BILL ANALYSIS
-----------------------------------------------------------------------
|Hearing Date:June 21, 2010 |Bill No:AB |
| |646 |
-----------------------------------------------------------------------
SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 646Author:Swanson
As Amended:April 13, 2010 Fiscal: Yes
SUBJECT: Physicians and surgeons: employment.
SUMMARY: Revises and expands an existing pilot project which
authorized qualified health care district hospitals, as defined, to
directly employ a limited number of physicians and surgeons, as
specified, and instead allows for health care districts, as defined,
which meet certain requirements, to employ up to ten physicians and
surgeons within each district and to provide employment contracts of
up to 10 years, and to allow employment contracts to be renewed or
extended to December 31, 2020. Requires a study to be completed
regarding the program and submitted to the Legislature by June 1,
2018, and provides for a sunset of the program by January 1, 2021.
NOTE : This measure is before the Committee for "Reconsideration."
This measure failed passage in this Committee by a vote of 5-3 on
June 29, 2009, and was granted reconsideration. It has been
amended.
Existing law:
1)Prohibits corporations and other artificial legal entities which are
not owned by physicians from having any professional rights,
privileges, or powers (known as the "prohibition against the
corporate practice of medicine.") 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 and surgeons on a salary basis by a licensed
charitable institution, foundation, or clinic if no charge for
professional services rendered to patients is made by that
institution, foundation, or clinic.
2)Exempts medical or podiatry professional corporations organized and
AB 646
Page 2
practicing pursuant to the Moscone-Knox Professional
Corporations Act (Corporations Codes Sections 13400 et seq.) and
requires a majority of the owners or shareholders of the
corporation to be licensed physicians and surgeons or
podiatrists, respectively.
3)Exempts the following clinics from the prohibition against the
corporate practice of medicine:
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 and surgeons who
hold academic appointments on the faculty of the university
if the charges are approved by the physician and surgeon 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
surgeons and charge for professional services. Prohibits,
however, these clinics from interfering with, controlling, or
otherwise directing a physician's and surgeon's professional
judgment in a manner prohibited by the corporate practice of
medicine 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
surgeons and charge for professional services rendered by
those physicians and surgeons. Prohibits the narcotic clinic
from interfering with, controlling, or otherwise directing a
physician's and surgeon's professional judgment in a manner
that is prohibited by the corporate practice of medicine
prohibition or any other provision of law.
4)Finds and declares that a large number of communities are having
great difficulty recruiting and retaining physicians and
surgeons and that in order to provide the medically necessary
services in rural and medically underserved communities that
many district hospitals have no other alternative than to
directly employ physicians and surgeons in order to provide
economic security adequate for them to relocate and reside
within their communities.
5)Establishes a pilot project that allows district hospitals that
AB 646
Page 3
are owned and operated by a health care district , as defined, to
employ physicians and surgeons and charge for professional
services rendered by those physicians and surgeons,
notwithstanding the general prohibition against the practice of
medicine by corporations or other artificial legal entities that
are not professional medical corporations controlled by licensed
physicians and surgeons.
6)Defines a qualified district hospital for purposes of the pilot
project as one governed pursuant to the Local Health Care
District Law and provides a percentage of care to Medicare,
Medi-Cal and uninsured patients, as specified, and is located in
a county with a total population of less than 750,000.
7)Prohibits district hospitals under the pilot project from
interfering with, controlling, or otherwise directing a
physician's and surgeon's professional judgment in a manner that
is prohibited by the corporate practice of medicine prohibition
or any other provision of law.
8)Allows qualified district hospitals under the pilot project to
provide for the direct employment of a total of 20 physicians
and surgeons and specifies that each qualified district hospital
may employ up to 2 physicians and surgeons.
9)Requires MBC to report to the Legislature no later than October
8, 2008, on the effectiveness of the pilot project and sunsets
this pilot project on January 1, 2011 .
10)Defines a general acute care hospital as a health facility
having a duly constituted governing body with overall
administrative and professional responsibility and an organized
medical staff that provides 24-hour inpatient care, including
the following basic services: medical, nursing, surgical,
anesthesia, laboratory, radiology, pharmacy, and dietary
services.
11)Defines Medically Underserved Area as an area as defined in
Federal Regulations or an area of the state where unmet priority
needs for physicians exist as determined by the California
Healthcare Workforce Policy Commission, as specified. Defines
"Medically Underserved Population" as the Medi-Cal, Healthy
Families and uninsured population.
12)Establishes under the Federal Regulations criteria for the
designation of Medically Underserved Areas (MUAs) and Medically
AB 646
Page 4
Underserved Populations (MUPs). MUAs and MUPs identify areas or
populations with a shortage of health care services.
Documentation of medically underserved is based on four factors:
health care provider to population ratio; infant mortality
rate; percentage of population below 100% of the federal poverty
rate; and percentage of population aged 65 or over.
This bill:
1)Revises and recasts existing law, as indicated above, which
established a pilot project that permits a hospital that is
owned and operated by a health care district, as defined, to
employ physicians and surgeons.
