Amended in Senate August 26, 2015

Amended in Senate August 18, 2015

California Legislature—2015–16 Regular Session

Assembly Bill No. 941

Introduced by Assembly Member Wood

February 26, 2015

An act to amend Section 1206 of the Health and Safety Code, relating to clinics.

LEGISLATIVE COUNSEL’S DIGEST

AB 941, as amended, Wood. Clinics: licensure and regulation: exemption.

Existing law provides for the regulation and licensure of clinics, as defined, by the State Department of Public Health. Under existing law, specified types of clinics are exempted from these licensing provisions, including a clinic that is conducted, maintained, or operated by a federally recognized Indian tribe and is located on land recognized as tribal land by the federal government.

This bill would expand that exemption to also include a clinic conducted, maintained, or operated by a federally recognized Indian tribe under a contract with the United States pursuant to federal law, without regard to the location of the clinic, except that if the clinic chooses to apply to the department for a state facility license, then the department would retain authority to regulate that clinic as a primary care clinic.

begin insert

This bill would incorporate additional changes to Section 1206 of the Health and Safety Code proposed by AB 1130 that would become operative if this bill and AB 1130 are chaptered and this bill is chaptered last.

end insert

Vote: majority. Appropriation: no. Fiscal committee: yes. State-mandated local program: no.

The people of the State of California do enact as follows:

SECTION 1.  

Section 1206 of the Health and Safety Code is
amended to read:

1206.  

This chapter does not apply to the following:

(a) Except with respect to the option provided with regard to
surgical clinics in paragraph (1) of subdivision (b) of Section 1204
and, further, with respect to specialty clinics specified in paragraph
(2) of subdivision (b) of Section 1204, any place or establishment
owned or leased and operated as a clinic or office by one or more
licensed health care practitioners and used as an office for the
practice of their profession, within the scope of their license,
regardless of the name used publicly to identify the place or
establishment.

(b) Any clinic directly conducted, maintained, or operated by
the United States or by any of its departments, officers, or agencies,
and any primary care clinic specified in subdivision (a) of Section
1204 that is directly conducted, maintained, or operated by this
state or by any of its political subdivisions or districts, or by any
city. Nothing in this subdivision precludes the state department
from adopting regulations that utilize clinic licensing standards as
eligibility criteria for participation in programs funded wholly or
partially under Title XVIII or XIX of the federal Social Security
Act.

(c) (1) Any clinic conducted, maintained, or operated by a
federally recognized Indian tribe or tribal organization, as defined
in Section 450 or 1603 of Title 25 of the United States Code, that
is located on land recognized as tribal land by the federal
government.

(2) Any clinic conducted, maintained, or operated by a federally
recognized Indian tribe or tribal organization, as defined in Section
450 or 1603 of Title 25 of the United States Code, under a contract
with the United States pursuant to the Indian Self-Determination
and Education Assistance Act (Public Law 93-638), regardless of
the location of the clinic, except that if the clinic chooses to apply
to the State Department of Public Health for a state facility license,
then the State Department of Public Health will retain authority
to regulate that clinic as a primary care clinic as defined by
subdivision (a) of Section 1204.

(d) Clinics conducted, operated, or maintained as outpatient
departments of hospitals.

(e) Any facility licensed as a health facility under Chapter 2
(commencing with Section 1250).

(f) Any freestanding clinical or pathological laboratory licensed
under Chapter 3 (commencing with Section 1200) of Division 2
of the Business and Professions Code.

(g) A clinic operated by, or affiliated with, any institution of
learning that teaches a recognized healing art and is approved by
the state board or commission vested with responsibility for
regulation of the practice of that healing art.

(h) A clinic that is operated by a primary care community or
free clinic and that is operated on separate premises from the
licensed clinic and is only open for limited services of no more
than 20 hours a week. An intermittent clinic as described in this
subdivision shall, however, meet all other requirements of law,
including administrative regulations and requirements, pertaining
to fire and life safety.

(i) The offices of physicians in group practice who provide a
preponderance of their services to members of a comprehensive
group practice prepayment health care service plan subject to
Chapter 2.2 (commencing with Section 1340).

(j) Student health centers operated by public institutions of
higher education.

(k) Nonprofit speech and hearing centers, as defined in Section
1201.5. Any nonprofit speech and hearing clinic desiring an
exemption under this subdivision shall make application therefor
to the director, who shall grant the exemption to any facility
meeting the criteria of Section 1201.5. Notwithstanding the
licensure exemption contained in this subdivision, a nonprofit
speech and hearing center shall be deemed to be an organized
outpatient clinic for purposes of qualifying for reimbursement as
a rehabilitation center under the Medi-Cal Act (Chapter 7
(commencing with Section 14000) of Part 3 of Division 9 of the
Welfare and Institutions Code).

