BILL ANALYSIS                                                                                                                                                                                                    Ó






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                                   THIRD READING 


          Bill No:  AB 2024
          Author:   Wood (D), et al.
          Amended:  8/15/16 in Senate
          Vote:     21 

           SENATE BUS., PROF. & ECON. DEV. COMMITTEE:  8-0, 6/6/16
           AYES:  Hill, Bates, Block, Gaines, Galgiani, Hernandez,  
            Mendoza, Wieckowski
           NO VOTE RECORDED:  Jackson

           SENATE HEALTH COMMITTEE:  8-0, 6/22/16
           AYES:  Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen,  
            Roth, Wolk
           NO VOTE RECORDED:  Pan

           SENATE APPROPRIATIONS COMMITTEE:  7-0, 8/11/16
           AYES:  Lara, Bates, Beall, Hill, McGuire, Mendoza, Nielsen

           ASSEMBLY FLOOR:  79-0, 5/5/16 - See last page for vote

           SUBJECT:   Critical access hospitals:  employment


          SOURCE:    Author


          DIGEST:  This bill 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.   










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          ANALYSIS:  
          
          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.  (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  
               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.







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             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)Authorizes, under the Knox-Keene Health Care Service Plan Act  
            of 1975, 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  
            fiscal and administrative management.  (Health and Safety Code  
            §§ 1340 et seq.)


          This bill:

          1) Authorizes, until 2024, 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  







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             interfere with, control, or otherwise direct the physician's  
             professional judgment.

          2) Requires the Office of Statewide Health Planning and  
             Development (OSHPD), 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.  

          3) Requires a CAH that is employing physicians and charging for  
             professional services rendered by those licensees to submit,  
             on or before July 1 of each year, a report to OSHPD for any  
             year in which this employment took place.

          Background
          
          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' 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.  The California Research Bureau (CRB)  
          issued a report in 2016, The Corporate Practice of Medicine in a  
          Changing Healthcare Environment  which 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.

          The Author notes that the CRB report reviewed key policy issues  
          associated with the ban, including the impact on rural access.   
          According to the Author, the CRB 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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          Health Care Access and the Changing Healthcare Employment  
          Landscape. California currently has a physician shortage.  As  
          the 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?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.  The survey found that  
          as physicians migrate from private practice to larger health  
          systems, the new landscape will require healthcare information  
          technology, 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.  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. 

          CAHs are small (25 or less beds) and located in remote, rural  
          areas.   The Author notes that they suffer significant  
          challenges in recruiting and retaining physicians and that the  
          difficulty in attracting physicians has serious implications for  
          public health.   Maintaining these hospitals is necessary for  







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          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.  


          FISCAL EFFECT:   Appropriation:    No          Fiscal  
          Com.:YesLocal:   No


          According to the Senate Committee on Appropriations analysis  
          dated August 11, 2016, the bill will result in potential  
          one-time costs of $70,000 for OSHPD to develop information  
          technology systems to collect specified data from participating  
          hospitals and potential ongoing costs of $130,000 per year to  
          develop data standards for reporting by participating hospitals,  
          collect and review data submitted by participating hospitals,  
          and eventually develop the required report.




          SUPPORT:   (Verified8/12/16)


          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







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          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:   (Verified8/12/16)


          None received


          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.


           
          ASSEMBLY FLOOR:  79-0, 5/5/16
          AYES:  Achadjian, Alejo, Travis Allen, Arambula, Atkins, Baker,  
            Bigelow, Bloom, Bonilla, Bonta, Brough, Brown, Burke,  
            Calderon, Campos, Chang, Chau, Chávez, Chiu, Chu, Cooley,  
            Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier,  
            Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson,  
            Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Harper, Roger  
            Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey,  
            Levine, Linder, Lopez, Low, Maienschein, Mathis, Mayes,  
            McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte,  
            O'Donnell, Olsen, Patterson, Quirk, Ridley-Thomas, Rodriguez,  
            Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,  







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            Wagner, Waldron, Weber, Wilk, Williams, Wood, Rendon
          NO VOTE RECORDED:  Beth Gaines

          Prepared by:Sarah Mason / B., P. & E.D. / (916) 651-4104
          8/16/16 9:09:04


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