2)Permits a health care district, which owns and operates a
hospital or other acute care facility, a skilled nursing or long
term care facility, clinic or community health programs, to
employ physicians and surgeons and charge for their professional
services in any health facility, clinic, or program owned and
operated by the district, if the physician and surgeon in whose
name the charges are made approves the charges, and if all of
the following conditions are met:
a) The service area of the health care district includes a
MUA or an MUP, as defined in current law, or has been
federally designated as a Health Professional Shortage Area
(HPSA).
b) Requires the health care district board to conduct a
public hearing, and adopt a formal resolution declaring that
a need exists for the district to recruit and directly employ
one or more physicians to serve unmet community need.
Provides that the resolution shall include the following
findings and declarations:
i) Patients living within the community have been forced
to seek care outside the community, or have faced extensive
delays in access to care, due to the lack of physicians and
surgeons.
ii) The communities served by the district lack sufficient
numbers of physicians and surgeons to meet community need
or have lost or are threatened with the impending loss of
one or more physicians and surgeons due to retirement,
planned relocation, or other reasons.
AB 646
Page 5
iii) The district has been actively working to recruit one
or more physicians and surgeons to address unmet community
need, or to fill an impending vacancy, for a minimum of 12
consecutive months, beginning July 1, 2008, without
success.
iv) The direct employment of one or more physicians and
surgeons by the district is necessary in order to augment
or preserve access to essential medical care in the
communities served by the district.
c) Requires the chief executive officer of the health care
district to submit an application to MBC, including a copy of
the adopted resolution, and a personal statement certifying
the health care district's inability to recruit one or more
physicians and surgeons, including all relevant
documentation, certifying that the inability to recruit
primary or specialty care physicians and surgeons has
negatively impacted patient care in the community, and that
the employment of physicians and surgeons by the health care
district would meet a critical, unmet need in the community
based upon a number of factors, including, but not limited
to, the number of patients referred for care outside of the
community, the number of patients who experienced delays in
treatment, the length of treatment delays, and negative
patient outcomes.
3)Provides that upon receipt and review of the application, the
adopted resolution, the personal statement of the chief
executive officer and all relevant documentation as indicated in
item c) above, that the MBC shall approve and authorize the
employment of up to five primary or specialty care physicians
and surgeons by the district. Provides that upon receipt and
review of subsequent information as specified in item c) above,
the MBC shall approve the employment of up to five additional
primary or specialty care physicians and surgeons by the
district.
4)Provides that upon approval by the MBC to employ physicians and
surgeons, the chief executive officer of the health care
district may recruit and employ physicians and surgeons, up to
the limits as specified, as district employees, but the chief
executive officer cannot actively recruit or employ a physician
and surgeon who is currently employed by a Federally Qualified
Health Center, Rural Health Center or other community clinic not
affiliated with the district.
AB 646
Page 6
5)Provides that employment contracts entered into with physicians
and surgeons shall be for a period of not more than 10 years ,
but may be renewed or extended, and provides that districts may
enter into, renew, or extend employment contracts with
physicians and surgeons until December 31, 2020.
6)Requires the Office of Statewide Health Planning and Development
(OSHPD), in consultation with the Department of Public Health
and MBC, to conduct an efficacy study of this program to
evaluate and report to the Legislature no later than June 1,
2018, on the:
a) Improvement in physician and surgeon recruitment and
retention in the districts participating in the program.
b) Impacts on physicians and surgeons and health care access
in the communities served by these districts.
c) Impacts on patient outcomes.
d) Degree of patient and participating physician and surgeon
satisfaction.
e) Impacts on the independence and autonomy of medical
decision making by employed physicians and surgeons.
7)Prohibits health care districts authorized to employ physicians
and surgeons from interfering with, controlling, or otherwise
directing a physician and surgeon's professional judgment, as
specified, under penalty of fine or imprisonment.
8)Specifies that nothing shall be construed to affect a primary
care clinic, as defined.
9)Specifies that nothing shall be construed to exempt the district
hospital from any reporting requirements that affect the MBC's
authority to take action against a physician and surgeon's
license.
10)Sunsets this program, which would allow health care districts
to employ physicians and surgeons, on January 1, 2021.
11)Deletes existing legal definition of a public or an independent
community nonprofit hospital or clinic located in medically
underserved areas, as defined in federal law, or an area where
AB 646
Page 7
unmet priority needs for physicians and surgeons exist, as
determined by the California Healthcare Workforce Policy
Commission, with a patient census that consists of more than 50
percent medically underserved populations, as defined.
12)Repeals existing legal definition of a qualified district
hospital as one that is governed by the Local Health Care
District Law, provides a percentage of care to Medicare,
Medi-Cal, and uninsured patients, as specified, is located in a
county with a total population of less than 750,000, and has net
losses from operations in fiscal year
2000-01, as reported to the OSHPD.