(l) A clinic operated by a nonprofit corporation exempt from
federal income taxation under paragraph (3) of subsection (c) of
Section 501 of the Internal Revenue Code of 1954, as amended,
or a statutory successor thereof, that conducts medical research
and health education and provides health care to its patients through
a group of 40 or more physicians and surgeons, who are
independent contractors representing not less than 10
board-certified specialties, and not less than two-thirds of whom
practice on a full-time basis at the clinic.

(m) Any clinic, limited to in vivo diagnostic services by
magnetic resonance imaging functions or radiological services
under the direct and immediate supervision of a physician and
surgeon who is licensed to practice in California. This shall not
be construed to permit cardiac catheterization or any treatment
modality in these clinics.

(n) A clinic operated by an employer or jointly by two or more
employers for their employees only, or by a group of employees,
or jointly by employees and employers, without profit to the
operators thereof or to any other person, for the prevention and
treatment of accidental injuries to, and the care of the health of,
the employees comprising the group.

(o) A community mental health center, as defined in Section
5601.5 of the Welfare and Institutions Code.

(p) (1) A clinic operated by a nonprofit corporation exempt
from federal income taxation under paragraph (3) of subsection
(c) of Section 501 of the Internal Revenue Code of 1954, as
amended, or a statutory successor thereof, as an entity organized
and operated exclusively for scientific and charitable purposes and
that satisfied all of the following requirements on or before January
1, 2005:

(A) Commenced conducting medical research on or before
January 1, 1982, and continues to conduct medical research.

(B) Conducted research in, among other areas, prostatic cancer,
cardiovascular disease, electronic neural prosthetic devices,
biological effects and medical uses of lasers, and human magnetic
resonance imaging and spectroscopy.

(C) Sponsored publication of at least 200 medical research
articles in peer-reviewed publications.

(D) Received grants and contracts from the National Institutes
of Health.

(E) Held and licensed patents on medical technology.

(F) Received charitable contributions and bequests totaling at
least five million dollars ($5,000,000).

(G) Provides health care services to patients only:

(i) In conjunction with research being conducted on procedures
or applications not approved or only partially approved for payment
(I) under the Medicare program pursuant to Section 1359y(a)(1)(A)
of Title 42 of the United States Code, or (II) by a health care service
plan registered under Chapter 2.2 (commencing with Section 1340),
or a disability insurer regulated under Chapter 1 (commencing
with Section 10110) of Part 2 of Division 2 of the Insurance Code;
provided that services may be provided by the clinic for an
additional period of up to three years following the approvals, but
only to the extent necessary to maintain clinical expertise in the
procedure or application for purposes of actively providing training
in the procedure or application for physicians and surgeons
unrelated to the clinic.

(ii) Through physicians and surgeons who, in the aggregate,
devote no more than 30 percent of their professional time for the
entity operating the clinic, on an annual basis, to direct patient care
activities for which charges for professional services are paid.

(H) Makes available to the public the general results of its
research activities on at least an annual basis, subject to good faith
protection of proprietary rights in its intellectual property.

(I) Is a freestanding clinic, whose operations under this
subdivision are not conducted in conjunction with any affiliated
or associated health clinic or facility defined under this division,
except a clinic exempt from licensure under subdivision (m). For
purposes of this subparagraph, a freestanding clinic is defined as
“affiliated” only if it directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, a clinic or health facility defined under this division,
except a clinic exempt from licensure under subdivision (m). For
purposes of this subparagraph, a freestanding clinic is defined as
“associated” only if more than 20 percent of the directors or trustees
of the clinic are also the directors or trustees of any individual
clinic or health facility defined under this division, except a clinic
exempt from licensure under subdivision (m). Any activity by a
clinic under this subdivision in connection with an affiliated or
associated entity shall fully comply with the requirements of this
subdivision. This subparagraph shall not apply to agreements
between a clinic and any entity for purposes of coordinating
medical research.

