BILL ANALYSIS Ó
AB 684
Page 1
(Without Reference to File)
CONCURRENCE IN SENATE AMENDMENTS
AB
684 (Alejo and Bonilla)
As Amended September 4, 2015
Majority vote
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|ASSEMBLY: |76-0 |(May 26, 2015) |SENATE: | |(September 11, |
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(vote not available)
Original Committee Reference: B. & P.
SUMMARY: Authorizes the establishment of landlord-tenant
relationships between a registered dispensing optician (RDO),
optometrist and an optical company as specified; transfers the
regulation of RDOs from the Medical Board of California (MBC) to
the California State Board of Optometry (CBO); replaces an
optometrist with a RDO on the CBO; establishes a RDO advisory
committee; and establishes a three-year period for the
transition of direct employment of optometrists to leasing
arrangements.
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The Senate amendments:
1) Define the following terms:
a) "Health plan" means a health care service plan
licensed pursuant to the Knox-Keene;
b) "Optical company" means a person or entity that is
engaged in the manufacture, sale, or distribution to
physicians and surgeons, optometrists, health plans, or
dispensing opticians of lenses, frames, optical supplies,
or optometric appliances or devices or kindred products;
c) "Optometrist" means a licensed person or an optometric
corporation, as specified;
d) "Registered dispensing optician" means a person so
licensed; and,
e) "Therapeutic ophthalmic product" means lenses or other
products that provide direct treatment of eye disease or
visual rehabilitation for diseased eyes.
2) Prohibit an optometrist from having any membership,
proprietary interest, co-ownership, or any profit-sharing
arrangement, either by stock ownership, interlocking
directors, trusteeship, mortgage, or trust deed, with any RDO
or any optical company, except as specified.
3) Permit a RDO or optical company to operate, own, or have an
ownership interest in a health plan so long as the health
plan does not directly employ optometrists to provide
optometric services directly to enrollees of the health plan,
and permits a RDO or optical company to provide, direct or
indirectly, products and services to the health plan or its
contracted providers, enrollees, or to other optometrists.
4) Permit, for purposes of this bill, an optometrist to be
employed by a health plan as a clinical director or to
perform services related to utilization management, quality
assurance, or other similar related services that do not
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require the optometrist to directly provide health care
services to enrollees. Prohibits an optometrist serving as a
clinical director from employing optometrists to provide
health care services to enrollees of the health plan.
5) Prohibit the RDO or optical company from interfering with the
professional judgment of the optometrist.
6) Require the Department of Managed Health Care (DMHC) to
forward consumer complaints to the CBO and requires DMHC and
CBO to enter into an Inter-Agency Agreement regarding
information sharing.
7) Permit an optometrist, a RDO, an optical company, or a health
plan to enter into a direct or indirect landlord-tenant
relationship with an optometrist under the following
conditions:
a) The practice shall be owned by the optometrist and in
every phase be under the optometrist's exclusive control,
including:
i) Selection and supervision of optometric staff;
ii) Scheduling patients;
iii) Determining the amount of time the optometrist
spends with patients;
iv) Fees charged for optometric products and services;
v) The examination procedures and treatment provided to
patients; and,
vi) The optometrist's contracting with managed care
organizations.
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b) The optometrist's records shall be the sole property of
the optometrist. Only the optometrist and those persons
with written authorization from the optometrist shall have
access to the patient records and the examination room,
except as otherwise provided by law;
c) The optometrist's leased space shall be definite and
distinct from space occupied by other occupants of the
premises, have a sign designating that the leased space is
occupied by an independent optometrist and be accessible to
the optometrist after hours or in the case of an emergency,
subject to the facility's general accessibility. This
shall not require a separate entrance to the optometrist's
leased space;
d) All signs and displays shall be separate and distinct
from that of the other occupants and shall have the
optometrist's name and the word "optometrist" prominently
displayed. This shall not prohibit the optometrist from
advertising the optometrist's practice location with
reference to other occupants or prohibit the optometrist or
RDO from advertising participation in any health plan's
network or the health plan's products in which the
optometrist or RDO participates;
e) There shall be no signs displayed on any part of the
premises or in any advertising indicating that the
optometrist is employed or controlled by the RDO, health
plan, or optical company;
f) Except as otherwise permitted by this bill, the RDO or
optical company shall not link its advertising with the
optometrist's name, practice, or fees. However, a health
plan may advertise its products and associated premium
costs and any copayments, coinsurance, deductibles, or
other forms of cost-sharing, and the names and locations of
the health plan's providers, including any optometrists or
RDOs that provide professional services, in compliance with
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the Knox-Keene. However, a health plan shall not advertise
the optometrist's fees for products and services that are
not included in the health plan's contract with the
optometrist;
g) The optometrist shall not be precluded from collecting
fees for services that are not included in a health plan's
products and services, subject to any patient disclosure
requirements contained in the health plan's provider
agreement with the optometrist or that are not otherwise
prohibited by the Knox-Keene;
h) The term of the lease shall be no less than one year and
shall not require the optometrist to contract exclusively
with a health plan;
i) The lease, rent terms, or payments shall not be based on
the number of eye exams performed, prescriptions written,
patient referrals, or the sale or promotion of the products
of a RDO or an optical company; and,
j) The landlord shall provide the optometrist with written
notice of the scheduled expiration date of a lease at least
60 days prior to the scheduled expiration date. The
landlord shall not interfere with an outgoing optometrist's
efforts to inform the optometrist's patients, in accordance
with customary practice and professional obligations, of
the relocation of the optometrist's practice.