13)Repeals existing legal provision limiting the number of
physicians and surgeons employed by each qualified district
hospital to 2 at any time, and for all participating qualified
district hospitals in the pilot project to 20.
14)Repeals existing requirement that the medical staff and the
elected trustees of a qualified district hospital concur by an
affirmative vote of each body that the physician's and surgeon's
employment is in the best interest of the communities served by
the hospital.
15)Repeals requirement that the employment contract with the
qualified hospital be for a term not to exceed four years.
FISCAL EFFECT: According to the Assembly Appropriations Committee
Analysis, dated May 20, 2009, unknown fee-supported special fund cost
of less than $50,000 to OSHPD to complete evaluation and submit a
report of the Legislature in 2018.
COMMENTS:
1.Purpose. This measure is co-sponsored by the Association of
California Health Care Districts (ACHCD) and the American Federation
of State, County & Municipal Employees (AFSCME). According to the
Author, the communities served by California health care districts
have suffered from a chronic shortage of physicians for decades.
This shortage is most acute in California's rural and underserved
urban communities, where Medi-Cal and Medicare are the primary
"payers" for health care services. In rural communities, doctors
cannot support themselves financially in an independent practice.
In urban areas, physicians are increasingly declining to accept
AB 646
Page 8
Medi-Cal and Medicare patients. This, as the Author argues, makes
it extremely difficult for districts to attract and keep the
physicians they need to serve in these communities. The Author
further indicates that many physicians now working in these
communities are planning to retire within the next two to three
years. There are very few potential recruits to replace retiring
doctors in these communities, and they are being aggressively
recruited by the California Department of Corrections and
Rehabilitation and other entities that can offer the security of
full-time employment. The Author states that potential recruits in
the communities serviced by health care districts are increasingly
seeking full time employment, and are not interested in establishing
independent practices. The Author argues that California's
physician hiring ban has become a significant barrier to the
recruitment of doctors in these communities.
2.Background.
a) Corporate Practice of Medicine (CPM) Ban. The law regarding
the corporate practice of medicine generally prohibits
corporations or other entities that are not controlled by
physicians from practicing medicine to ensure that lay persons
are not controlling or influencing the professional judgment and
practice of medicine by licensed physicians and surgeons.
California codifies this prohibition in Business and Professions
Code Sections 2400, et seq. A study done by the California
Research Bureau (CRB) in October of 2007, indicates, however,
that although the CPM prohibition has an historical and legal
basis, most states today, including California, allow a number of
exemptions including those for health maintenance organizations,
professional medical corporations, teaching hospitals and certain
community clinics and non-profit organizations. The CRB calls
into question the utility of the CPM doctrine and whether it
makes sense in light of the statutes and regulations that
directly address concerns raised by the doctrine regarding
employment of physicians and surgeons and because of today's
changing health care landscape.
In 2008, Meritt, Hawkins & Associates (MHA) put out a report
entitled, 2008 Review of Physician and CRNA Recruiting
Incentives, and indicated that physician recruiting today is
characterized by a strong demand for physicians in most
specialties, coupled with a limited supply, "The nation continues
to face a physician shortage," and that a recruiting pattern that
has become apparent over the last three years is an increasing
number of hospitals that are employing physicians. The new trend
AB 646
Page 9
toward hospital employment of physicians, according to MHA, is
different from the 1990's when physicians approached hospitals
about employment opportunities rather that the reverse. Many
physicians, specialists in particular, are seeking hospital
employment to relieve them of the stress of high malpractice
rates, the struggle for reimbursement, administrative duties and
the general risks and hassles of private practice. Hospital
employment is viewed favorably by many physicians today and, in
their experience, hospitals offering employed positions may enjoy
an advantage over those that do not. MHA further states that
laws pertaining to physician recruitment can create scenarios
where it is more practical for hospitals to employ physicians
than to assist them in establishing independent practices.
Employing physicians also represents one way that hospitals can
address the issue of physician/hospital competition that may
arise when physicians open their own specialty hospitals or
surgery centers.
b) Areas Designated as HPSA, MUA or MUP. The Health Resources
and Services Administration Shortage Designation Branch, of the
U.S. Department of Health and Human Services, develops shortage
designation criteria and uses them to decide whether or not a
geographic area, population group or facility is a Health
Professional Shortage Area (HPSA) or a Medically Underserved Area
(MUA) or Population (MUP). HPSAs may be designated as having a
shortage of primary medical care, dental or mental health
providers. They may be urban or rural areas, population groups
or medical or other public facilities. The criteria for
determining primary medical care HPSAs of greatest shortage are
based on a number of factors: population-to-provider ratio,
poverty rate, and travel distance/time to nearest accessible
source of care. There are additional factors such as infant
mortality/low birth weight rates for primary care. A scale is
developed for scoring of each factor and relative weights for the
various factors are used. As of September 30, 2009, there are
6,204 primary care HPSAs nationwide with 65 million people living
in them. It would take 16,643 practitioners to meet their need
for primary care providers (a population to practitioner ratio of
2,000:1).