(2) By January 1, 2007, and every five years thereafter, the
Legislature shall receive a report from each clinic meeting the
criteria of this subdivision and any other interested party
concerning the operation of the clinic’s activities. The report shall
include, but not be limited to, an evaluation of how the clinic
impacted competition in the relevant health care market, and a
detailed description of the clinic’s research results and the level
of acceptance by the payer community of the procedures performed
at the clinic. The report shall also include a description of
procedures performed both in clinics governed by this subdivision
and those performed in other settings. The cost of preparing the
reports shall be borne by the clinics that are required to submit
them to the Legislature pursuant to this paragraph.

begin insert

begin insert SEC. 1.5. end insert   

end insert

begin insert Section 1206 of the end insert begin insert Health and Safety Code end insert begin insert is
amended to read: end insert

1206.  

This chapter does not apply to the following:

(a) Except with respect to the option provided with regard to
surgical clinics in paragraph (1) of subdivision (b) of Section 1204
and, further, with respect to specialty clinics specified in paragraph
(2) of subdivision (b) of Section 1204, any place or establishment
owned or leased and operated as a clinic or office by one or more
licensed health care practitioners and used as an office for the
practice of their profession, within the scope of their license,
regardless of the name used publicly to identify the place or
establishment.

(b) Any clinic directly conducted, maintained, or operated by
the United States or by any of its departments, officers, or agencies,
and any primary care clinic specified in subdivision (a) of Section
1204 that is directly conducted, maintained, or operated by this
state or by any of its political subdivisions or districts, or by any
city. Nothing in this subdivision precludes the state department
from adopting regulations that utilize clinic licensing standards as
eligibility criteria for participation in programs funded wholly or
partially under Title XVIII or XIX of the federal Social Security
Act.

(c)  begin insert (1) end insert begin insert   end insert Any clinic conducted, maintained, or operated by a
federally recognized Indian tribe or tribal organization, as defined
in Section 450 or begin delete 1601 end delete begin insert 1603 end insert of Title 25 of the United States Code,
that is located on land recognized as tribal land by the federal
government.

begin insert

(2) Any clinic conducted, maintained, or operated by a federally
recognized Indian tribe or tribal organization, as defined in Section
450 or 1603 of Title 25 of the United States Code, under a contract
with the United States pursuant to the Indian Self-Determination
and Education Assistance Act (Public Law 93-638), regardless of
the location of the clinic, except that if the clinic chooses to apply
to the State Department of Public Health for a state facility license,
then the State Department of Public Health will retain authority
to regulate that clinic as a primary care clinic as defined by
subdivision (a) of Section 1204.

end insert

(d) Clinics conducted, operated, or maintained as outpatient
departments of hospitals.

(e) Any facility licensed as a health facility under Chapter 2
(commencing with Section 1250).

(f) Any freestanding clinical or pathological laboratory licensed
under Chapter 3 (commencing with Section 1200) of Division 2
of the Business and Professions Code.

(g) A clinic operated by, or affiliated with, any institution of
learning that teaches a recognized healing art and is approved by
the state board or commission vested with responsibility for
regulation of the practice of that healing art.

(h) A clinic that is operated by a primary care community or
free clinic and that is operated on separate premises from the
licensed clinic and is only open for limited services of no more
than begin delete 20 end delete begin insert 30 end insert hours a week. An intermittent clinic as described in
this subdivision shall, however, meet all other requirements of
law, including administrative regulations and requirements,
pertaining to fire and life safety.

(i) The offices of physicians in group practice who provide a
preponderance of their services to members of a comprehensive
group practice prepayment health care service plan subject to
Chapter 2.2 (commencing with Section 1340).

(j) Student health centers operated by public institutions of
higher education.

(k) Nonprofit speech and hearing centers, as defined in Section
1201.5. Any nonprofit speech and hearing clinic desiring an
exemption under this subdivision shall make application therefor
to the director, who shall grant the exemption to any facility
meeting the criteria of Section 1201.5. Notwithstanding the
licensure exemption contained in this subdivision, a nonprofit
speech and hearing center shall be deemed to be an organized
outpatient clinic for purposes of qualifying for reimbursement as
a rehabilitation center under the Medi-Cal Act (Chapter 7
(commencing with Section 14000) of Part 3 of Division 9 of the
Welfare and Institutions Code).

(l) A clinic operated by a nonprofit corporation exempt from
federal income taxation under paragraph (3) of subsection (c) of
Section 501 of the Internal Revenue Code of 1954, as amended,
or a statutory successor thereof, that conducts medical research
and health education and provides health care to its patients through
a group of 40 or more physicians and surgeons, who are
independent contractors representing not less than 10
board-certified specialties, and not less than two-thirds of whom
practice on a full-time basis at the clinic.

(m) Any clinic, limited to in vivo diagnostic services by
magnetic resonance imaging functions or radiological services
under the direct and immediate supervision of a physician and
surgeon who is licensed to practice in California. This shall not
be construed to permit cardiac catheterization or any treatment
modality in these clinics.

