BILL ANALYSIS Ó
SENATE COMMITTEE ON
BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT
Senator Jerry Hill, Chair
2015 - 2016 Regular
Bill No: AB 2024 Hearing Date: June 6,
2016
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|Author: |Wood |
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|Version: |May 23, 2016 |
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|Urgency: |No |Fiscal: |Yes |
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|Consultant|Sarah Mason |
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Subject: Critical access hospitals: employment
SUMMARY: Authorizes a federally certified critical access hospital
(CAH) to employ physicians and charge for their services until
2024 and requires the Medical Board of California (MBC) to
provide a report to the Legislature on the impact of authorizing
CAHs to employ physicians.
Existing law:
1)Provides for the licensure and regulation of physicians
and surgeons by the MBC pursuant to the Medical Practice
Act (Act). (Business and Professions Code (BPC) § 2000 et
seq.)
2)States that corporations and other artificial legal entities
shall have no professional rights, privileges, or powers.
Provides that the MBC may in its discretion, and under
regulations adopted by it, grant approval of the employment of
licensees on a salary basis by licensed charitable
institutions, foundations, or clinics, if no charge for
professional services rendered patients is made by any such
institution, foundation, or clinic. (BPC § 2400)
3)Establishes exceptions to the ban on the corporate practice of
medicine (CPM), thereby allowing certain types of facilities
to employ physicians, including:
AB 2024 (Wood) Page 2
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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
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 regulated by the Department
of Alcohol and Drug Programs to employ physicians and
charge for professional services rendered by those
physicians. Prohibits, however, 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; and,
d) A hospital that is owned and operated by a licensed
charitable organization that offers only pediatric
subspecialty care, as specified. (BPC § 2401)
4)Establishes the following protections against retaliation for
health care practitioners who advocate for appropriate health
care for their patients pursuant to Wickline v. State of
California (192 Cal. App. 3d 1630):
a) It is the public policy of the State of California that
a health care practitioner be encouraged to advocate for
appropriate health care for his or her patients. For
purposes of this section, "to advocate for appropriate
health care" means to appeal a payer's decision to deny
AB 2024 (Wood) Page 3
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payment for a service pursuant to the reasonable grievance
or appeal procedure established by a medical group,
independent practice association, preferred provider
organization, foundation, hospital medical staff and
governing body, or payer, or to protest a decision, policy,
or practice that the health care practitioner, consistent
with that degree of learning and skill ordinarily possessed
by reputable health care practitioners with the same
license or certification and practicing according to the
applicable legal standard of care, reasonably believes
impairs the health care practitioner's ability to provide
appropriate health care to his or her patients.
b) The application and rendering by any individual,
partnership, corporation, or other organization of a
decision to terminate an employment or other contractual
relationship with or otherwise penalize a health care
practitioner principally for advocating for appropriate
health care consistent with that degree of learning and
skill ordinarily possessed by reputable health care
practitioners with the same license or certification and
practicing according to the applicable legal standard of
care violates the public policy of this state.
c) This law shall not be construed to prohibit a payer from
making a determination not to pay for a particular medical
treatment or service, or the services of a type of health
care practitioner, or to prohibit a medical group,
independent practice association, preferred provider
organization, foundation, hospital medical staff, hospital
governing body, or payer from enforcing reasonable peer
review or utilization review protocols or determining
whether a health care practitioner has complied with those
protocols. (BPC § 510)
5)Under the Knox-Keene Health Care Service Plan Act of 1975,
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. Provides in regulation that the organization of a
health plan must include separation of medical services from
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fiscal and administrative management. (Health and Safety Code
§§ 1340 et seq.)
This bill:
1) Until 2024, authorizes a federally certified critical access
hospital (CAH) to employ physicians and charge for
professional services rendered by those licensees if the
medical staff concur by an affirmative vote that the
physician's employment is in the best interest of the
communities served by the hospital and the hospital does not
interfere with, control, or otherwise direct the physician's
professional judgment.
2) Requires MBC, on or before July 1, 2023, to provide a report
to the Legislature containing data about the impact of
employing physicians on CAHs and their ability to recruit and
retain physicians.
FISCAL
EFFECT: Unknown. This bill is keyed "fiscal" by Legislative
Counsel.
COMMENTS:
1. Purpose. The Author is the Sponsor of this bill. According
to the Author, in April 2016, the California Research Bureau
(CRB) published a report "The Corporate Practice of Medicine
in a Changing Healthcare Environment" which raised questions
as to whether the existing exemptions are already so broad
that the original intent of the ban, to assure clinical
decisions remain independent, has been seriously diluted.