Under the federal requirements, an MUA may be a whole county or a
group of contiguous counties, a group of county or civil
divisions or a group of urban census tracts in which residents
have a shortage of personal health services. The criteria for
MUA designation involves application of the Index of Medical
Underservice (IMU) to obtain a score for the area. The IMU
AB 646
Page 10
involves four variables: ratio of primary medical care
physicians per 1,000 population, infant mortality rate,
percentage of the population with incomes below the poverty
level, and percentage of the population age 65 or over.
Generally any area which has an IMU score of 62.0 or less
qualifies for designation as an MUA. The MUP designation again
involves the application of the IMU to data on an underserved
population which includes such factors as low-income or
Medicaid-eligible populations, or cultural and/or linguistic
access barriers to primary care services.
The only difference for California is that an MUA may also be
designated by the California Healthcare Workforce Policy
Commission in determining that there are unmet needs for a
specific area and that MUPs also include Medi-Cal, Health
Families and uninsured populations. The Shortage Designation
Program of the Healthcare Workforce Development Division of the
Office of Statewide Health Planning and Development provides
technical assistance to clinics, health care districts and other
primary care providers seeking recognition as an HPSA or MUA or
MUP.
c) Health Care District Hospitals. Health care districts operate
roughly two-thirds of the public hospitals in California. There
are 75 health care districts that are voter-created local
government entities governed by publicly elected boards of
trustee. Health care districts currently operate 46 of
California's 72 public hospitals, providing health care services
to over 2 million Californians annually; 31 of the hospitals
owned and operated by health care districts are designated
"rural" hospitals. The vast majority of facilities are located
in rural California. Most of these facilities are quite small,
and tend to serve a disproportionate percentage of uninsured and
Medi-Cal patients. In some cases, upwards of 50% of the patients
served by health care districts and their health facilities are
insured by Medi-Cal. Health care districts and their hospitals
are formed, operated and governed by Section 32000 of the Health
and Safety Code. It has been indicated that this measure would
enable approximately 46 health care district hospitals and
approximately 130 other public, independent community nonprofit
hospitals and clinics to hire physicians and surgeons directly
since they serve in areas designated as MUA, MUP or HPSA.
d) Shortage of Qualified Physicians in California. According to
a June 2009 report by the California HealthCare Foundation
entitled, Fewer and More Specialized: A New Assessment of
AB 646
Page 11
Physician Supply in California, the overall supply of physicians
in the state is lower than previous estimates, actually 17
percent lower than estimated by the American Medical Association.
The number of primary care physicians actively practicing in
California is also at or below the estimated needs. There are
only approximately 59 primary care physicians in active patient
care per 100,000 population, when the needed estimate is at least
80. Only 16 of California's 58 counties are close to the needed
estimate of primary care physicians. However, it was found that
there is an abundance of specialists practicing in the state,
with 115 per 100,000 population, but again only half the counties
are above the estimated need for specialists. Finally, rural
counties suffer from low physician practice rates, and from a
diminishing supply of primary care physicians, and future erosion
of the supply of physicians to these disadvantaged communities is
expected. One of the primary steps recommended for policymakers
to take is to increase the number of primary care physicians
needed in this state, especially in communities of need, and to
provide greater financial incentives, especially in underserved
areas.
A report prepared by the National Health Foundation for the
California Hospital Association titled, Physician Workforce
Shortage Issues in California Rural Hospitals, found that:
(1) Rural hospitals do not have sufficient physician coverage;
specifically specialists and primary care physicians. (2) Rural
location and the lack of spousal job opportunities deter
physicians from practicing in rural areas. (3) Access to
healthcare in the community is diminished due to the lack of
adequate physician coverage. (4) In California, reimbursement
from Medi-Cal is not adequate to cover patient care and the payer
mix and population size in rural communities cannot support a
specialist's practice. (5) Competition in the form of large
medical groups and urban opportunities divert physicians from
rural areas; (6) Rural hospitals use creative approaches to
recruit and retain physicians.
(7) The inability for rural hospitals to employ physicians serves
as a barrier and roadblock that deters physicians from practicing
in rural areas.
A recent January 2007 report by the Advisory Council on Future
Growth in the Health Professions , from the Office of Health
Affairs of the University of California, titled, A Compelling
Case for Growth, indicated that organizations including the
American Medical Association, Council on Graduate Medical
Education, Association of American Medical Colleges, American
AB 646
Page 12
College of Physicians, and the U.S. Bureau of Health Professions
have predicted an impending shortage of U.S. physicians. In
California, two studies issued in 2004 project statewide
shortages and severe unmet regional needs within a decade. One
of these studies projects a statewide shortage of nearly 17,000
doctors (15.9 percent) by 2015.
