BILL ANALYSIS
AB 648
Page 1
Date of Hearing: April 21, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
AB 648 (Chesbro) - As Amended: April 15, 2009
SUBJECT : Rural hospitals: physician services.
SUMMARY : Establishes a pilot project to permit certain rural
hospitals to directly employ physicians and surgeons.
Specifically, this bill :
1)Establishes the Rural Hospital Physician and Surgeon Services
Demonstration Project, which permits a rural hospital to
employ one or more physicians and surgeons, not to exceed 10
physicians and surgeons at one time, as specified, to provide
medical services.
2)Permits the rural hospital to retain all or part of the income
generated by the physician and surgeon for medical services
billed and collected by the rural hospital, if the physician
and surgeon approves the charges.
3)States that the total number of licensees employed by the
rural hospital at one time shall not exceed 10, unless the
employment of additional physicians and surgeons is deemed
appropriate by the Medical Board of California (MBC) on a
case-by-case basis.
4)Requires a rural hospital employing a physician and surgeon
pursuant to 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.
5)Requires each physician and surgeon employed by a rural
hospital to sign a statement biennially indicating that the
physician and surgeon:
a) Voluntarily desires to be employed by the hospital;
b) Will exercise independent medical judgment in all
matters relating to the provision of medical care to his or
her patients;
c) Will report immediately to the MBC any action or event
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that the physician and surgeon reasonably and in good faith
believes constitutes a compromise of his or her independent
medical judgment in providing care to patients in a rural
hospital or other health care facility owned or operated by
the rural hospital.
6)Requires a rural hospital to retain the signed statement for
at least three years and submit a copy of the signed statement
to the MBC within 10 working days after the statement is
signed.
7)Prohibits a rural hospital from interfering with, controlling,
or directing a physician's and surgeon's exercise of his or
her independent medical judgment in providing medical care to
patients. If the MBC believes that a rural hospital has
violated this prohibition, the MBC shall refer the matter to
the State Department of Public Health, which shall investigate
the matter, as specified.
8)States that nothing in this chapter shall exempt a rural
hospital from a reporting requirement or affect the authority
of the board to take action against a physician's and
surgeon's license.
9)Requires the MBC to deliver a report to the Legislature
regarding the demonstration project no later than January 1,
2019. The report shall include an evaluation of the
effectiveness of the demonstration project in improving access
to health care in rural and medically underserved areas and
the demonstration project's impact on consumer protection as
it relates to intrusions into the practice of medicine.
10)Sunsets the project on January 1, 2020.
11)Makes Legislative findings and declarations.
12)Defines a "rural hospital" as:
a) A general acute care hospital located in an area
designated as nonurban by the United States Census Bureau;
b) A general acute care hospital located in a rural-urban
commuting area code of 4 or greater as designated by the
United States Department of Agriculture; or
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c) A rural general acute care hospital, as defined in
Health and Safety Code 1250(a).
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
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)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.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Due to
an overall shortage of physicians, many California hospitals
face significant obstacles attracting and retaining physicians.
This situation is especially difficult in California's rural
areas and this shortage limits access to health care for
Californians in these communities. AB 646 improves access to
health care in California's rural communities through
legislation allowing rural hospitals to directly employ
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physicians and bill for their professional services."
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.
There are 66 rural hospitals in California as defined by AB 648.
The sponsors of this bill indicate that rural hospitals have a
particularly difficult time attracting physicians, especially
primary care practitioners, and would benefit from the ability
to hire them directly as employees. There are varied reasons
for the dearth of qualified individuals, but often the problem
is that rural communities have a higher Medicare/Medicaid payer
mix, and the resulting lower reimbursement rates make it
difficult for physicians to maintain a practice.
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 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
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analysis of an expanded pilot, the Board
contends that the statutes governing the corporate practice of
medicine should not be amended
as a solution to solve the problem of access to healthcare."
This bill proposes a new pilot for rural hospitals that would
include a greater number of participating facilities and
physicians, for a greater length of time, which should enable
the MBC to do a more thorough analysis of the direct employment
of physicians.
Arguments in support . According to the sponsors, the California
Hospital Association, "AB 648 would allow physicians who are
willing to live and work in rural areas to focus on providing
their patients with timely, quality medical care without the
overwhelming burden of administrative, financial, and
operational concerns associated with maintaining a medical
practice."
Arguments in opposition . The California Radiological Society
writes, "We believe that the bar on the corporate practice of
medicine and the ability of hospitals to employ physicians is an
important public policy provision to ensure physician
independence and the ability to practice in the patient's best
interests. The difficulty in recruiting physicians in
California is more likely result of declining reimbursement than
whether the physician is an employee or independent contractor
or member of a contracted group."
Related legislation . AB 646 (Swanson) of 2009 would permit
health care districts and certain public hospitals, independent
community nonprofit hospitals, and clinics, 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
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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
California Hospital Association (sponsor)
Fairchild Medical Center
Kindred Hospital
Mammoth Hospital
Mercy Medical Center Redding
Mountain Communities Healthcare District
Mountains Community Hospital
Regional Council of Rural Counties
St. Elizabeth Community Hospital
Sutter Amador Hospital
Victor Valley Community Hospital
One individual
Opposition
California Radiological Society
One individual
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301