BILL ANALYSIS                                                                                                                                                                                                    Ó



          SENATE COMMITTEE ON HEALTH
                          Senator Ed Hernandez, O.D., Chair

          BILL NO:                    SB 396    
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          |AUTHOR:        |Hill                                           |
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          |VERSION:       |April 22, 2015                                 |
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          |HEARING DATE:  |April 29, 2015 |               |               |
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          |CONSULTANT:    |Vince Marchand                                 |
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           SUBJECT  :  Health care: outpatient settings and surgical clinics:  
          facilities: licensure and enforcement.

           SUMMARY  :  Requires a surgical clinic to be eligible for licensure by the  
          California Department of Public Health regardless of physician  
          ownership, deems a surgical clinic to have met licensure  
          requirements if they are federally certified, requires  
          inspections of accredited outpatient surgical settings to be  
          unannounced, and requires both accredited and federally  
          certified surgical settings to be subject to the same reporting  
          requirements to the Office of Statewide Health Planning and  
          Development as licensed surgical clinics.
          
          Existing law:
          1.Licenses and regulates various clinics by the California  
            Department of Public Health (CDPH), including primary care  
            clinics as well as specialty clinics which include surgical  
            clinics. 

          2.Defines a "surgical clinic," for purposes of provisions of law  
            defining what types of clinics are eligible for licensure by  
            CDPH, as a clinic that is not part of a hospital and that  
            provides ambulatory surgical care for patients who remain less  
            than 24 hours. However, it exempts from this definition any  
            place or establishment owned or leased and operated as a  
            clinic or office by one or more physicians or dentists in  
            individual or group practice, but specifies that physicians or  
            dentists, may, at their option, apply for licensure.

          3.Requires any licensed health facility, health care service  
            plan or medical care foundation, or the medical staff of the  
            institution, prior to granting or renewing staff privileges  
            for any physician, psychologist, podiatrist, or dentist, to  







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            request a report from the respective professional licensing  
            board to see if any report has been made pursuant to existing  
            provisions of law indicating that the licensee has been denied  
            staff privileges, removed from a medical staff, or had his or  
            her staff privileges restricted.

          4.Requires, until CDPH adopts regulations relating to the  
            provision of services by certain clinics, including surgical  
            clinics, those clinics to comply with the federal  
            certification standards in effect immediately preceding  
            January 1, 2013. In the case of surgical clinics, these  
            clinics are required to comply with applicable federal  
            certification standards for an ambulatory surgical clinic, as  
            specified. Requires CDPH, by July 1, 2017, to submit a report  
            to the appropriate legislative committees that describes the  
            extent to which the federal certification standards are or are  
            not sufficient as a basis for state licensing standards, and  
            requires this report to make recommendations for any  
            California-specific standards that may be necessary. Sunsets  
            these provisions of law on January 1, 2018.

          5.Requires licensed clinics to annually file with OSHPD certain  
            reports, including utilization and financial data, as well as  
            an Ambulatory Surgery Data Record report for each patient  
            encounter during which at least one ambulatory surgery  
            procedure is performed. Establishes a fee that clinics are  
            required to pay that is tied to the number of reports a clinic  
            files, as specified.

          6.Defines "outpatient setting" as any facility clinic or other  
            setting that is not part of a general acute care hospital  
            where anesthesia is used in doses that, when administered,  
            have the probability of placing a patient at risk for loss of  
            life-preserving protective reflexes. Specifies that an  
            outpatient setting can only be operated if it is one of the  
            following:

                  a.        An ambulatory surgical center that is  
                    CMS-certified;
                  b.        A tribal clinic, as specified;
                  c.        A clinic operated directly by the United  
                    States or any of its departments;
                  d.        A clinic licensed by CDPH;
                  e.        A health facility licensed as a general acute  
                    care hospital;








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                  f.        A dental office using anesthesia pursuant to  
                    specified provisions of law; or,
                  g.        An outpatient setting that has been accredited  
                    by an accreditation agency that is approved to issue  
                    certificates of accreditation to outpatient settings  
                    by the Medical Board of California (MBC).