In January 2007, the California Medical Association (CMA) also
stated in a fact sheet that in the next two decades California's
population is projected to increase by 10 million people. By
2030 the number of seniors will double, and one in six
Californians will be over 65 years old. As people age, their
demand for physician services increases. This increasing need
for doctors, an aging physicians workforce, changing physician
practice patterns, and inadequate medical education capacity
suggest that California and the nation will see significant
doctor shortages in the near future. Also, CMA indicated that
most California counties have so few physicians that they are
classified as HPSAs and that roughly two-thirds of HPSAs are in
rural areas, and the remaining third are in very urban areas.
According to an October 2006 report by the U.S. Department of
Health and Human Services, entitled, Physician Supply and Demand:
Projections to 2020, it was estimated that approximately 7,000
additional primary care physicians are currently needed in
underserved areas to federally-designated shortage areas, and
that there will likely be little change in market pressure to
improve the undersupply of primary care physicians in rural and
other underserved communities. It is estimated that between 2005
and 2020, demand for primary and non-primary care physicians will
grow faster than supply, as well as for individual physician
specialties.
According to a 2001 report by the Center for Health Professions
entitled The Practice of Medicine in California: A Profile of the
Physician Workforce, Californians face substantially unequal
access to physicians, depending on geography. The report points
out that the ratio of total physicians to population ranged from
a high of 238 physicians per 100,000 population in the Bay Area
to a low of 120 physicians per 100,000 population in the South
Valley/Sierra. Regions with the state's largest metropolitan
areas (Bay Area and Los Angeles) have the most robust supplies of
physicians, with physicians even more likely than the general
population to choose these urban areas. Three regions composed
of a mix of rural areas and small- to medium-sized metropolitan
areas (Central Valley/Sierra, Inland Empire and South
AB 646
Page 13
Valley/Sierra) have the lowest amount of physicians.
e) MBC Report to the Legislature on the Effectiveness of the
Pilot Project. SB 376 (Chesbro, Chapter 411, Statutes of 2003),
which established the pilot project allowing hospitals that are
owned and operated by a health care district to employ 20
physicians and surgeons and charge for professional services
rendered by those physicians, required MBC to report to the
Legislature no later than October 1, 2008 on the evaluation of
the effectiveness of the pilot project in improving access to
health care in rural and MUAs 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 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.
f) Prior Legislation. SB 1640 (Ashburn, 2008) which is similar
to the provisions of this bill, would have revised existing law
establishing a pilot project that permits a hospital that is
owned and operated by a health care district, as defined, to
employ physicians and surgeons; authorized a qualified hospital
that meets specified requirements to employ an unlimited number
of physicians and surgeons, and allowed the qualified hospital to
charge for professional services rendered by those physicians.
SB 1640 failed passage in this Committee.
SB 1294 (Ducheny, 2008) would have extended a pilot project that
AB 646
Page 14
permits a hospital that is owned and operated by a health care
district, as defined, to employ physicians and surgeons and
charge for professional services rendered by those physicians.
Also would have changed the definition of a qualified district
hospital, and revised the pilot project to allow an unlimited
number of physicians and surgeons to be employed by all of the
district hospitals and for an individual district hospital to
employ up to five licensees at a time.
SB 1294 failed passage in the Assembly Appropriations Committee.
AB 1944 (Swanson, 2008) would have deleted the pilot project for
the current hospital districts and instead authorize a health
care district, as defined, to employ a physician and surgeon if
specified requirements are met and the district does not
interfere with, control, or otherwise direct the professional
judgment of the physician and surgeon. AB 1944 failed passage in
the Senate Health Committee.
SB 376 (Chesbro, Chapter 411, Statutes of 2003) established a pilot
project that permits a hospital that is owned and operated by a
health care district, as defined, to employ 20 physicians and
surgeons and charge for professional services rendered by those
physicians. This bill sunsets these provisions on January 1,
2011.
3.Similar Legislation in 2009. SB 726 (Ashburn) revises the current
pilot project to authorize the direct employment by qualified health
care districts and rural hospitals, of an unlimited number of
physicians and surgeons under the pilot project, and would authorize
such a district or hospital to employ up to 5 physicians and
surgeons at a time if certain requirements are met. It also
provides a definition for "qualified health care district" including
that they are located in a MUA or MUP so designated by the federal
government or is within a federally designated HPSA. It also
provides a definition for "qualified rural hospital" including that
it is a general acute care hospital located in an area designated as
non-urban by the U.S. Census Bureau, or in a rural-urban commuting
area code of four or greater as designated by the U.S. Dept. of
Agriculture, or a rural hospital located in a MUA or MUP so
designated by the federal government, or within a federally
designated HPSA. SB 726 would require the chief executive officer
of a qualified health care district or rural hospital to provide
certification to the MBC that they have been unsuccessful in
recruiting a physician and surgeon and their reason for their lack
of success. Also, they must provide notification to the MBC of
their intent to enter into a contract and prohibits the district or
AB 646
Page 15
hospital from trying to recruit or employ physicians and surgeons
who are already employed by a federally qualified health center,
rural health center or community clinic. This measure limits the
term of a contract to 10 years and extends the pilot project until
January 1, 2018. This measure is on the inactive file of the
Assembly Floor.
