprehensive eye care solution." ARGUMENTS IN OPPOSITION: None on file. AMENDMENTS: Assemblymember Alejo carried legislation (AB 595, of the current legislation session) that sought to provide a solution for the issues as outlined in this analysis. As such, Assemblymember Bonilla desires to add Assemblymember Alejo as a joint author to this measure. Since this is an urgency measure, the following amendments should be made to ensure the legislation goes into effect immediately: On page 2, line 4, strike:January 1, 2016On page 3, line 8, strike:and on and afterOn page 3, line 9, strike:January1, 2016REGISTERED SUPPORT: EYEXAM of California AB 684 Page 10 For Eyes Optical Company LensCrafters National Association of Optometrists and Opticians National Vision, Inc. Sam's Club Opticals Sears Optical U.S. Vision, JCPenny Optical Walmart Stores Inc. 2 individuals REGISTERED OPPOSITION: None on file. Analysis Prepared by:Le Ondra Clark Harvey, Ph.D. / B. & P. / (916) 319-3301 AB 684 Page 11