BILL ANALYSIS
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|Hearing Date:July 6, 2009 |Bill No:AB |
| |648 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS
AND ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 648Author:Chesbro
As Amended:May 28, 2009 Fiscal: Yes
SUBJECT: Rural hospitals: physician services.
SUMMARY: Establishes a demonstration project to permit rural
hospitals, as defined, whose service area includes a medically
underserved or federally designated shortage area and which meet
certain specified requirements, to directly employ physicians and
surgeons. Provides that the total number of licensees employed shall
not exceed 10, unless the Medical Board of California (MBC) makes a
determination that additional physicians and surgeons is deemed
appropriate. Requires documentation and statements regarding the
ability of physicians and surgeons to exercise his or her independent
medical judgment in providing care to patients. Requires a report to
be completed by MBC regarding the project and submitted to the
Legislature by June 1, 2019.
NOTE : This measure is before the Committee for reconsideration.
This measure failed passage in Committee by a vote of 4-4 on June
29, 2009.
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.
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2)Exempts medical or podiatry professional corporations organized and
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.
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5)Establishes a pilot project that allows district hospitals that
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; 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.
10)Sunsets this pilot project on January 1, 2011.
11)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.
12)Establishes under federal law criteria for the designation of
Medically Underserved Areas (MUAs) and Medically 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;
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percentage of population below 100% of the federal poverty rate;
and percentage of population aged 65 or over.
This bill:
1)Makes findings and declarations that many hospitals in the state are
having great difficulty recruiting and retaining physicians and that
there is a shortage of physicians in communities across California,
particularly in rural areas, and this shortage limits access to
health care for Californians in these communities states that
allowing rural hospitals to directly employ physicians will allow
rural hospitals to provide economic security adequate for a
physician to relocate and reside in the communities service by the
rural hospitals and will help rural hospitals recruit physicians to
provide medically necessary services in these communities, it will
also provide physicians with the opportunity to focus on the
delivery of health services to patients without the burden of
administrative, financial, and operational concerns associated with
the establishment and maintenance of medical office, thereby giving
physicians a reasonable professional and personal lifestyle.
2)Defines a "rural hospital" as :
a) A general acute care hospital located in an area designated as
non-urban 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.
c) A rural general acute care hospital, as defined in Health and
Safety Code 1250(a).
3)Establishes the Rural Hospital Physician and Surgeon Services
Demonstration Project, which permits a rural hospital whose service
area includes an MUA, an MUP, or that has been federally designated
as an HPSA, to employ one or more physicians and surgeon, not to
exceed 10 physicians and surgeons at one time, as specified, to
provide medical services.
4)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 physicians and surgeon
approves the charges.
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5)Permits a rural hospital to participate in the program if:
a) The rural hospital can document that it has been unsuccessful
in recruiting one or more primary care or specialty physicians
for at least 12 continuous months beginning July 1, 2008; and,
b) The chief executive officer of the rural hospital certifies to
MBC that the inability to recruit primary care or specialty
physicians has negatively impacted patient care in the community
and that there is a critical unmet need in the community, based
on a number of factors, including, but not limited to, the number
of patients referred for care outside the community, the number
of patients who experienced delays in treatment, and the length
of the treatment delays.
6)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 MBC on a
case-by-case basis.
7)Requires a rural hospital employing a physician and surgeon pursuant
to this project tol 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.
8)Requires each physician and surgeon employed by a rural hospital to
sign a statement biennially indicating that the physicians and
surgeons:
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 this or her
patients.
c) Will report immediately to MBC any action or event 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.
9)Requires a rural hospital to retain the signed statement for at
least three years and submit a copy of the signed statement to MBC
within 10 working days after the statement is signed.
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10)Prohibits a rural hospital from interfering with, controlling, or
directing a physician's and surgeon's exercise of his or her
independent judgment in providing medical care to patients, and if
MBC believes that a rural hospital has violated this prohibition,
MBC shall refer the matter to the State Department of Public Health,
which shall investigate the matter, as specified.
11)States that nothing shall exempt a rural hospital from a reporting
requirement or affect the authority of MBC to take action against a
physician's and surgeon's license.
12)Requires MBC to 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 related to intrusions into the
practice of medicine.
13)Sunsets the demonstration project on January 1, 2020.
FISCAL EFFECT: The Assembly Appropriations Committee analysis dated
May 20, 2009, indicates that there are no direct fiscal impacts to MBC
to continue the oversight of physicians in California, the
demonstration project, the Corporate Practice of Medicine prohibitions
and exceptions, and to complete the report to the Legislature at the
end of the 10-year period.