The Author notes that the report reviewed key policy issues
associated with the ban including the impact on rural access.
According to the Author, the report noted the need for
additional data to assess how the CPM ban affects physicians
and access, and the Author notes that this bill can provide
that additional data.
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According to the Author, the shortage of physicians is well
documented and notes that in 2008, the Council on Graduate
Medical Education (CGME) estimated there were 63 primary care
physicians per 100,000 persons. By CGME estimates, up to 80
primary physicians are needed per 100,000 people. Using the
CGME metric, only 16 California counties fall within the
needed supply range meaning less than one third of
Californians live in a county with adequate health access.
Strategies, such as increased funding for residency and loan
forgiveness programs, are being actively pursued to address
this crisis. The Author notes that those funding strategies
provide hope for long term solutions but more can be done to
make rural communities and the hospitals located in them
inviting places to practice medicine.
According to the Author, CAHs are small (25 or less beds) and
located in remote, rural areas. They suffer significant
challenges in recruiting and retaining physicians. The
difficulty in attracting physicians has serious implications
for public health. Maintaining these hospitals is necessary
for both the health of residents and the viability of the
community. The Author states that allowing these hospitals
to employ physicians would provide physicians with the
economic security and financial stability that comes with
employment and assist in the ability to attract physicians.
The Author also notes that medical practice models have
changed over the years. The private practitioner is now
just one option available to new physicians. While medical
residents identify geographic location, personal time and
lifestyle as the most important considerations in evaluating
practice opportunities, 92 percent of residents prefer an
employment situation and the income guarantee it provides.
Younger physicians are comfortable with an employment setting
and extending those opportunities to hospitals in rural
California provides benefits to the physicians, hospitals and
communities.
2. Ban on the Corporate Practice of Medicine (CPM). CPM is
usually referred to in the context of a prohibition, banning
hospitals from employing physicians. 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'
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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.
Over the years, various state and federal statutes have
weakened the CPM prohibition. According to the 2007 CRB
report, "California's CPM doctrine has been defined largely
through lawsuits and Attorney General opinions over decades,
and then riddled by HMO and other legislation; its power and
meaning are now inconsistent?. Although some non-profit
clinics may employ physicians, California applies the CPM
doctrine to most other entities.... Teaching hospitals may
employ physicians, but other hospitals, including most public
and non-profit hospitals, may not employ physicians.
Professional medical corporations are expressly permitted to
engage in the practice of medicine, and may employ
physicians. [However, t]hese medical corporations may
operate on a for-profit basis, although the profit motive was
one of the original rationales of the CPM prohibition."
The 2016 CRB report notes that "since 2007, the provision of
healthcare has undergone changes in California. The
Affordable Care Act is responsible for an increase in insured
patients across the state. In 2016-2017, 13.5 million
Californians are expected to have enrolled in Medi-Cal, up
from 7.9 million in 2012-2013, and 1.5 million people will be
enrolled in Covered California at the end of 2015-2016. As a
result, more insured patients than ever are accessing
healthcare services without a commensurate increase in
healthcare practitioners." The report suggested assessing
changing financial incentives; considering whether other
methods of protecting physician autonomy are sufficient;
increasing patient access to data about physician-hospital
relationships and hospital metrics; determining whether the
current alignment strategies used by physicians and hospitals
are more costly than direct employment models; and collecting
additional data to better understand the impact of CPM.
California is one of only five remaining states that adhere
to some form of the ban. The American Medical Association
(AMA), historically the driving force behind the CPM
prohibition, no longer views physician employment as a
violation of medical ethics and has removed the doctrine from
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its ethical code.
3. Health Care Access and the Changing Healthcare Employment
Landscape. California currently has a physician shortage. As
the 2016 CRB report notes, "AMA figures show that, on
average, California has 80 primary care physicians and 138
specialty physicians per 100,000 residents. This is in the
upper range for primary care physicians (60-80) and above the
range for specialty care physicians (85-105) recommended by
the Department of Health and Human Services. However, when
disaggregated by region, there is a coverage disparity.
California's rural regions have lower numbers of physicians
than its urban areas. For instance, the San Joaquin Valley
has only 45 primary care physicians and 74 specialty
physicians per 100,000 residents, compared with the Bay
Area's 78 primary care physicians and 155 specialists per
100,000 residents. The number of healthcare providers,
including primary care physicians, in California is not
anticipated to dramatically increase soon."