8) Permit the landlord to terminate the lease for the following
reasons:
a) The optometrist's failure to maintain a license to
practice optometry or the imposition of restrictions,
suspension, or revocation of the optometrist's license, or
if the optometrist or the optometrist's employee is or
becomes ineligible to participate in state or federal
government-funded programs;
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b) Termination of any underlying lease where the
optometrist has subleased space, or the optometrist's
failure to comply with the underlying lease provisions that
are made applicable to the optometrist;
c) If the health plan is the landlord, the termination of
the provider agreement between the health plan and the
optometrist, in accordance with the Knox-Keene; and,
d) Other reasons pursuant to the terms of the lease or
permitted under the Civil Code.
9) Require the landlord to act in good faith in terminating the
lease and prohibits the landlord from terminating the lease
for reasons that constitute interference with the practice of
optometry.
10)Prohibit the landlord from terminating the lease solely
because of a report, complaint, or allegation filed by the
optometrist against the landlord, a RDO or a health plan, to
the CBO, the DMHC, or any other law enforcement or regulatory
agency.
11)Authorize the CBO to inspect, upon request, an individual
lease agreement and requires the landlord or tenant, as
applicable, to promptly comply with the request. Failure or
refusal to comply with the request for a lease agreement
within 30 days of receiving the request constitutes
unprofessional conduct and is grounds for disciplinary action
by the appropriate regulatory agency. This bill permits only
the redaction of personal information on the lease
agreements, as specified by Civil Code.
12)Declare any financial information contained in the lease
submitted to a regulatory entity to be considered
confidential trade secret information and is exempt from
disclosure under the California Public Records Act.
13)Permit a lease to include commercially reasonable terms that:
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a) Require the provision of optometric services at the leased
space during certain days and hours;
b) Restrict the leased space from being used for the sale or
offer for sale of spectacles, frames, lenses, contact
lenses, or other ophthalmic products, except that the
optometrist shall be permitted to sell therapeutic
ophthalmic products if the RDO, health plan, or optical
company located on or adjacent to the optometrist's leased
space does not offer any substantially similar therapeutic
ophthalmic products for sale;
c) Require the optometrist to contract with a health plan
network, health plan, or health insurer; and,
d) Permit the landlord to directly or indirectly provide
furnishings and equipment in the leased space.
14)Prohibit a RDO from having any membership, proprietary
interest, coownership, or profit sharing arrangement either
by stock ownership, interlocking directors, trusteeship,
mortgage, or trust deed, with an optometrist, except as
permitted under this bill.
15)Clarify that nothing in this bill shall prohibit a physician
and surgeon or his or her professional corporation from
contracting with or employing optometrists, ophthalmologists,
or optometric assistants and entering into a contract or
landlord tenant relationship with a health plan, optical
company, or RDO, as specified.
16)State that any violation of this bill constitutes a
misdemeanor.
17)Permit the CBO to promulgate regulations that impose
administrative fines, which may be assessed in addition to
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any other applicable fines, citations, or administrative or
criminal actions.
18)Transfer the regulation of RDOs from the MBC to the CBO.
19)Require an RDO to display specified consumer information
related to the CBO.
20)Require an optometrist who practices in a setting with a RDO
to report the business relationship to the CBO, as determined
by the CBO.
21)Authorize the CBO to inspect any premises at which the
business of a RDO is co-located with the practice of an
optometrist. Requires the CBO to provide a copy of its
inspection results, if applicable, to the DMHC.