          7.Requires MBC to adopt standards for accreditation and, in  
            approving accrediting agencies to perform accreditation of  
            outpatient settings, to ensure that the certification program,  
            at a minimum, includes specified standards, including having  
            written transfer agreements with a hospital, permitting  
            surgery only by physicians who have admitting privileges at a  
            local hospital, and having a system for quality assessment and  
            improvement.

          8.Requires accrediting agencies to inspect outpatient settings,  
            and permits MBC to also conduct inspections. Requires  
            certificates of accreditation to be valid for no more than  
            three years.

          This bill:
          1.Clarifies a provision of law that permits a physician or  
            dentist, at their option, to apply for licensure from CDPH as  
            a surgical clinic by specifically requiring a surgical clinic  
            to be eligible for licensure by CDPH regardless of physician,  
            podiatrist, or dentist ownership.

          2.Deems a surgical clinic to have met licensure requirements,  
            until CDPH adopts regulations relating to the provision of  
            services by a surgical clinic, upon presenting documentation,  
            within a three-year period, that the surgical clinic has met  
            the federal certification standards for an ambulatory surgical  
            clinic established by the Centers for Medicare and Medicaid  
            Services (CMS-certified).

          3.Adds a CMS-certified facility, or an accredited outpatient  
            setting, as specified, to provisions of law requiring licensed  
            health facilities to check with professional licensing boards  
            prior to granting staff privileges to a physician or other  
            licensed health care professional to see if a report has been  
            made indicating that the licensee has had staff privileges  
            revoked or restricted elsewhere.

          4.Requires all inspections after the initial inspection for  








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            accreditation to be unannounced inspections, which existing  
            law requires to be at least every three years by the  
            accreditation agency and as often as necessary by MBC.

          5.Requires an accredited outpatient setting, as defined, and a  
            CMS-certified facility, to be subject to the provisions of law  
            that require reporting of data to the Office of Statewide  
            Health Planning and Development (OSHPD), including the  
            Ambulatory Surgery Data Record report for each patient  
            encounter during which at least one ambulatory surgery  
            procedure is performed, as well as certain utilization and  
            financial data. 

          6.Requires an accredited outpatient setting and a CMS-certified  
            facility to pay a fee to OSHPD based on the number of  
            ambulatory surgery data records submitted to OSHPD, but  
            prohibits this fee from exceeding the reasonable costs  
            incurred by OSHPD in regulating the outpatient setting and  
            facility.

          7.Requires each licensee who performs procedures in an  
            accredited outpatient setting to be peer reviewed at least  
            every two years. Requires this peer review to be a process in  
            which the basic qualifications, staff privileges, employment,  
            medical outcomes, or professional conduct of a licensee is  
            reviewed to make recommendations for quality improvement and  
            education, if necessary, including when the outpatient setting  
            has only one licensee. 

          8.Requires the peer review for accredited outpatient settings to  
            be performed by licensees who are qualified by education and  
            experience to perform the same or similar types of procedures.

          9.Requires the findings of the peer review of accredited  
            outpatient settings to be reported to the accrediting body,  
            which is required to determine if the licensee continues to  
            meet the requirements necessary to be granted clinical  
            privileges.

          10.Delays a requirement, from March 1, 2015 to March 1, 2016,  
            for MBC to make a report, along with recommendations, to the  
            Governor and Legislature on the vertical enforcement and  
            prosecution model, as defined.

           FISCAL  








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          EFFECT  :  This bill has not been analyzed by a fiscal committee.

           COMMENTS  :
          1.Author's statement.  According to the author, the primary  
            focus of this bill is to allow ambulatory surgical clinics  
            (ASCs), which are Medicare certified and are currently  
            required to seek accreditation as an "outpatient setting,"  
            that meet both the accreditation requirements of an  
            accrediting agency and those of MBC as well as those of CDPH,  
            to have the option of becoming licensed by the CDPH, which has  
            primary responsibility and oversight of those ASCs which are  
            Medicare certified. This will allow one agency (CDPH) to have  
            primary jurisdiction and responsibility for those ASCs  
            operating within California and to ensure they meet all  
            standards and requirements of both CDPH and the federal  
            regulations for ASCs. This measure will also clear up any  
            confusion as to where a patient may file a complaint regarding  
            an ASC that may be accredited and at the same time Medicare  
            certified. Currently, a complaint may have to be filed both  
            with MBC and CDPH so that appropriate action may be taken  
            against the ASC. This measure will also require that current  
            outpatient settings are also subject to peer review and that  
            any peer review findings be reported to their appropriate  
            accrediting agency.

