BILL ANALYSIS
AB 646
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 646 (Swanson) - As Amended: April 13, 2009
SUBJECT : Physicians and surgeons: employment.
SUMMARY : Permits health care districts (districts) and certain
public hospitals, independent community nonprofit hospitals, and
clinics, as specified, to directly employ physicians and
surgeons. Specifically, this bill :
1)Permits a district to directly employ, and charge for
professional services rendered by, a physician and surgeon
with the approval of the physician and surgeon.
2)Permits a public or an independent community nonprofit
hospital or clinic located in a medically underserved area, or
an area where unmet priority needs for physicians and surgeons
exist, with a patient census that consists of more than 50%
medically underserved populations, to employ physicians and
surgeons, and to charge for professional services rendered by
a physician and surgeon, with the approval of the physician
and surgeon.
3)Prohibits a district, a public or an independent community
nonprofit hospital or clinic from interfering with,
controlling, or otherwise directing a physician and surgeon's
professional judgment.
4)Deletes the 2003 pilot project permitting certain hospitals to
directly employ physicians and surgeons, as specified.
EXISTING LAW :
1)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 the Medical Board of California (MBC) may,
pursuant to regulations it 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
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institution, foundation, or clinic.
2)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.
3)Provides certain additional exceptions to the prohibition
against CPM.
4)Authorizes until January 1, 2011, a pilot project to allow
qualified district hospitals, as defined, to employ a
physician, if the hospital does not interfere with, control,
or otherwise direct the professional judgment of the
physician. To qualify for the project, a district hospital
must: be in a county with population of 750,000 or less; have
reported net losses in 2000-01; and, have at least 50% of
combined patient days from Medicare, Medi-Cal and uninsured
patients.
5)Permits the establishment of local health care districts to
provide health care services and authorizes health care
districts to establish, maintain, and operate, or provide
assistance in the operation of, one or more health facilities
or health services, including, but not limited to, outpatient
programs, services, and facilities; retirement programs,
services, and facilities; chemical dependency programs,
services, and facilities; or other health care programs,
services, facilities and activities at any location within or
without the district for the benefit of the district and the
people served by the district.
FISCAL EFFECT : Unknown. This bill is keyed non-fiscal.
COMMENTS :
Purpose of this bill . According to the author's office, "Many
California communities have suffered from a chronic, severe
shortage of doctors for over a decade. This shortage is worst
in California's rural and underserved inner-city areas where
Medi-Cal and Medicare are the primary "payors" for health care
services. In many of our communities, doctors cannot support
themselves financially in independent practice. The majority of
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doctors in California do not accept Medi-Cal patients. This
makes it extremely difficult for rural and inner city
communities to attract and keep the doctors their residents
need. Many physicians now working in these communities are
planning to retire within the next two to three years.
Residents in these communities are often unable to get access to
the medical care they need, or must travel hundreds of miles
from home in order to get it.
"This proposal, jointly sponsored by AFSCME, ACHD, and UAPD,
will empower all 75 of California's Health Care Districts, as
well as all nonprofit hospitals and clinics in Health
Professional Shortage Areas, to recruit and keep the doctors
their communities need to provide care to Medi-Cal patients and
the uninsured. It would do so by allowing physician employers
to provide doctors with the financial security they need to stay
in our communities."
Background . The corporate practice of medicine (CPM) is
typically referred to in the context of a prohibition, banning
hospitals from employing physicians. 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.
California's 75 health care districts (HCDs) are voter-created
local government entities governed by publicly elected boards of
trustees. HCDs currently operate 46 of California's 72 public
hospitals, providing health care services to over 2 million
Californians annually. HCDs are subject to California's CPM
prohibition. This bill would enable 46 HCD hospitals and
approximately 130 other public, independent community nonprofit
hospitals and clinics to hire physicians directly.
Advocates argue that physician recruitment is essential to the
continued existence of HCDs. According to a 2007 California
Medical Association report, the average age of physicians in the
rural and underserved urban communities is approaching 60, with
many of those planning to retire in the next two years.
Co-sponsors of this bill, the Association of California
Healthcare Districts (ACHD) reports that, "In their struggle to
recruit and keep physicians, rural and underserved urban
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communities in California must compete with large physician
groups, Kaiser, the state Department of Corrections, rural
hospitals in almost every other state in the nation as well as
other entities that may directly employ physicians."
