BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 2024| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- 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. AB 2024 Page 2 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. AB 2024 Page 3 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 AB 2024 Page 4 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. AB 2024 Page 5 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 AB 2024 Page 6 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 AB 2024 Page 7 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, AB 2024 Page 8 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 **** END ****