BILL ANALYSIS
AB 2292
Page 1
Date of Hearing: March 23, 2010
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
AB 2292 (Bonnie Lowenthal) - As Introduced: February 18, 2010
SUBJECT : Pharmacy: clinics.
SUMMARY : Permits the Board of Pharmacy (Board) to grant a
limited license to a clinic that is certified as an ambulatory
surgical center (ASC) for participation in the Medicare program
or accredited as an outpatient setting to allow them to purchase
drugs at wholesale for administration or dispensing to clinic
patients for pain and nausea under the direction of a physician.
Allows the Board to conduct inspections of these clinics at any
time in order to determine whether a clinic is operating in
compliance with the law.
EXISTING LAW :
1)Defines a surgical clinic as a clinic that is not part of a
hospital, and that provides ambulatory surgical care for
patients who remain less than 24 hours. Existing law requires
surgical clinics to be licensed and certified by the
Department of Public Health (DPH).
2)Defines an outpatient setting as any facility, clinic, office,
or other setting that is not part of a general acute care
hospital, where anesthesia is used in compliance with the
community standard of practice.
3)Prohibits the operation of an outpatient setting, including a
surgical clinic, unless the setting is licensed by DPH,
certified to participate in the Medicare program, as
specified, or accredited by an accreditation agency approved
by the Medical Board of California (MBC).
4)Permits a surgical clinic to purchase drugs at wholesale
prices to administer or dispense to patients registered for
care at the clinic and limits the administration or dispensing
of surgical clinic drugs to drugs that control pain and
nausea, and prohibits drugs from being dispensed in amounts
greater than that required to meet the patient's needs for 72
hours.
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5)Authorizes surgical clinics to purchase and distribute such
drugs only after being licensed to do so by the Board, as
specified, and requires surgical clinics to keep records as to
the kind and amount of drugs purchased, administered, and
dispensed, for at least three years.
6)Requires a surgical clinic that is licensed to purchase and
provide such drugs to notify the Board of any proposed changes
in ownership or beneficial interest, as specified.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, as a result of
the Capen v. Shewry (2007) 155 Cal. App. 4th 378 decision
( Capen v. Shewry) , DPH has interpreted that it no longer has
the authority to issue state licenses and renew licenses to
ASCs that are owned in whole or in part by physicians.
Current law allows the Board to issue pharmacy permits to
state licensed individuals or entities. Because
physician-owned ASCs are now deemed "unlicensed" by the state,
the authority of the Board to issue permits may be unclear.
Currently, the Board is issuing permits through the Drug
Enforcement Agency (DEA) number of the medical directors of
these clinics, but is re-evaluating its authority to do so.
This process imposes substantial demand and liability on the
medical director; and should the board cease to issue permits
at all, each physician-owned ASC would have to completely
redesign how medications are procured and distributed to
patients, with each physician having to use their individual
DEA number to order drugs for their patients.
The author states that given that patients come to ASCs for a
wide range of surgeries as well as diagnostic procedures, the
prescription products in jeopardy are a large and complex
variety of intravenous drugs used for general anesthesia,
sedation and recovery room care, as well as, emergency drugs
to manage a variety of potential medical emergencies, ranging
from cardiovascular instability and cardiac arrest, to
anaphylactic shock, pulmonary decompensation, and life
threatening reactions to general anesthesia. The potential
impact of the loss of pharmacy permits to the medical
directors of these clinics is substantial to California's
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healthcare delivery system, as most clinics and their surgeons
cannot be expected to operate their own "individual" pharmacy
and continue to provide the high quality, low cost care to
patients. As a result, many patients would not be able to
obtain surgery at these centers and would be required to
receive care at higher cost locations.
2)AMBULATORY SURGICAL CENTERS . ASCs are health care facilities
that specialize in providing surgery, pain management and
certain diagnostic (e.g., colonoscopy) services in an
outpatient setting. Since the first ASC was established in
1970, many procedures that used to be performed exclusively in
hospitals began taking place in ASCs such as knee, shoulder,
eye, spine, and other surgeries. Most ASCs are licensed,
certified by Medicare and accredited by one of the major
health care accrediting organizations. Stand-alone ASCs
rarely have a single owner and most involve at least some
physician ownership. Physician partners who perform surgeries
in the center will often own at least some part of the
facility, but ownership percentages vary considerably. Some
ASCs are entirely physician-owned and some have a development
or management company that owns a percentage of a center.
According to a 2008 article in Health Affairs, in 2003, there
were an estimated 3,800 ASCs operational nationally, with more
than 40% owned by physicians and another 40% in joint
physician-hospital or physician-corporate ventures. From 2000
to 2006, the number of ASCs grew by 55%.
3)MEDICARE CERTIFICATION . The federal Centers for Medicare and
Medicaid Services (CMS) develops Conditions of Participation
and Conditions for Coverage that are minimum standards a
health care organization must meet in order to participate in
the Medicare and Medicaid programs. Certification as a
surgical clinic is limited to any distinct entity that
operates exclusively for purposes of providing surgical
services to patients not requiring hospitalization. A
surgical clinic may be either hospital-operated or
independent. However, it must be physically and
administratively distinct from other operations of the
hospital and be able to identify its costs separately from
other hospital costs.
According to CMS, covered procedures performed in certified ASCs
are those that generally do not exceed 90 minutes in length
and do not require more than four hours recovery or
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convalescent time. The surgical clinic may not perform a
surgical procedure on a Medicare beneficiary when, before
surgery, an overnight hospital stay is anticipated.