          2.Background on ambulatory surgery centers and Capen v. Shewry.  
            Under existing law, surgical clinics in California are  
            regulated in one or more of three ways: (1) licensed as a  
            surgical clinic by CDPH; (2) CMS-certified to accept payment  
            from Medicare and Medicaid; or, (3) accredited by an agency  
            approved by MBC.  MBC currently has approved five accrediting  
            agencies. Prior to 2007, most of the settings that were  
            certified as ambulatory surgical centers by CMS to take  
            Medicare and Medicaid payments were also licensed as surgical  
            clinics by CDPH, as CDPH generally utilized the same standards  
            for licensing as CMS uses for certification, and it was often  
            in the clinic's interest to be licensed for purposes of being  
            included in health insurance networks. If the surgical setting  
            did not plan on performing procedures for which it would seek  
            payment from Medicare or Medi-Cal or other third-party payors,  
            an outpatient surgical setting would often choose to just  
            become accredited by an MBC-approved accrediting agency.

            However, in 2007, the Third District Court of Appeal issued  
            its decision in the lawsuit  Capen v. Shewry  (Capen). In Capen,  








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            the issue before the court was whether a surgical clinic that  
            is wholly owned and operated by a physician, but where  
            physicians who are not owners will practice, is required to  
            obtain a license from CDPH. Up to this point, CDPH had  
            interpreted existing law as requiring licensure when physician  
            who were not owners were practicing surgery at the location.   
            Existing law exempts from the definition of a surgical clinic  
            "any place or establishment owned or leased and operated as a  
            clinic or office by one or more physicians?in individual or  
            group practice." CDPH was asserting that if physicians who are  
            not part of the ownership group were allowed to practice, the  
            clinic would not fall under this exemption. However, the court  
            found that the statute in question was ambiguous, and  
            concluded that physician-owned clinics are not subject to  
            licensing by CDPH. Even though the statute specifically gave a  
            physician-owned clinic  the option  , at the clinics choice, of  
            seeking licensure, CDPH interpreted the court's decision in  
            Capen to strip CDPH of the authority to license or regulate a  
            surgical clinic that had any degree of physician ownership,  
            and that it could not issue or renew a license for any  
            surgical clinic that is even partly physician owned.

            Because of the nature of surgical clinics, there is often at  
            least some partial physician ownership, even with surgical  
            facilities that are associated with large medical systems. As  
            a result of the Capen decision and CDPH's interpretation that  
            it could no longer renew a license where there was partial  
            physician ownership, the number of surgical clinics went from  
            about 500 in 2007 to only 35 surgical clinics licensed in  
            California today. Additionally, because only licensed clinics  
            are currently required to report ambulatory surgery data to  
            OSHPD, the amount of ambulatory surgical data has gone way  
            down: according to the California HealthCare Foundation,  
            1,167,583 outpatient surgeries were reported to OSHPD in 2007,  
            while only 120,155 were reported in 2010 - this despite the  
            fact that more and more surgeries are happening in outpatient  
            settings.

            To help fill in some of the regulatory void created by the  
            Capen decision and a concern that there was insufficient  
            oversight of outpatient surgery settings, the Legislature  
            passed SB 100 (Price), Chapter 645, Statutes of 2011.  SB 100  
            made a number of changes regarding the approval, oversight,  
            and inspection of outpatient settings that were accredited by  
            MBC-approved accrediting agencies, and gave accrediting  








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            agencies the ability to issue outpatient settings a plan of  
            corrective action for any deficiencies found during  
            inspections.
          