COMMENTS:
1.Purpose. The California Hospital Association is the Sponsor of this
measure. According to the Sponsor, the supply of physicians in
California estimated from the MBC data is 17 percent lower than that
estimated from the American Medical Association (AMA) Physician
Masterfile data. Of the active physicians in California, primary
care physicians represent 20 percent fewer than the national
standard estimated from AMA data. The number of primary care
physicians practicing in California is at the bottom end of the
range of estimated needs and the supply of physicians is poorly
distributed within 42 counties, primarily in rural areas, falling
below the needed estimate. In addition to the low supply of
physicians, the Author indicates that rural counties are also facing
the additional problem of an aging physician primary care workforce,
and significant difficulty recruiting and retaining younger
physicians. This situation limits access to health care for
Californians in these rural communities.
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The Sponsor argues that California is currently only one of five
states in the nation which prohibits hospitals from directly
employing physicians. The other states are Colorado, Iowa, Ohio and
Texas. There is already an exception in California allowing
University of California and public hospitals to directly hire
physicians.
The Sponsor further states that California's rural hospitals face
significant obstacles attracting and retaining physicians. The
reasons are varied but often include the higher Medicare/Medi-Cal
payer mix in rural communities with the accompanying lower
reimbursements. Rural areas tend to have higher proportions of
low-income, uninsured and older patients. Hence, primary care
physicians and specialists cannot generate sufficient income to
sustain a rural practice. The Sponsor contends that if rural
hospitals had the ability to directly hire physicians, they could
provide the economic incentive to attract and retain these
physicians resulting in increased access to quality health care
services for millions of rural residents.
2.Background.
a) Rural Hospitals and Rural Health Care in California. The 69
state and federally designated rural hospitals in California
serve the health needs of 17% of California's residents who live
in rural areas. There are 42 out of 58 counties with rural
hospitals and hospitals vary in size with a range of 4 to 186
beds with the majority of hospitals having less than 44 beds.
They not only provide health care, but often serve as the largest
employer in the region impacting both the health care industry
and the local economy. The rural health care system in
California serves more than 800,000 patients in their emergency
rooms each year and provides almost 1 million acute and
skilled-nursing be days a year to rural communities. Rural
hospitals are greatly dependent on Medicare and Medicaid
reimbursements due to their patient demographics. Medicaid
reimbursements in California are the lowest in the United States
(25% less than the national average). Therefore rural hospitals
are not able to afford operating costs as they are not reimbursed
properly for care given. Additionally, the payer mix in rural
communities is suboptimal for the financial success of rural
hospitals. The patient bases of rural hospitals tend to be
covered by Medi-Cal, Medicare or are uninsured. They are missing
a high rate of private and employer based plans which would
normally make up for some of the losses with increases in
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Medi-Cal and uninsured patients. Due to these challenges, 6
hospitals have closed in the past 4 years and 75% of remaining
hospitals have had to reduce the range of their services.
In addition to the economic stress of inadequate reimbursement and
California's budget crisis, the state is also experiencing issues
related to physician workforce recruitment in rural areas. While
the number of physicians per 100,000 population has increased,
there is a wide geographic and demographic distribution of
physicians. Specifically, there is a maldistribution of both
specialists and primary care physicians in rural areas.
b) 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
toward hospital employment of physicians, according to MHA, is
different from the 1990's when physicians approached hospitals
about employment opportunities rather than 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
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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.
c) 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
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
texpected. 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 health
care 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
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and population size in rural communities cannot support a
specialists' 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 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 organization including the American Medical
Association, Council on Graduate Medical Education, Association
of American Medical Colleges, American 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 1 in 6 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, 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
specialities.
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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 within 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
Valley/Sierra) have the lowest amount of physicians.
d) 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.
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e) Prior Legislation. SB 1640 (Ashburn, 2008) which is
substantially 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
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.
Changes the definition of a qualified district hospital, and
revises 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 would 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 this Session. SB 726 (Ashburn) revises and
expands the current pilot project to authorize the direct employment
by qualified district hospitals, as defined, of an unlimited number
of physicians and surgeons under the pilot project, and authorizes
such hospital to employ up to 5 licensees at a time if certain
requirements are met. It also revises the definition of a qualified
hospital to mean a hospital that, among other things, is operated by
the health care district itself and is either a small and rural
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hospital, as defined, or is located within a MUA, as specified. SB
726 would further revise the pilot project to authorize a qualified
district hospital to directly employ a physician and surgeon
specializing in family practice, internal medicine, general surgery,
or obstetrics and gynecology, and would authorize the hospital to
request permission from MBC to employ a physician and surgeon
specializing in a different field if certain requirements are met.
