BILL ANALYSIS
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|Hearing Date:July 6, 2009 |Bill No:AB |
| |1152 |
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SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND
ECONOMIC DEVELOPMENT
Senator Gloria Negrete McLeod, Chair
Bill No: AB 1152Author:Anderson
As Amended:May 18, 2009 Fiscal: No
SUBJECT: Professional corporations: licensed physical therapists.
SUMMARY: Adds licensed physical therapists to the list of licensed
health care professionals who under existing law could be
shareholders, officers, directors, or professional employees of a
medical corporation and podiatric medical corporation so long as the
sum of all shares owned by the licensed persons does not exceed 49% of
the total number of shares of the professional corporation, as
specified.
Existing law within the Corporations Code:
1)Establishes the Moscone-Knox Professional Corporation Act which
regulates the formation and operation of professional corporations.
Defines a professional corporation as a corporation organized under
the General corporation law, as specified, or a corporation that is
engaged in rendering professional services in a single profession.
2)Specifies in the Moscone-Knox Professional Corporation Act that
specific licensed persons may be shareholders, officers, directors
or professional employees of professional corporations so long as
the sum of all shares owned by those licensed persons does not
exceed 49% of the total number of shares of the professional
corporation and so long as the number of those licensed persons
owning shares in the professional corporation does not exceed the
number of persons licensed by the governmental agency regulating the
designated professional corporation. Provides that specified
licensed professionals may be shareholders, officers, directors of
professional employees under the following:
a) Medical corporation : licensed doctors of podiatric medicine,
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licensed psychologists, registered nurses, licensed optometrists,
licensed marriage and family therapists, licensed clinical social
workers, licensed physician assistants, licensed chiropractors,
and licensed acupuncturists, and naturopathic doctors.
b) Podiatric medical corporation : licensed physicians and
surgeons, licensed psychologists, registered nurses, licensed
psychologists, registered nurses, licensed optometrists, licensed
chiropractors, licensed acupuncturists, and naturopathic doctors.
3)Naturopathic doctor corporations : licensed physicians and surgeons,
licensed psychologists, registered nurses, licensed physician
assistants, licensed chiropractors, licensed acupuncturists,
licensed physical therapists, licensed doctors of podiatric
medicine, licensed marriage, family, and child counselors, licensed
clinical social workers, and licensed optometrists.
4)States that no professional corporation may be formed so as to cause
any violation of law, or any applicable rules and regulations,
relating to fee splitting, kickbacks, or other similar practices by
physicians and surgeons or psychologists, including, but not limited
to, Section 650 of the Business and Professions Code. Provides that
a violation of any such provision is grounds for the suspension or
revocation of the certificate of registration of the professional
corporation.
Existing law within the Business and Professions Code:
1)States that corporations and other artificial legal entities have no
professional rights, privileges or powers. 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.") Exempts medical or podiatry professional corporations
organized and practicing pursuant to the Moscone-Knox Professional
Corporations Act and requires a majority of the owners or
shareholders of the corporation to be licensed physicians and
surgeons or podiatrists, respectively.
2)States that a medical or podiatry corporation is a corporation which
is authorized to render professional services, as defined in the
Corporations Code, so long as that corporation and its shareholders,
officers, directors and employees rendering professional services
who are physicians, psychologists, registered nurses, optometrists,
podiatrists or, in the case of a medical corporation only, physician
assistants, are in compliance with the Moscone-Knox Professional
Corporation Act, as specified.
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3)Provides that the offer, delivery, receipt, or acceptance by any
person licensed under the Healing Arts Division of the Business and
Professions Code and the Chiropractic Initiative Act (including but
not limited to physicians, podiatrists, osteopaths, psychologists,
acupuncturists, optometrists, dentists, and chiropractors) of any
rebate, refund, commission, preference, patronage, dividend,
discount, or other consideration, whether monetary or otherwise, as
a compensation or inducement for referring patients, clients, or
customers to any person, irrespective of any membership, proprietary
interest or ownership in or with any person to whom these patients,
clients, or customers are referred is unlawful.
1)States that a violation of item # 2), above, is a public offense
and is punishable upon a first conviction by imprisonment in the
county jail for not more than one year, or by imprisonment in
the state prison, or by a fine not exceeding $50,000, or by both
imprisonment and a fine. Specifies that a second or subsequent
conviction is punishable by imprisonment in the state prison or
by imprisonment in the state prison and a fine of $50,000.