Proponents of the bill argue that exempting HCDs from the CPM
ban will enable them to attract physicians by absorbing all of
the overhead and administrative duties of establishing a medical
practice, and providing a stable, competitive salary.
Opponents argue that the bar on CPM is an important public
policy provision to ensure physician independence and the
ability to practice in the patient's best interests. Some argue
that the difficulty in recruiting physicians in some parts of
California is more likely the result of declining reimbursement
than physicians' employment status. This decline in
reimbursement is driven by the increased market dominance of
large health care plans and insurers, which would in no way be
affected by this bill.
SB 326 (Chesbro) Chapter 411, Statutes of 2003, established a
pilot project permitting district hospitals meeting specific
requirements to hire and employ up to two physicians each, for a
total of 20 physicians statewide, if the district hospital met
the following conditions:
operates in a county of 750,000 or less population;
reported net operating losses in fiscal year 2000-01;
and,
has a patient base of at least 50% combined Medi-Cal,
Medicare, and uninsured patients.
SB 326 required the Medical Board of California (MBC) to
administer and evaluate the project prior to its sunset on
January 1, 2011. In its 2008 report, the MBC stated that it was
"challenged in evaluating the program and preparing this report
because the low number of participants did not afford us
sufficient information to prepare a valid analysis of the pilot.
?[W]hile the Board supports the ban on the corporate practice of
medicine, it also believes there may be justification to extend
the pilot so that a better evaluation can be made.
"However, until there is sufficient data to perform a full
analysis of an expanded pilot, the Board
contends that the statutes governing the corporate practice of
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medicine should not be amended
as a solution to solve the problem of access to healthcare."
This bill is not consistent with the MBC report because it
permanently repeals the ban on the corporate practice of
medicine in districts, certain public hospitals, independent
community nonprofit hospitals, and clinics.
Arguments in support . The sponsors, American Federation of
State, County and Municipal Employees (AFSCME), AFL-CIO, state,
"Due to the large number of uninsured and underinsured
Californians, a number of California communities are
experiencing difficulty recruiting and retaining physicians and
surgeons. In particular, the rural and underserved urban
communities served by California's Health Care Districts suffer
from a long-standing shortage of doctors?. In order to recruit
professionals to provide medically necessary services in these
communities, many district hospitals must directly employ them
in order to provide adequate economic security?.
"All Californians should have the right to accessible medical
facilities and qualified medical professionals in the areas in
which they live. Assembly Bill 646 will better enable district
hospitals across the state to guarantee this right, while
assuring patients that the professional judgment of their
physicians and surgeons will not be influenced by the district
hospital."
Arguments in opposition . The California Medical Association
writes, "The bar against the corporate practice of medicine has
been in place in California since 1938 and has been protected by
the courts and the legislature since. The bar provides a
fundamental protection for patients by ensuring their
physicians' sole interest is what is best for the patient. When
hospitals are allowed to directly employ and charge for
physician services, quality of care suffers due to the fact that
hospitals derive income from patient beds being filled?.
"Hospital employment of physicians eliminates competition for
outpatient services and instead forces all care to be delivered
through the hospital. As hospitals gain market share in small
communities, physicians not employed will likely be forced out
of business. This results in increased costs as the hospital is
able to negotiate higher rates from third party payers for both
physician and hospital services."
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Related legislation . AB 648 (Chesbro) of 2009 would allow rural
hospitals, as specified, to directly employ physicians and
surgeons. This bill is pending in the Assembly Business and
Professions Committee.
Prior legislation . AB 1944 (Swanson) of 2008 was a similar bill
that would allow health care districts to employ a physician and
surgeon. This bill died in Senate Health Committee.
SB 1294 (Ducheny) of 2008 would have expanded the pilot project
enabling HCDs to directly employ physicians. This bill failed
passage in the Assembly Appropriations Committee.
SB 1640 (Ashburn) of 2008 would have expanded the pilot project
to enable general acute care hospitals to directly employ
physicians. This bill failed passage in the Assembly Business
and Professions Committee.
Double referred . This bill is double-referred to the Assembly
Health Committee.
REGISTERED SUPPORT / OPPOSITION :
Support
American Federation of State, County and Municipal Employees
(AFSCME), AFL-CIO (co-sponsor)
Association of California Healthcare Districts (co-sponsor)
Union of American Physicians and Dentists (UAPD/AFSCME)
(co-sponsor)
Congress of California Seniors
Regional Council of Rural Counties
Numerous individuals
Opposition
California Medical Association
California Society of Pathologists
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301
AB 646
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