This measure would limit the term of a contract to 10 years and
extend the pilot project until January 1, 2018. This measure passed
out of this Committee by a vote of 6 to 2, and is now in the
Assembly and has been referred to Assembly Business and Professions
Committee and the Assembly Health Committee.
AB 646 (Swanson) revises and expands the existing pilot project to
allow for health care districts, as defined, whose service area
includes a medically underserved or federally designated shortage
area and which meet certain specified requirements, to employ up to
5 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. This
measure is scheduled to be heard on June 29, 2009, in this
Committee.
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 an MUA or an MUP, or
in a federally designated HPSA to recruit primary or specialty
care physicians to employ at their facility; however, the chief
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
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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
meet an unmet need in the community based upon a number of
factors. SB 726 would allow a district hospital organized and
governed pursuant to the Local Health Care District Law that is
located within an MUP or MUA, so designated by the federal
government, or is a small or rural hospital to recruit primary or
specialty care physicians, 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. A major restriction for SB 726 is that the
hospital is limited to recruiting a "core physician" which is
defined as one specializing in family practice, internal
medicine, general surgery, or obstetrics and gynecology. The
hospital may request permission from MBC to hire a physician in a
another field of practice but only demonstrating that recruiting
efforts have failed and the hospital can show they have a
pervasive need for a physician in that specialty.
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 total number of physicians and surgeons
employed by the 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
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requirements of the hospital makes a showing of clear need and
there is concurrence of the medical staff of the hospital.
c) Increases length of employment contract 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 4 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. The California Association of Rural Health
Clinics (CARHC) is in support of this measure and indicates that
nearly half of California's rural health clinics (RHCs) are owned
and operated by rural hospitals, and many rural hospitals operate
RHCs. RHCs serve mostly low-income patients, although in some cases
they are the only primary care provider in the community. The CARHC
argues that having to make contracts with physicians and being
unable to offer them benefits like health insurance and retirement
puts hospital-based RHCs at a distinct disadvantage when it comes to
recruiting and retaining doctors. According to the CARHC, most
physicians nowadays are looking for a situation that mimics a
position with Kaiser or some other HMO; clearly defined hours,
benefits, minimal after-hours calls. The CARHC states that it is
especially hard for rural facilities to compete in this situation;
not only does the doctor need to work as an independent contractor
but our communities don't always have everything that they want for
their families (cultural events, shopping, appropriate work for
physicians' partners, etc.). The CARHC believes that creating a
pilot project to test the workability of allowing rural hospitals to
employ physicians will be a great first step in resolving the issues
that have prevented this from happening in our state so far.
The Regional Council of Rural Counties (RCRC) is also in support of
this measure and indicates that rural communities throughout
California have had tremendous difficulty recruiting and retaining
physicians, threatening the public health, medical access and the
operational stability of these facilities. Given the dominant mix
of Medi-Cal and uninsured patients, the establishment of independent
physician and surgeon practices in these rural areas is fiscally
problematic. The RCRC argues that the wiser choice is to allow our
rural hospitals to hire physicians and surgeons directly, providing
an attractive alternative to the creation of a private practice in a
sparsely populated region. The RCRC states that the enactment of
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this measure would be an excellent recruitment and retention tool
for rural hospitals, and it would further enhance the health of our
communities and strengthen the viability of these critical
facilities.
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 bard is not the answer to solve the question of access.
CMA 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 a
medical school at UC Merced. 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 , 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 where federally qualified
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 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 rural
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Community Clinics and Health Centers (CCHCs) ability 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 of
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 address their concerns.
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 an enforcement
agency 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.
8.Author's Amendments : The Author has agreed to take the following
amendments in Senate Health Committee:
a) To prohibit a rural hospital from hiring a physician employed
by a clinic
b) To add whistle blower protection for physicians who file a
complaint about a hospital interfering with their independent
medical judgment.
NOTE : Double-referral to Senate Health Committee (second).
SUPPORT AND OPPOSITION:
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Support:
California Hospital Association (Sponsor)
California Association of Rural Health Clinics
California Commission on Aging
California Healthcare West
Coalinga Regional Medical Center
Colusa Regional Medical Center
Mayers Memorial Hospital District
Mercy Medical Center Mt. Shasta
Mercy Medical Center Redding
Regional Council of Rural Counties
St. Elizabeth Community Hospital
Sutter Coast Hospital
Oppose Unless Amended:
California Primary Care Association
Opposition:
California Medical Association
Central Valley Health Network
Darin M. Camarena Health Centers
Los Angeles County Medical Association
California Radiological Society
California Society of Pathologists
National Health Services, Inc.
Consultant:Bill Gage