Existing law within the Health and Safety Code:
1)Prohibits a person, firm, partnership, association, corporation,
agent or employee thereof, from, for profit, referring or
recommending a person to a physician, hospital, health-related
facility, or dispensary for any form of medical care or
treatment of any ailment or physical condition. The imposition
of a fee or charge for any such referral or recommendation
creates a presumption that the referral or recommendation is for
profit.
2)States that a violation of item # 1), above, shall constitute a
misdemeanor and upon conviction thereof, may be punished by
imprisonment in the county jail for no longer than one year, or
a fine of not more than five thousand dollars ($5,000), or by
both such fine and imprisonment.
This bill:
1)Adds licensed physical therapists to the list of licensed health
care professionals who under existing law could be shareholders,
officers, directors, or professional employees of a medical
corporation and podiatric medical corporation so long as the sum of
all shares owned by the licensed persons does not exceed 49% of the
total number of shares of the professional corporation, as
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specified.
2)Conforms the definition of medical or podiatry corporation contained
in the Business and Professions Code to the Corporations Code, and
includes in the list of licensed professionals who could be a
shareholder, officer, director or employee of a medical or podiatry
corporation the following: chiropractors, acupuncturists,
naturopathic doctors, physical therapists, and in the case of a
medical corporation only, marriage and family therapists, or
clinical social workers.
FISCAL EFFECT: Unknown. This bill is keyed "non-fiscal" by
Legislative Counsel.
COMMENTS:
1.Purpose. According to the Author, this bill is a clean-up bill that
would add licensed physical therapists to the list of healing arts
practitioners who may be shareholders, officers, directors, or
professional employees of medical corporations or podiatric medical
corporations. According to the California Podiatric Medical
Association (CPMA), the Sponsor of this bill, counsel for the
Department of Consumer Affairs informed some members of the CPMA
that it is impermissible for a podiatric medical corporation or a
medical corporation to employ a physical therapist. CPMA states
that the rationale for this opinion is that in 2003, when the
Naturopathic Practice Act was enacted, it specifically established
the list of professionals that were naturopathic doctors were
authorized to employ, including physical therapists. The list of
professionals that a medical corporation or a podiatric corporation
can employ never included physical therapists, despite the fact that
both corporations have employed physical therapists for years.
2.Background.
a) Professional Corporations. The Moscone-Knox Professional
Corporations Act states that specified healthcare licensees may
be shareholders, officers, directors or professional employees of
medical or podiatric medical corporations, so long as the sum of
all shares owned by those licensed persons does not exceed 49% of
the total number of shares of the professional corporation and so
long as the number of those licensed persons owning shares in the
professional corporation does not exceed the number of persons
licensed by the governmental agency regulating the designated
professional corporation. Currently, the list of licensed health
care licensees that could be employed by medical or podiatric
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medical corporations excludes physical therapists. The main
reasons for the formation of professional corporations are the
tax and personal liability protections accorded by such
formations.
b) Business and Professions Code Section 650. Both Congress and
California enacted legislation to protect against unnecessary or
unreasonably costly referrals by physicians and other health
professionals to facilities in which they had a financial
interest and where the health care practitioner could profit
based on the volume of referrals made . This legislation at the
federal level and in California took the form of specific
prohibitions against referrals where certain specified financial
interests of the referring practitioner were involved.
This longstanding policy relating to the prohibitions against
receiving payments or some other form of compensation for
referring patients for health care services has been embodied in
Section 650 of the Business and Professions Code and Section 445
of the Health and Safety Code since the early 1990's. These
provisions were enacted to protect consumers from unnecessary and
excessive health care costs, referrals based on considerations
other than the best interests of the patients, deceit and fraud,
payment to a licensee where professional services have not been
rendered, and to ensure medical professionals make judgments
about rendering services uninfluenced by their own financial
interests.
". . .the evil to be proscribed by Section 650 '. . .is not
just the payment for the
referral, but also any relationship where the referral may be
induced by
considerations other than the best interests of patients. . ."
[63 Ops.Cal.Atty.Gen.89,92 (1980)]
Under the federal physician self-referral prohibition (commonly
known as the "Stark Law"), a physician is prohibited from
referring to an entity for certain "designated health services"
if he or she has an ownership interest or a compensation
arrangement with the entity. In addition, the referral recipient
is prohibited from submitting a claim or receiving payment for
services provided pursuant to a prohibited referral. Because a
"compensation arrangement" is defined as one which involves any
form of remuneration, direct and indirect, the federal law
applies to every financial relationship between an entity and a
physician, and likely to intermediaries and Internet based
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service providers who facilitate transactions between the
physician and the provider of designated health services.
"Designated health services" include outpatient prescriptions and
radiology services.