(n) A clinic operated by an employer or jointly by two or more
employers for their employees only, or by a group of employees,
or jointly by employees and employers, without profit to the
operators thereof or to any other person, for the prevention and
treatment of accidental injuries to, and the care of the health of,
the employees comprising the group.

(o) A community mental health center, as defined in Section
begin delete 5601.5 end delete begin insert 5667 end insert of the Welfare and Institutions Code.

(p) (1) A clinic operated by a nonprofit corporation exempt
from federal income taxation under paragraph (3) of subsection
(c) of Section 501 of the Internal Revenue Code of 1954, as
amended, or a statutory successor thereof, as an entity organized
and operated exclusively for scientific and charitable purposes and
that satisfied all of the following requirements on or before January
1, 2005:

(A) Commenced conducting medical research on or before
January 1, 1982, and continues to conduct medical research.

(B) Conducted research in, among other areas, prostatic cancer,
cardiovascular disease, electronic neural prosthetic devices,
biological effects and medical uses of lasers, and human magnetic
resonance imaging and spectroscopy.

(C) Sponsored publication of at least 200 medical research
articles in peer-reviewed publications.

(D) Received grants and contracts from the National Institutes
of Health.

(E) Held and licensed patents on medical technology.

(F) Received charitable contributions and bequests totaling at
least five million dollars ($5,000,000).

(G) Provides health care services to patients only:

(i) In conjunction with research being conducted on procedures
or applications not approved or only partially approved for payment
(I) under the Medicare program pursuant to Section 1359y(a)(1)(A)
of Title 42 of the United States Code, or (II) by a health care service
plan registered under Chapter 2.2 (commencing with Section 1340),
or a disability insurer regulated under Chapter 1 (commencing
with Section 10110) of Part 2 of Division 2 of the Insurance Code;
provided that services may be provided by the clinic for an
additional period of up to three years following the approvals, but
only to the extent necessary to maintain clinical expertise in the
procedure or application for purposes of actively providing training
in the procedure or application for physicians and surgeons
unrelated to the clinic.

(ii) Through physicians and surgeons who, in the aggregate,
devote no more than 30 percent of their professional time for the
entity operating the clinic, on an annual basis, to direct patient care
activities for which charges for professional services are paid.

(H) Makes available to the public the general results of its
research activities on at least an annual basis, subject to good faith
protection of proprietary rights in its intellectual property.

(I) Is a freestanding clinic, whose operations under this
subdivision are not conducted in conjunction with any affiliated
or associated health clinic or facility defined under this division,
except a clinic exempt from licensure under subdivision (m). For
purposes of this subparagraph, a freestanding clinic is defined as
“affiliated” only if it directly, or indirectly through one or more
intermediaries, controls, or is controlled by, or is under common
control with, a clinic or health facility defined under this division,
except a clinic exempt from licensure under subdivision (m). For
purposes of this subparagraph, a freestanding clinic is defined as
“associated” only if more than 20 percent of the directors or trustees
of the clinic are also the directors or trustees of any individual
clinic or health facility defined under this division, except a clinic
exempt from licensure under subdivision (m). Any activity by a
clinic under this subdivision in connection with an affiliated or
associated entity shall fully comply with the requirements of this
subdivision. This subparagraph shall not apply to agreements
between a clinic and any entity for purposes of coordinating
medical research.

(2) By January 1, 2007, and every five years thereafter, the
Legislature shall receive a report from each clinic meeting the
criteria of this subdivision and any other interested party
concerning the operation of the clinic’s activities. The report shall
include, but not be limited to, an evaluation of how the clinic
impacted competition in the relevant health care market, and a
detailed description of the clinic’s research results and the level
of acceptance by the payer community of the procedures performed
at the clinic. The report shall also include a description of
procedures performed both in clinics governed by this subdivision
and those performed in other settings. The cost of preparing the
reports shall be borne by the clinics that are required to submit
them to the Legislature pursuant to this paragraph.

begin insert

begin insert SEC. 2. end insert   

end insert begin insert

Section 1.5 of this bill incorporates amendments to
Section 1206 of the Health and Safety Code proposed by both this
bill and Assembly Bill 1130. It shall only become operative if (1)
both bills are enacted and become effective on or before January
1, 2016, (2) each bill amends Section 1206 of the Health and Safety
Code, and (3) this bill is enacted after Assembly Bill 1130, in which
case Section 1 of this bill shall not become operative.

end insert