Anticipated extended care in a non-hospital health care
setting as a result of a particular procedure is not a covered
surgical clinic procedure for Medicare beneficiaries.
4)MBC ACCREDITATION . Physicians are currently prohibited by law
from performing specified outpatient surgeries, unless they
are performed in a licensed or accredited setting. The law
also specifies that certain outpatient surgery settings are
excluded from the accreditation requirement, such as surgery
clinics certified to participate in the Medicare program and
licensed surgical clinics. Physicians presently performing
surgery under specified anesthesia levels in unlicensed
settings that are also not Medicare-certified, such as their
offices, must seek accreditation from one of the following
accreditation agencies currently approved by MBC: American
Association for Accreditation of Ambulatory Surgery Facilities
Inc.; Accreditation Association for Ambulatory Health Care;
Joint Commission on Accreditation of Healthcare Organizations;
or, the Institute of Medical Quality.
5)BOARD LICENSURE REQUIREMENT . Under existing law, the surgical
clinic, outpatient setting, or ASC is required to comply with
all applicable laws and regulations enforced by DPH and the
Board, relating to drug distribution, in order to ensure that
inventories, security procedures, training, protocol
development, recordkeeping, packaging, labeling, dispensing,
and patient consultation are carried out in a manner that is
consistent with the promotion and protection of the health and
safety of the public.
6)CAPEN V. SHEWRY . In 2007, a California appellate court ruled
that ASCs owned, in whole or in part, by physicians, would no
longer be eligible for licensure by DPH. As a result, DPH
ceased licensure activities of ASCs owned by physicians,
although it continued to perform Medicare certification for
those facilities. Prior to the Capen v. Shewry ruling, DPH
interpreted the exemption from licensure in law for
physician-owned clinics to mean that each licensed health
practitioner at the clinic had to have at least some share in
the ownership (or leasehold) and operation of the clinic. DPH
interpreted the law in this way to ensure that a practitioner
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at the clinic could not disclaim responsibility for its
operation should a problem arise. Although following Capen v.
Shewry , DPH is not renewing or granting any licenses to a
surgical clinic with any degree of physician ownership, it
continues to certify these centers for Medicare purposes.
7)PRIOR LEGISLATION :
a) AB 832 (Jones) of 2009 would have required DPH to
convene a workgroup to develop recommendations regarding
the oversight of ASCs to address issues raised in Capen v.
Shewry . Findings of Capen v. Shewry have led DPH to
conclude the department no longer has the authority to
license certain ASC. AB 832 died on Suspense in Assembly
Appropriations Committee.
b) AB 1574 (Plescia) of 2008 contained similar provisions
to those proposed in this bill and would have required the
Board to inspect outpatient settings and ASCs within 120
days of issuing a clinic license and then at least annually
there after. AB 1574 was vetoed by Governor Schwarzenegger
who stated that the bill failed to address the larger issue
concerning the Capen v. Shewry ruling.
c) AB 2122 (Plescia) of 2008 would have required surgical
clinics to meet prescribed licensing requirements and
standards, including compliance with Medicare conditions of
participation, and also contained provisions nearly
identical to those proposed in AB 1574. AB 2122 died in
Assembly Appropriations Committee.
d) AB 543 (Plescia) of 2007 also would have required
surgical clinics to meet specified operating and staffing
standards, to limit surgical procedures, as specified, and
to develop and implement policies and procedures consistent
with Medicare conditions of participation, including
interpretive guidelines. AB 543 was vetoed by Governor
Schwarzenegger who, stated that the bill did not establish
appropriate time limits for performing surgery under
general anesthesia, inappropriately restricted
administrative flexibility, and created fiscal pressure
during ongoing budget challenges.
e) AB 2308 (Plescia) of 2006 would have required the
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Department of Health Services (now DPH) to convene a
workgroup to develop licensure criteria to protect patients
receiving care in surgical clinics, and to submit workgroup
conclusions and recommendations to the appropriate policy
committees of the Legislature no later than March 1, 2007.
AB 2308 also would have revised existing law to
replace the term "licensed surgical clinic" with
"ambulatory surgical centers" or "ASCs." AB 2308 was
vetoed by Governor Schwarzenegger, who stated that the bill
did not establish clear licensing standards for surgical
clinics.
f) AB 595 (Speier), Chapter 1276, Statutes of 1994,
requires that certain outpatient settings, including
surgical clinics, to be licensed by the state, Medicare
certified, or accredited by an agency approved by the MBC.
REGISTERED SUPPORT / OPPOSITION :
Support
California Ambulatory Surgery Association
Coast Surgery Center
Folsom Surgery Center
Kings Eye Center Medical Group
North State Surgery Centers
Oasis Surgery Center
Pacific Endo Surgical Center
Peninsula Eye Surgery Center
Presidio Surgery Center
Riverside Surgery Center, Inc.
Roseville Surgery Center
Salinas Surgery Center
San Gabriel Valley Surgical Center
Santa Maria Digestive Diagnostic Center
Scripps Encinitas Surgery Center
St. Joseph's Surgery Center
Surgecenter of Palo Alto
Sutter Fairfield Surgery Center
Sylvan Surgery Center, Inc.
United Surgical Partners International
University Ambulatory Surgery Center
Opposition
AB 2292
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None on file.
Analysis Prepared by : Martin Radosevich / HEALTH / (916)
319-2097