The federal law creates an absolute prohibition on referrals
regardless of intent unless the financial relationship or the
referral falls within a stated exception. Hence, failure to find
an exception to the federal law's prohibition is generally fatal
to a transaction. One of the exceptions provided under the
federal law is for personal service arrangements where
remuneration from an entity meets several specific requirements
including that the remuneration not exceed their fair market
value.
It is unclear how these prohibitions may apply to this bill, or if
the intent of Section 650 in prohibiting certain financial
relatiohships and referrals between practitioners from occurring
would be undermined by allowing physical therapists to become
part of a medical or podiatric medical corporation.
3.DCA Opinion. Prior to last year, medical and podiatric medical
corporations employed physical therapists. However, late last year,
a DCA attorney informed some members of the CPMA that the DCA
believes that it is now impermissible for a podiatric medical
corporation or a medical corporation to employ physical therapists.
According to DCA, in 2003, when
SB 907 (Burton, Chapter 485, Statutes of 2003) created the
Naturopathic Doctors Act, the list of licensed professionals that
naturopathic doctors were authorized to employ included physical
therapists. DCA argues that since the list of professionals that
medical and podiatric medical corporations can employ did not
explicitly include physical therapists, the law prohibits both
professional corporations from hiring physical therapists. This
bill allows medical and podiatric medical corporations to employ
physical therapists, and CPMA argues, prevents the termination of
the employment of physical therapists by medical and podiatric
medical corporations. Since existing law allows medical
corporations and podiatric medical corporations to employ other
licensed health care professionals including psychologists, nurses,
optometrists, chiropractors, acupuncturists, and naturopathic
doctors, it appears such professional corporations should be
permitted to employ physical therapists.
4.Prior Legislation. SB 907 (Burton, Chapter 485, Statutes of 2003)
created the Naturopathic Doctors Act, and created the naturopathic
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corporations which allowed the employment by naturopathic doctors of
licensed physicians and surgeons, psychologists, nurses, physician
assistants, chiropractors, acupuncturists, physical therapists,
doctors of podiatric medicine, marriage, family, and child
counselors, clinical social workers, and optometrists.
5.Arguments in Support. According the California Medical Association ,
and the California Orthopaedic Association , this bill provides
needed clarification to existing law. If the law is not clarified,
both argue, medical or podiatric corporations would be forced to
change into other business models in order to hire physical
therapists, or fire all of their physical therapy employees.
6.Oppose Unless Amended. The California Physical Therapy Association
(CPTA) has taken an oppose unless amended position on this bill and
requests an amendment to include a separate category for Physical
Therapy Corporations and allow such corporations to include as
shareholders, officers, directors of the professional corporation,
licensed physicians and surgeons, licensed doctors of podiatric
medicine, licensed occupational therapists, licensed speech-language
pathologists, licensed acupuncturists, licensed chiropractors,
registered nurses, social workers, psychologists, naturopathic
doctors, and dentists.
Additionally, CPTA argues that this bill allows medical corporations
to control the point of access to physical therapy services and
allows physicians to refer patients to themselves. CPTA argues that
this practice poses an inherent conflict of interest, removes choice
for the consumer and sets up an unfair competition with
physical-therapist owned clinics and could cause many physical
therapist-owned clinics to close their doors. CPTA provided the
Committee with several background materials on the effect of
increased utilization of physical therapy services. One of this
background information is a memo from the Office of the Inspector
General (OIG) of the Department of Health and Human Services which
indicated that based on a simple random sample of 70 physical
therapy line items billed by physicians and rendered in the first 6
months of 2002, the OIG found that 91% of physical therapy billed by
physicians and allowed by Medicare during the first six months of
2002 did not meet program requirements, resulting in $136 million in
improper payments.
The California Chiropractic Association has taken an oppose unless
amended position on this bill and claims that this bill is written
narrowly and only benefits medical or podiatric corporations. It is
requesting that this bill be amended so that chiropractic
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corporations are also allowed to also employ physical therapists.
7.Author's Amendments. The Author is proposing amendments to be made
in Committee to address the concerns of the California Chiropractic
Association. The amendments will include physical therapists in the
list of healthcare professionals who under existing law could be
shareholders, officers, directors, or professional employees of a
chiropractic corporation so long as the sum of all shares owned by
the licensed persons does not exceed 49% of the total number of
shares of the professional corporation, as specified.
SUPPORT AND OPPOSITION:
Support:
California Podiatric Medical Association (sponsor)
California Medical Association
California Orthopaedic Association
Opposition:
Various Physical Therapists
Oppose unless amended :
California Chiropractic Association
California Physical Therapy Association
Consultant:Rosielyn Pulmano