22)Prohibit any individual, corporation, or firm operating as a
RDO before January 1, 2016, or an employee of such an entity,
from being subject to any action for engaging in conduct
prohibited by specified current laws as they exist prior to
this bill's enactment until January 1, 2019, except that a
RDO shall be subject to discipline for duplicating or
changing lenses without a prescription or order.
23)State that nothing in this bill shall be construed to imply
or suggest that an RDO is in violation of or in compliance
with the law.
24)State that the exemption shall not apply to any business
relationships prohibited by current law commencing
registration or operations on or after January 1, 2016.
25)Permit an individual, corporation, or firm operating as a RDO
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engaging in a business relationship with an optometrist at
locations registered with the MBC before January 1, 2016 to
continue to do so until January 1, 2019.
26)State that the three-year safe harbor period does not apply
to any administrative action or litigation pending, cause for
discipline, or cause of action accruing prior to September 1,
2015.
27)Require any health plan, as specified, to report to the CBO
in writing that:
a) Fifteen percent of its locations no longer employ an
optometrist by January 1, 2017;
b) Forty five percent of its locations no longer employ an
optometrist by August 1, 2017; and,
c) One hundred percent of its locations no longer employ an
optometrist by January 1, 2019.
28)Require the CBO to provide health plans' compliance reports
to the director of the DCA and the Legislature.
29)Replace one optometrist with an RDO on the CBO.
30)Permit the RDO member of the CBO to be a stockholder in,
owner of, or a member of the board of trustees of any school
of optometry, or financially interested, directly or
indirectly, in any concern manufacturing or dealing in
optical supplies at wholesale.
31)Establish a RDO committee to advise and make recommendations
to CBO regarding the regulation of a RDO. The committee
shall consist of five members, two of whom shall be RDOs, two
of whom shall be public members, and one of whom shall be a
member of the CBO. Initial appointments to the committee
shall be made by the CBO.
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32)State that the RDO committee shall be responsible for:
a) Recommending registration standards and criteria for the
registration of dispensing opticians;
b) Reviewing of the disciplinary guidelines relating to RDOs;
c) Recommending to the CBO changes or additions to
regulations; and,
d) Carrying out and implementing all responsibilities and
duties imposed upon it pursuant to this bill or as
delegated to it by the CBO.
33)Require the RDO committee to meet at least twice a year and
as needed.
34)Require recommendations by the RDO committee regarding scope
of practice or regulatory changes to be approved, modified,
or rejected by the CBO within 90 days of submission to the
CBO. If the CBO rejects or significantly modifies the intent
or scope of the recommendation, the RDO committee may request
that the CBO provide its reasons in writing, which shall be
provided within 30 days.
35)Require the Governor to appoint the RDO and public members to
the RDO committee after the initial appointments by the CBO.
The RDO committee shall submit a recommendation to the CBO
regarding which CBO member should be appointed to serve on
the RDO committee, and the CBO shall appoint the member to
serve. Committee members shall serve a term of four years
except for the initial staggered terms. A member may be
reappointed, but no person shall serve as a member of the
committee for more than two consecutive terms.
36)Make clarifying and technical amendments.
FISCAL EFFECT: Unknown
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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
that has found this business model to be unlawful. AB 684 is
seeking a legislative solution that allows multiple models to
continue to operate, while also leveling the playing field for
both large and small operators, ensuring that consumers'
interests are protected, and optometrists' clinical judgment
is preserved. This legislation would clarify and modernize
the law."
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 prescription filled on site.
Under Business and Professions Code (BPC) Sections 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.
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Under these code sections, it is also unlawful for RDOs to do
any of the following:
1)Advertise the furnishing of, or to furnish, the services of a
refractionist, an optometrist or a physician and surgeon;
2)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,
3)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 by an
optical company, claiming that such relationships violated BPC
Sections 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 Sections
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 Sections 655and 2556 impose on relationships between
optometrists and optical companies for Knox-Keene plans that
employ optometrists and affiliate with optical companies. The
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Supreme Court remanded the case to trial court for determination
of whether relationships involved in Pearle Vision's Knox-Keene
arrangement violate BPC Sections 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 Sections 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 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
Section 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 United States Supreme Court declined to hear the case, and
the Ninth Circuit decision upholding the law became final.
Other States. There are 14 United States 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.
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Need for This Legislation. This bill clarifies and modernizes
modern law by allowing multiple models to continue to operate
for a three-year period during which the businesses will
transition from direct employment of optometrists to leasing
arrangements. Without the transition period, these businesses
are under threat of closure, which would cause significant job
loss and cut off care for the more than two million California
patients served by these businesses every year.
Analysis Prepared by:
Le Ondra Clark Harvey / B. & P. / (916)
319-3301
FN: 0002394