AB 648 (Chesbro) establishes the Rural Hospital Physician and Surgeon
Services Demonstration Project, which permits a rural hospital, as
defined, whose service area includes an MUA, an MUP, or that has
been federally designated as an HPSA, to employ one or more
physicians and surgeons, not to exceed 10 physicians and surgeons at
one time, as specified, to provide medical services. However, the
bill permits the hospital to exceed 10 physicians if MBC deems
appropriate. Allows for a rural hospital to participate in the
program if they meet specified requirements. Provides that a rural
hospital that employs a physician and surgeon shall develop and
implement a written policy to ensure that each employed physician
and surgeon exercises his or her independent medical judgment in
providing care to patients. Also provides that a rural hospital
shall not interfere with, control, or direct a physician's and
surgeon's exercise of his or her independent medical judgment in
providing medical care to patients, and if MBC believes a rural
hospital has violated this prohibition, then MBC may refer the
matter to the Department of Public Health (DPH) to investigate and
DPH may assess a civil penalty, as specified. Provides MBC shall
provide an evaluation report to the Legislature by January 1, 2019,
and provides for a sunset of the Demonstration Project by January 1,
2020. This measure failed passage in this Committee by a vote of
4-4 on June 29, 2009, and was granted reconsideration.
4.Important Differences Between AB 646 (Swanson), AB 648 (Chesbro) and
SB 726 (Ashburn) and the Current Pilot Project.
a) All measures expand the number of hospitals that may
participate. The current pilot project is very restrictive in
the number of hospitals that can participate in the program. It
specifies that a "qualified district hospital" was one which is a
district hospital organized and governed pursuant to the Local
Health Care District Law, provides a percentage of care to
Medicare, Medi-Cal and uninsured patients that exceeds 50 percent
of patient days, is located in a county with a total population
of less than 750,000, and has net losses from operations in
fiscal year 2000-01, as reported by OSHPD. AB 646 will allow
health care district hospitals that serve in a MUA or an MUP, or
AB 646
Page 16
in a federally designated HPSA to recruit primary or specialty
care physicians to employ at their facility, however, the
executive officer of the health care district must show to MBC
that they have tried to actively recruit a doctor for a 12 month
period and have been unable to do so and that the employment of
the physician would meet an unmet need in the community based
upon a number of factors. It is unclear how many hospitals could
participate, but health care district hospitals and their clinics
in both urban and rural settings that meet the requirements would
qualify. AB 648 will allow a rural hospital that also serves
similar areas as in AB 646 to recruit primary or specialty care
physicians, and like AB 646 the chief executive officer of the
rural hospital would certify to MBC that they have tried to
actively recruit a doctor for a 12 month period and have been
unable to do so and that the employment of the physician would
serve an unmet need in the community based upon a number of
factors. SB 726 would allow a qualified health care district
located within a federally designated MUP, MUA or HPSA, or a
qualified rural hospital that is located within a federally
designated MUP, MUA or HPSA, or is designated in specified ways
by the U.S. Census Bureau or the U.S. Dept. of Agriculture as a
rural community, to recruit and employ physicians and surgeons,
and like AB 646 and AB 648, the chief executive officer of the
hospital would certify to MBC that they have tried to actively
recruit a doctor for a
12 month period and have been unable to do so and that the
employment of the physician would meet an unmet need in the
community based upon a number of factors.
b) All measures expand the number of physicians and surgeons able
to participate. The current pilot project limits each hospital
to no more than 2 participating physicians and no more than 20
physicians for all participating hospitals. MBC was critical of
this limitation in trying to evaluate the success of this
program. AB 646 only limits the number of physicians who may be
employed by each hospital to 5, but it also allows MBC to provide
up to 5 additional primary or specialty care physicians and
surgeons (a total of 10) once MBC approves certification by the
hospital of the need for additional physicians and surgeons. AB
648 provides that the total number of physicians and surgeons
employed by the rural hospital at one time shall not exceed 10,
unless the employment of additional physicians and surgeons is
deemed appropriate by MBC on a case-by-case basis.
SB 726 provides that the health district or rural hospital may
employ an "unlimited number" of physicians and surgeons, but that
the total number of physicians and surgeons employed by a
AB 646
Page 17
particular hospital shall not exceed 2 at any time, but that MBC
may authorize the hospital to hire no more that 3 additional
physicians and surgeons (for a total of 5) if certain specified
requirements of the hospital makes a showing of clear need and
there is concurrence of the medical staff of the hospital.
c) All measures increase the length of employment contracts for
physicians and surgeons. The current pilot project restricts the
period of the employment contract with the physician and surgeon
for a term not to exceed four years . AB 646 provides that
employment contracts shall be for a period of not more than 10
years, but may be renewed or extended until December 31, 2020.
AB 648 provides for no limitation on the period of the employment
contract with the physician and surgeon. SB 726 provides similar
to
AB 646 that the term of the contract shall not be in excess of 10
years.
