BILL ANALYSIS Ó
AB 2024
Page 1
ASSEMBLY THIRD READING
AB
2024 (Wood)
As Amended April 11, 2016
Majority vote
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|Committee |Votes|Ayes |Noes |
| | | | |
| | | | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Business & |15-0 |Salas, Baker, Bloom, | |
|Professions | |Campos, Chávez, | |
| | |Dahle, Dodd, Eggman, | |
| | |Gatto, Gomez, Holden, | |
| | |Jones, Mullin, Ting, | |
| | |Wood | |
| | | | |
|----------------+-----+----------------------+--------------------|
|Health |17-0 |Wood, Maienschein, | |
| | |Bonilla, Burke, | |
| | |Campos, Chiu, | |
| | |Dababneh, Gomez, | |
| | | | |
| | | | |
| | |Roger Hernández, | |
| | |Lackey, Nazarian, | |
| | |Olsen, Patterson, | |
| | |Rodriguez, Santiago, | |
| | |Steinorth, Waldron | |
| | | | |
AB 2024
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SUMMARY: Permits a federally certified critical access hospital
(CAH) to employ physicians and charge for professional services
rendered by those physicians.
EXISTING LAW:
1)Provides for the licensure and regulation of physicians and
surgeons by the Medical Board of California (MBC).
2)Prohibits corporations and other artificial legal entities
from having any professional rights, privileges, or powers
(known as the "prohibition against the corporate practice of
medicine" (CPM)), and further provides that the Division of
Licensing of MBC may, pursuant to regulations MBC has adopted,
grant approval for the employment of physicians on a salaried
basis by a licensed charitable institution, foundation, or
clinic if no charge for professional services rendered to
patients is made by that institution, foundation, or clinic.
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.
4)Provides certain additional exceptions to the prohibition
against CPM, including:
a) Clinics operated primarily for the purpose of medical
education by a public or private nonprofit university
medical school, to charge for professional services
rendered to teaching patients by licensed physicians who
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hold academic appointments on the faculty of the
university, if the charges are approved by the physician 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
charge for professional services. Prohibits, however,
these clinics from interfering with, controlling, or
otherwise directing a physician's professional judgment in
a manner prohibited by the CPM prohibition or any other
provision of law;
c) A narcotic treatment program, but prohibits the narcotic
clinic from interfering with, controlling, or otherwise
directing a physician's professional judgment in a manner
that is prohibited by the CPM prohibition or any other
provision of law;
d) Under the Knox-Keene Health Care Service Plan Act of
1975 (Knox-Keene), authorizes licensed health care service
plans to employ or contract with health care professionals,
including physicians, to deliver professional services, and
requires health plans to demonstrate that medical decisions
are rendered by qualified medical providers unhindered by
fiscal and administrative management; and,
e) In the Medi-Cal Program, permits hospitals that submit
claims for hospital inpatient psychiatric services under
contract with Medi-Cal managed care plans to receive
reimbursement on a per diem basis for an array of services,
including a mental health professional's daily visit fee.
5)Defines a "small and rural hospital" as an acute care hospital
that is designated within specified peer groups based upon a
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December 20, 1982 report, as specified; or that is designated
within other specified peer groups, has no more than 76 acute
care beds, and is located in an incorporated place or census
designated place of 15,000 or less population according to the
1980 federal census.
6)Permits hospitals designated as CAHs and certified by the
Secretary of the United States Department of Health and Human
Services under the federal Medicare rural hospital flexibility
program to be eligible for supplemental payments for covered
outpatient services rendered to Medi-Cal eligible persons.
7)Provides that payments made pursuant to 4) above, are
contingent upon receipt of federal financial participation,
and are limited by the appropriation in the annual Budget Act
for the non- federal share of these payments. Requires
supplemental payments to be apportioned among CAHs based upon
their number of Medi-Cal outpatient visits.
8)Permits the Department of Health and Human Services to develop
criteria to waive any requirements for CAHs under the federal
Medicare Rural Hospital Flexibility Program, that are in
conflict with federal requirements, if the department finds
that it is in the public interest to do so, and the department
determines that the waiver would not negatively affect the
quality of patient care.
9)Specifies that a CAH is a general acute care hospital, and
every hospital designated by the department as a CAH, and
certified as such by the United States Department of Health
and Human Services, shall be deemed to be a general acute care
hospital, even if the department waives regulatory
requirements otherwise applicable to general acute care
hospitals.
10)Indicates that each hospital designated by the department as
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a CAH, and certified as such by the Secretary of the United
States Department of Health and Human Services under the
federal Medicare rural hospital flexibility program, shall be
eligible for supplemental payments for Medi-Cal covered
outpatient services rendered to Medi-Cal eligible persons.