The nationwide trend in healthcare is toward direct
employment. According to a 2011 survey from the consulting
firm Accenture:
"U.S. physicians continue to sell their private practices
and seek employment with healthcare systems, according to a
new survey from Accenture. As physicians migrate from
private practice to larger health systems, the new
landscape will require healthcare information technology
(IT), medical device manufacturers, pharmaceutical
companies and payers to revise their business models and
offerings. At the same time, hospitals will need to
determine how to retain and recruit the correct mix of
physicians, especially in high-growth service lines,
including cardiovascular care, orthopedics, cancer care and
radiology. Patients will increasingly move to large health
systems, as opposed to the current trend of visiting
doctors in private, small practice settings.
"'Health reform is challenging the entire system to deliver
improved care through insight driven health,' said Kristin
Ficery, senior executive, Accenture Health. 'We see an
increasing number of physicians leaving private practice to
join hospital systems, which will force all stakeholders to
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revise and refine their business models, product offerings
and service strategies.'"
Benefits to employment include:
Relief from administrative responsibilities,
especially those relating to insurance billing.
Malpractice insurance.
Greater access and support for healthcare IT
tools, facilities, and medical equipment.
A predictable work week.
Economic stability.
4. SB 376 Pilot Program. In 2003, the Legislature established a
pilot project to allow qualified hospital districts to
directly employ physicians (SB 376, Chesbro, Chapter 411,
Statutes of 2003). As the 2016 CRB report notes, hospital
districts were established in California in 1945 in an
attempt to give rural, low income areas without ready access
to hospital facilities a source of tax dollars that could be
used to construct and operate community hospitals and
healthcare institutions, and, in medically underserved areas,
to recruit physicians and support their practices.
SB 376 allowed each hospital district to hire two physicians,
for a total of 20 physicians throughout the state. To qualify
for the pilot project, a hospital district was required to
meet certain criteria, including population numbers and
numbers of uninsured patients. During the pilot project,
five participating hospital districts recruited and hired six
physicians, whose employment contract periods ran three to
four years.
SB 376 required MBC to report to the Legislature on the
evaluation of the effectiveness of the pilot project in
improving access to health care in rural and medically
underserved areas and the project's impact on consumer
protection as it relates to intrusions into the practice of
medicine. In the report, MBC estimated that a total of 20
physician participants were needed to conduct a valid
analysis of the project. Only six physicians were hired by
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eligible hospitals. Further, MBC had difficulty gathering
information from the participants on the success of the plan.
Only three of the five participating hospitals and five of
the six participating doctors responded to MBC's inquires.
MBC stated that it regrets the lack of participation in the
project.
According to the report, MBC held discussions with numerous
interested parties, even beyond those participating in the
project and found widespread concern over the lack of
physicians in rural areas. MBC stated that due to the
"limited extent" of participation, it was unable to fully
evaluate the project. In the report, MBC stated that it does
not support the complete removal of the limitations on the
corporate practice of medicine, but concluded that there may
be justification to continue the project. MBC stated that it
might be appropriate to expand the pilot project to allow
more hospitals to participate; but until more information is
available it does not recommend amending the statues that
govern the corporate practice of medicine.
5. Arguments in Support. Supporters note how difficult it is
for hospitals to recruit and retain physicians to practice in
rural and underserved areas and write that the ability to
hire physicians as this bill allows will directly improve and
increase access to quality health care services and the
health of the communities rural hospitals serve. Supporters
note that CAHs are the smallest, most remote rural hospitals
in the state and face numerous challenges in being able to
hire the physicians who would actually like to be hired.
Supporters write that California continues to be the most
restrictive state for employment of physicians by hospitals
and that to remain competitive in an already challenging
environment, CAHs should have the opportunity to offer
physicians economic security and financial stability through
employment, thereby ensuring that rural residents have access
to medically necessary services.
6. Prior Related Legislation. AB 824 (Chesbro, 2011) was
similar to bill language in AB 648 of 2009 below which would
have extended the pilot project to January 1, 2022. ( Status:
This bill failed passage in the Assembly Committee on
Health.)
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AB 926 (Hayashi, 2011) would have reenacted SB 376 pilot
project but would have allowed all qualified district
hospitals to employ not more than 50 physicians and surgeons
until January 1, 2022. ( Status: This bill failed passage in
the Assembly Committee on Business, Professions and Consumer
Protection.)
AB 1360 (Swanson, 2011) would have authorized a new pilot
project that allowed a healthcare district and a clinic owned
or operated by a healthcare district to employ physicians and
surgeons if the service area included a medically underserved
area or a medically underserved population or had been
federally designated as a health professional shortage area.