5.Arguments in Support. According to the AFSCME (Co-Sponsor), this
measure would only be of benefit to small, independent community
based hospitals, such as those owned and operated by health care
districts. It would give health care districts the same authority
as all other public health care agencies in California; those
operated by the federal government, state and counties which are all
exempt from the physician hiring ban. There are more than 3,000
employed doctors working for these entities in the state. Most
states allow the employment of physicians by hospitals and other
heath care facilities, and it is a common practice nationally, and
AFSCME argues that the current physician hiring ban has become a
significant barrier to the recruitment of doctors in rural and
underserved urban communities. AFSCME indicates that this measure
builds on the pilot program by authorizing all communities in need
to employ the physicians through health care districts. Many of
these communities have suffered from a chronic, severe shortage of
doctors for over a decade; worst in California's rural and
underserved inner-city areas where Medi-Cal and Medicare are the
primary payors for health care services. The majority of doctors in
California do not accept Medi-Cal patients. This measure is an
important step towards comprehensive health care reform, and it is
one that has no direct state cost. It will provide these
communities in need with a powerful physician recruitment tool, by
giving doctors the financial security they need to live and work in
our communities.
The ACHD (Co-Sponsor) asserts that this measure will help California's
medically underserved areas, areas with high concentration of
AB 646
Page 18
Medi-Cal patients, address an increasingly severe physician
shortage. Much of this shortage is due to the high level of
Medi-Cal and uninsured patients living in these areas, and the
rapidly declining number of private practice physicians willing to
provide care to these groups. According to ACHD, health care
districts are currently the only public health entities in the state
prohibited from direct physician employment even though physician
employment is a well-established practice at the state and county
level in California. As argued by ACHD, direct physician employment
is legal in most states and has long had the approval of the
American Medical Association. "It is time to lift the ban on
physician employment for California's Health Care Districts and in
California's medically underserved communities, and provide them
with an essential physician recruitment and retention tool."
The MBC supports the concept of this bill. MBC supports the concept
of expanding access to care in rural and underserved areas and
believes extending the current pilot project is an effective way to
accomplish that goal. However, MBC is concerned that there are
currently two other similar pieces of proposed legislation with the
same purpose. Each of the three bills on this topic would allow
between 40 and 80 hospitals to hire physicians. Any one of these
bills would be appropriate for expansion of the pilot project, but
if more than one of these bills were to pass, they would seemingly
overlap, create an inconsistent physician employment process, and
increase the workload for staff. MBC would like to support one of
the bills going forward but cannot support more than one bill as
that would create conflicting programs and be impossible to track
and regulate, thus preventing adequate consumer protection.
The California State Association of Counties and many of the health
care districts are in support of this measure and indicate that the
significant shortage of qualified medical personnel affects all
counties large and small. For urban counties and counties that
operate hospitals, the shortage of medical personnel threatens their
ability to meet state staff ratio standards and attract physicians.
The impacts of the medical workforce shortage are also dire in rural
counties, where access to medical specialists is severely limited.
All counties and health care districts report difficulty attracting
and retaining primary care physicians. This measure offers an
opportunity for legislators to support health care district
hospitals without any cost to the state so that they may continue to
provide a critical safety net for Medi-Cal, retired and low-income
communities and to the growing number of uninsured, underinsured
patients in our communities due to the national economic crisis.
AB 646
Page 19
The California Farm Bureau Federation (CFBF) is in support of this
measure and argues that the health care services for California's
rural residents, many of whom derive their income from agricultural
production, are increasingly difficult to find. The CFBF also
points out that rural communities face an increasing shortage of
primary-care physicians and that for physicians to work in these
communities they need to be provided a stable income and to provide
their patients with timely and quality care without the burdens
associated with maintaining a medical practice. The CFBF further
indicates that California's farmer and ranchers reside mainly in
rural areas and that allowing hospitals to directly employ
physicians will improve the medical care available to their members.
The CFBF believes that this measure will help improve access to
quality health care for California' rural residents and help
maintain a strong agricultural economy by maintaining a health care
system for farmers and ranchers.
6.Arguments in Opposition. The California Medical Association (CMA)
opposes this bill and states that the prohibition on the corporate
practice of medicine is vital to ensuring physician independence and
protecting patient health. They argue that if hospitals are allowed
to directly employ and charge for physician services, quality of
care suffers due to the fact that hospitals derive income from more
tests being performed and patient beds being filled. CMA agrees
that access to physician services is essential and that, in some
areas, there are physician shortages. However, violating the
corporate bar is not the answer to solve the question of access.
CMCA has been very supportive of measures to deal with physician
supply problems, including advocating for increased slots for
medical training in California and supporting the development of
medical schools at UC Merced and Riverside. In fact, CMA has worked
extensively to establish stable funding for the Steve Thompson Loan
Repayment Program to place physicians in underserved communities.
CMA states that this measure would result in reduced access and
increased costs. Hospital employment of physicians eliminates
competition and patient choice by forcing 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 and reduces the ability
of patients to choose where they wish to receive health care.