          3.Double referral. This bill was heard in the Senate Business,  
            Professions and Economic Development Committee on April 20,  
            2015, and passed with a 9-0 vote.

          4.Prior legislation. SB 534 (Hernandez), Chapter 722, Statutes  
            of 2013, requires chronic dialysis clinics, surgical clinics,  
            rehabilitation clinics, and intermediate care  
            facilities/developmentally disabled-nursing to meet federal  
            certification standards until CDPH adopts licensing  
            regulations for these facilities, and sunsets these provisions  
            on January 1, 2018.

          SB 100 (Price,) of 2011, required MBC to make a number of  
            changes regarding the approval, oversight and inspection of  
            outpatient settings and accreditation agencies and in  
            developing a plan of corrective action for any deficiencies  
            found by the accreditation agencies or the MBC during  
            inspections.

          SB 1150 (Negrete McLeod), of 2010, would have required MBC to  
            adopt regulations regarding the appropriate level of physician  
            availability needed within clinics or other settings using  
            laser or intense pulse light devices, required MBC to post a  
            factsheet on cosmetic surgery, required MBC to adopt standards  
            for out patient settings that offer in vitro fertilization,  
            and made changes to MBC oversight of accreditation agencies.  
            SB 1150 was held on the Assembly Appropriations Committee  
            suspense file.
            
            SB 674 (Negrete McLeod), of 2009, would have required  
            specified healing arts licensees to include professional  
            designations behind their names in advertisements; required  
            MBC to adopt regulations regarding the appropriate level of  
            physician availability needed within clinics or other settings  
            using laser or intense pulse light devices for elective  
            cosmetic procedures; permitted MBC to adopt standards that it  
            deems necessary for outpatient settings that offer in vitro  
            fertilization; and revised accreditation requirements and  
            procedures. SB 674 was vetoed by the Governor, who stated:  
            "While some provisions may provide marginal improvements to  
            consumer protection, I cannot support this bill when it fails  








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            to address the need for stronger licensing and oversight of  
            outpatient surgical centers. The continued reliance by the  
            medical community on external accreditation agencies without  
            enforcement capability is an insufficient solution for  
            protecting patients. As outpatient surgeries continue to  
            increase in number and complexity, surgical centers cannot  
            continue to perform procedures in an unregulated and  
            unenforced environment."

            AB 832 (Jones), of 2009, would have required CDPH to convene a  
            workgroup to consider and develop recommendations for state  
            oversight and monitoring of ambulatory surgical centers, to  
            ensure public health and safety. AB 832 was held on the  
            Assembly Appropriations Committee suspense file.

            AB 543 (Plescia), of 2007, would have established licensing  
            requirements for surgical clinics and would have required,  
            effective January 1, 2008, that all surgical clinics meet  
            specified operating and staffing standards. AB 543 was vetoed  
            by the Governor, who stated: "While I support the intent of  
            this legislation, I am unable to sign it as it lacks critical  
            patient safety protections. This bill doesn't establish  
            appropriate time limits for performing surgery under general  
            anesthesia. Further it inappropriately restricts  
            administrative flexibility and creates state fiscal pressure  
            during ongoing budget challenges. I am directing the  
            Department of Public Health to pursue legislation that  
            establishes licensure standards for these facilities that are  
            consistent with federal requirements and protect the health  
            and safety of patients."
            
          5.Support.  This bill is supported by MBC, which states that  
            existing law requires licensed surgical clinics to report  
            aggregate utilization and patient encounter data to OSHPD.  
            However, when these physician-owned ambulatory surgical  
            centers were required to be accredited instead of licensed,  
            there was no requirement to report data to OSHPD. MBC states  
            that this resulted in a serious deficiency of data for  
            accredited outpatient settings. In addition, MBC states that  
            existing law allows a physician who owns his or her own  
            outpatient setting to choose not to have peer review of his or  
            her practice, and that MBC believes that for consumer  
            protection, physician working in these settings should be  
            subjected to peer review evaluations, which can be utilized as  
            a tool by the accrediting agencies when determining compliance  