11)Specifies that payments made shall be contingent upon receipt
of federal financial participation, and shall be limited by
the appropriation in the annual Budget Act for the nonfederal
share of these payments. Supplemental payments shall be
apportioned among CAHs based upon their number of Medi-Cal
outpatient visits.
FISCAL EFFECT: None. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS:
Physician Shortage. Estimates obtained from the Council on
Graduate Medical Education (CGME) indicate that the number of
primary care physicians actively practicing in California is far
below the state's need. The distribution of these primary care
physicians is also poor. In 2008, there were 69,460 actively
practicing primary care physicians in California, of which only
35% reported they actually practiced primary care. This equates
to 63 active primary care physicians per 100,000 persons.
However, according to the CGME, up to 80 primary care physicians
are needed per 100,000 persons in order to adequately meet the
needs of the population. When the same metric is applied
regionally, only 16 of California's 58 counties fall within the
needed supply range for primary care physicians. In other
words, less than one third of Californians live in a community
where they have access to adequate health care services.
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When rural communities are examined, there is a significant
shortage of physicians. Rural hospitals experience difficulty
in recruiting and retaining physicians. Factors influencing
this include a lack of benefits and retirement as a result of
working as an independent contractor. Similarly, results of a
2015 survey of medical residents indicate that 92% of
respondents would prefer employment with a salary versus working
as an independent practitioner (Merritt Hawkins, Survey of
Final-Year Medical Residents, 2015).
Critical Access Hospitals. The CAH program was created by
Congress in 1997 in response to numerous rural hospitals closing
across the nation in the 1980s and 1990s. It is a designation
provided by the Centers for Medicare and Medicaid Services to
ensure that individuals in isolated areas have access to health
care services. The Medicare Rural Hospital Flexibility Program
helps to reduce CAHs financial burdens through a cost-based
Medicare reimbursement for services rendered.
The primary eligibility requirements for CAHs are as follows:
1)A CAH must have 25 or fewer acute care inpatient beds.
2)It must be located more than 35 miles from another hospital
(or 15 miles across secondary roads to account for difficult
terrain such as mountains, rivers or snow).
3)It must maintain an annual average length of stay of 96 hours
or less for acute care patients.
4)It must provide 24/7 emergency care services.
CAH Mileage Exemption. The CAH requirements also included a
provision allowing states to waive the minimum of 35 miles
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distance requirement and designate small hospitals considered
"necessary providers" as CAHs. This permitted states to provide
small, struggling facilities with federal funding. The
exemption provision was utilized widely, and more than 1,300, or
nearly one in four acute care hospitals, had been designated as
CAHs by 2006. In 2006, Congress eliminated the exception, and
those hospitals that had already been designated as CAHs under
the exemption were grandfathered. (Kaiser Health News, When
Critical Access Hospitals Are Not So Critical, 2011). In
California, there are 34 CAHs. Of those, 3 have received an
exemption: 1) Redwood Memorial Hospital in Fortuna, CA, 2)
Healdsburg District Hospital in Healdsburg, CA and 3) Orchard
Hospital in Gridley, CA.
The Ban on the Corporate Practice of Medicine (CPM). The CPM is
defined as any involvement of corporations in medicine. The CPM
may also be defined more narrowly, for example, as the
employment of a physician by a lay-controlled corporation that
sells the services of the physician for a profit or provides the
physician's services to its employees free of charge. The CPM
now most commonly refers to the employment of physicians by
hospitals, but is also used to refer to employment of physicians
by for-profit and non-profit corporate entities and government
(see Business and Professions Code (BPC) Section 2400).
According to a report published by the California Research
Bureau, The Corporate Practice of Medicine Doctrine, the ban on
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. Currently, only five states: 1) California, 2)
Colorado, 3) Iowa, 4) Ohio and, 5) Texas, clearly prohibit
hospitals from employing physicians and in all five states,
certain types of hospitals and providers are exempt from the
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ban.
Exemptions to the Ban on the CPM. The following entities may
employ physicians:
1)A clinic operated primarily of the purpose of medical
education by a public or private nonprofit university medical
school.
2)A clinic operated by a nonprofit corporation as an entity
organized and operated exclusively for scientific and
charitable purposes.
3)A narcotic treatment program.
4)A hospital owned and operated by a licensed charitable
organization that offers only pediatric subspecialty care, as
specified.
5)A health maintenance organization (HMO).
The author indicates that due to the problems with recruiting
and retaining physicians to work in CAHs, CAHs should be
included as a group that is exempt from the ban on the CPM.
Analysis Prepared by: LeOndra
Clark Harvey, Ph.D. / B. & P. / (916) 319-3301
FN: 0002826
AB 2024
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