The bill would have provided that a district could extend any
employee contracts up to 10 years and would have required a
study of the program's effectiveness and a sunset date of
January 1, 2022. ( Status: This bill failed passage in the
Assembly Committee on Health.)
SB 726 (Ashburn, 2009) would have extended the SB 376 pilot
project to 2018 and would have revised the pilot to authorize
the direct employment by qualified healthcare districts and
qualified rural hospitals of an unlimited number of
physicians and surgeons, and authorized such hospitals to
employ up to five physicians and surgeons at a time with a
term of contract not to exceed 10 years. ( Status: This bill
failed passage in the Senate Committee on Business,
Professions and Economic Development.)
AB 646 (Swanson, 2009) was almost identical to AB 1360.
( Status: This bill failed passage in the Senate Committee on
Business, Professions and Economic Development.)
AB 648 (Chesbro, 2009) would have established a new pilot
project that extended the scope of the first pilot and would
have authorized a rural hospital to employ up to 10
physicians and surgeons at one time and to retain all or part
of the income generated for medical services billed and
collected, provided the physician and surgeon in whose name
the charges are made approved the charges. The bill would
have required a rural hospital to develop and implement a
policy regarding the independent medical judgment of the
physician and surgeon. This pilot would have expired January
1, 2020. ( Status: This bill failed passage in the Senate
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Committee on Business, Professions and Economic Development.)
SB 1294 (Ducheny, 2008) would have extended the SB 376 pilot
project to January 1, 2017 and would have allowed district
hospitals to hire an unlimited number of physicians and
surgeons, subject to board approval. It would also have
changed the definition of a qualified district hospital to a
hospital that, among other things, is located in a medically
underserved area or a rural hospital that had net losses in
the most recent fiscal year. ( Status: This bill failed
passage in the Assembly Appropriations Committee.)
SB 1640 (Ashburn, 2008) would have extended the SB 376 pilot
project to January 1, 2016 and revised it to authorize
"general acute care hospitals" in rural or underserved areas,
to employ an unlimited number of physicians and surgeons and
to charge for professional services rendered by those
physicians. ( Status: This bill failed passage in the Senate
Committee on Business, Professions and Economic Development.)
AB 1944 (Swanson, 2008) would have eliminated the SB 376
pilot project and instead would have permanently authorized
healthcare districts to employ physicians to primarily treat
Medi-Cal patients and bill for the physicians' services with
their approval. It would have prohibited the hospital from
interfering with the professional judgment of physicians and
surgeons. ( Status: This bill failed passage in the Senate
Health Committee.)
7. Who Should Report to the Legislature? This bill proposes to
have MBC report on the impact of CAHs employing physicians.
As noted above, MBC was required to provide a report to the
Legislature under SB 376 and the same requirement for MBC was
contained in legislation seeking to extend the pilot project,
as well as legislation to extend and expand the pilot.
Throughout those discussions, this Committee has been
concerned about the role of MBC in making determinations
about the unmet medical needs of communities and weighing in
on the impacts of lifting CPM on health care access. MBC is
primarily a licensing agency and an enforcement agency, with
the primary mission to protect consumers and patients and to
take necessary licensing actions against physicians and
surgeons for violation(s) of the Medical Practices Act.
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The role of making determinations about the unmet medical
needs of communities in California and to what extent
additional physicians and surgeons are needed in these
communities would seem more appropriate for an agency such as
the Office of Statewide Health Planning and Development
(OSHPD).
The Author may wish to consider amending the measure in the
next committee to make this change.
NOTE : Double-referral to Senate Committee on Health.
SUPPORT AND OPPOSITION:
Support:
Adventist Health
Alliance of Catholic Health Care
Association of California Healthcare Districts
Banner Lassen Medical Center
California Hospital Association
California Special Districts Association
Catalina Island Medical Center
Eastern Plumas Health Care
Fairchild Medical Center
Glenn Medical Center
Health Access California
Jerold Phelps Community Hospital
Kern Valley Healthcare District
Loma Linda University Health
Mayers Memorial Hospital District
Mendocino Coast District Hospital
Modoc Medical Center
Northern Inyo Healthcare District
Rural County Representatives of California
San Bernardino Mountains Community Hospital
Santa Ynez Valley Cottage Hospital
Sutter Lakeside Hospital
Tehachapi Valley Healthcare District
Trinity Hospital
Opposition:
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None on file as of June 1, 2016.
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