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            with existing law. Finally, MBC states that inspections  
            currently performed by accrediting agencies are announced,  
            unless they are deemed status surveys. Requiring subsequent  
            inspections to be unannounced will help to ensure that  
            facilities do not have time to prepare for an inspection and  
            will more closely align with inspections for other types of  
            ambulatory surgery settings. The California Ambulatory Surgery  
            Association states in support that even though existing law  
            provides adequate oversight for ambulatory surgery settings  
            utilizing certain levels of anesthesia, a September 2007 court  
            ruling (Capen v. Shewry) has prohibited CDPH from issuing  
            state licenses to physician-owned surgery centers, which make  
            up the vast majority of ambulatory surgery settings in  
            California. Furthermore, CASA states that without adding an  
            accredited outpatient setting and CMS-certified ambulatory  
            surgical center to the list of eligible facilities that can  
            obtain reports from the MBC, surgery centers are unable to  
            ensure that physicians and others providing care in those  
            facilities have not been denied staff privileges, been removed  
            from a medical staff, or have had his or her staff privileges  
            restricted. This bill is also supported by the California  
            Hospital Association (CHA), which states that many of their  
            hospitals and systems operate or have other business  
            relationships with outpatient centers in which surgery is  
            performed. CHA supports the requirement in this bill for the  
            organization to determine if a certain report has been made  
            indicating the applying physician, psychologist, podiatrist or  
            dentist has been denied staff privileges or had his or her  
            staff privileges restricted. CHA also supports the goal of the  
            bill to establish a peer review process in these settings.

          6.Opposition.  The California Society of Plastic Surgeons (CSPS)  
            opposes this bill, stating that it does not believe the  
            changes would result in any improvement of the accreditation  
            process or enhance patient safety. Rather, CSPS states that  
            this bill only increases costs for accredited facilities,  
            which will increase costs to the overall healthcare system.  
            According to CSPS, this bill creates additional onerous data  
            reporting with no obvious need or plan for use of the data.  
            CSPS also argues the use of unannounced inspections would put  
            patient safety at risk, as staff and physician attention would  
            be diverted from patient care by the inspectors and their  
            requirements for evaluating manual, logs, and patient records.

          7.Oppose unless amended. The California Medical Association  








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            (CMA) states that it is concerned that some of the proposed  
            changes would create significant logistical challenges for  
            certain outpatient surgery settings without a commensurate  
            increase in consumer protection. According to CMA, some of the  
            proposed changes, including unannounced visits by an  
            accreditation agency, some of the peer review changes, and  
            mandatory reporting, could create unnecessary hardship on  
            certain facilities. CMA states that we should not seek to  
            unduly burden facilities with regulations that have an  
            uncertain impact on improving patient care.

          8.Technical amendments. 
          
               a.     This bill requires an accredited outpatient setting  
                 and a CMS-certified facility to pay a fee to OSHPD based  
                 on the number of ambulatory surgery data records  
                 submitted to OSHPD, but prohibits this fee from exceeding  
                 the reasonable costs incurred by OSHPD in  regulating  the  
                 outpatient setting and facility. However, for these  
                 purposes, OSHPD is not "regulating" these settings, but  
                 just collecting data and making some of it publicly  
                 available. To avoid confusion, the word "regulating"  
                 should be deleted, and instead the costs should not  
                 exceed the reasonable costs incurred by OSHPD related to  
                 the reports filed by these settings.

               b.     This bill deems a surgical clinic to have met  
                 licensure requirements upon presenting documentation,  
                  within a three-year period  , that the surgical clinic has  
                 met federal certification standards. The intent of this  
                 provision is to ensure the federal certification is  
                 within three years, but the way this is phrased it could  
                 be interpreted to mean that the clinic has three years  
                 within which to provide documentation of federal  
                 certification. This should be clarified. 
          
           SUPPORT AND OPPOSITION  :
          Support:  California Ambulatory Surgery Association
                    California Hospital Association
                    Medical Board of California
          
          Oppose:   California Medical Association (unless amended)
                    California Society of Plastic Surgeons

                                      -- END --








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