The Central Valley Health Network , which is a non-profit membership
organization comprised of 124 federally qualified health centers, is
opposed to this measure and asserts that once health care districts
are given the authority to directly hire and bill for physician
services, it will create an environment that federally qualified
AB 646
Page 20
health centers, which provide linguistically and culturally
sensitive care, will no longer be able to compete, in regards to the
recruitment and retention of qualified physicians. "Thus the impact
of this bill could have a detrimental effect on the ability of
federally qualified health centers to meet the growing health care
demands of their patients, which consists of the Central Valley and
Inland Empire's underserved and uninsured populations."
The California Radiological Society (CRS) writes in opposition that
allowing an expansion of the ability of hospitals to employ
physicians will in any way mitigate the current recruitment and
retention problems. The difficulty in recruiting physicians in
California is more likely the result of declining reimbursement than
whether the physician is an employee or independent contractor or
member of a contracted group. Reduced reimbursement is driven by
increased market dominance by large health care service plans and
insurers, and AB 646 would allow hospitals to directly hire and bill
for physician services making other physicians in the area no longer
able to compete, according to CRS.
The California Primary Care Association (CPCA) has an "oppose unless
amended" position on this measure. CPCA is concerned over the
possible impact of this bill could have on California's clinic
safety-net and believes this bill could severely limit the ability
of rural Community Clinics and Health Centers (CCHCs) to recruit and
hire physicians, largely because they cannot offer as competitive a
salary and benefits package as hospitals and their affiliates.
Currently CCHCs are exempt from the Corporate Practice of Medicine
Act, which mitigates the economic disadvantage by allowing the CCHC
to bear the administrative burden involved with billing and
liability on behalf of the physician. Currently, physicians
contracting with hospitals manage the administrative elements on
their own. If this bill passes, argues CPCA, it would disrupt a
level playing field thereby making it nearly impossible for CCHCs to
recruit and retain physicians. CPCA indicates that they have
provided amendments to the Author which addresses their concerns.
Staff notes that recent amendments to this measure may address the
concern of CPCA since it does not allow the health districts to
recruit or employ a physician and surgeon who is currently employed
by a federally qualified health center, rural health center or
community clinic.
7.Policy Issue : Should the Medical Board be involved in making
determinations about the unmet medical needs of communities or the
need for primary or specialty physicians and surgeons in these
areas? MBC is primarily a licensing agency and enforcement agency
AB 646
Page 21
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. 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 OSHPD. The Committee may want to give serious
consideration to directing the Authors of AB 646 (Swanson), AB 648
(Chesbro) and SB 726 (Ashburn) to contact the Healthcare Workforce
Policy Commission under OSHPD to determine whether this would be a
more appropriate agency and governing body to make such
determinations.
NOTE : Double-referral to Health Committee (second.)
SUPPORT AND OPPOSITION:
Support:
American Federation of State, County and Municipal Employees, AFL-CIO
(Co-Sponsor)
Association of California Healthcare Districts (Co-Sponsor)
American Association of Retired Persons (AARP)
Antelope Valley Hospital
Bay Area Air Quality Management District
Beta Healthcare Group
California Commission on Aging
California Society of Dermatology and Dermatologic Surgery
California Farm Bureau Federation
California Labor Federation
California Senior Legislature
California State Association of Counties
Camarillo Health Care District
City of Delano
City of Reedley
Coalinga Regional Medical Center
Congress of California Seniors
Dolores Huerta Foundation
Fallbrook Healthcare District
Gray Panthers
Healdsburg Health Care District
Hi-Desert Medical Center
Jericho
Kaweah Delta Health Care District
Mammoth Hospital
Marin Healthcare District
AB 646
Page 22
Medical Board of California
Mendocino Coast District Hospital
Oak Valley Hospital
Pacific Health Alliance
Palm Drive Health Care District
Pasadena Public Health Department
Petaluma Health Care District
Pioneers Memorial Health Care District
Regional Council of Rural Counties
Salinas Valley Memorial Healthcare System
San Bernardino Mountains Community Hospital District
Sequoia Healthcare District
Service Employees International Union (SEIU)
Sierra Kings Health Care District
Soledad Community Health Care District
Sonoma Valley Hospital
4 Individuals
Oppose Unless Amended: California Primary Care Association
Opposition:
American College of Emergency Physicians
Association of California Neurologists
California Academy of Eye Physicians and Surgeons
California Chapter of the American College of Cardiology
California Medical Association
California Radiological Society
California Society of Anesthesiologists
California Society of Dermatology and Dermatologic Surgery (CalDerm)
California Society of Pathologists
California Society of Plastic Surgeons
California Society of Physical Medicine and Rehabilitation
Central Valley Health Network
CEP America Emergency Physician Partners
Children's Specialty Care Coalition
Clinica Sierra Vista
Darrin M. Camarena Health Centers, Inc
Family HealthCare Network
Los Angeles County Medical Association
National Health Services, Inc.
San Bernardino County Medical Society
1 individual
Consultant:Bill Gage