BILL ANALYSIS
AB 2566
Page 1
Date of Hearing: April 13, 2010
ASSEMBLY COMMITTEE ON BUSINESS, PROFESSIONS AND CONSUMER
PROTECTION
Mary Hayashi, Chair
AB 2566 (Carter) - As Introduced: February 19, 2010
SUBJECT : Practice of medicine: cosmetic surgery: employment of
physicians and surgeons.
SUMMARY : Makes it a crime for a business organization to
violate the bar against the corporate practice of medicine
(CPM), if that organization is in the business of outpatient
elective cosmetic medical procedures or treatments.
Specifically, this bill :
1)Declares it a public offense for a business organization that
offers to provide, or provides, outpatient elective cosmetic
medical procedures or treatments, that is owned or operated in
violation of CPM and that contracts with, or otherwise
employs, a physician and surgeon to facilitate its offers to
provide, or the provision of, outpatient elective cosmetic
medical procedures or treatments that may only be provided by
the holder of a valid physician's and surgeon's certificate.
2)Defines "outpatient elective cosmetic medical procedures or
treatments" to mean medical procedures or treatments that are
performed to alter or reshape normal structures of the body
solely in order to improve appearance.
3)Makes legislative findings and declarations.
EXISTING LAW :
1)States that corporations and other artificial legal entities
shall have no professional rights, privileges, or powers.
However, the Medical Board of California (MBC) may in its
discretion, after such investigation and review of such
documentary evidence as it may require, and under regulations
adopted by it, grant approval of the employment of licensees
on a salaried basis by licensed charitable institutions,
foundations, or clinics, if no charge for professional
services rendered patients is made by any such institution,
foundation, or clinic.
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2)Establishes MBC under the Department of Consumer Affairs,
which, via the Medical Practice Act (MPA), licenses physicians
and surgeons and regulates their practice.
3)Makes it unlawful to knowingly make, or cause to be made, any
false or fraudulent claim for payment of a health care
benefit, or to aid, abet, solicit, or conspire with any person
to do so, and makes a violation of this prohibition a public
offense.
4)Authorizes a unit of MBC known as "The Office of Safe
Medicine" that investigates CPM violations outside of quality
of care issues.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "The
purpose of the bill is to train needed enforcement attention,
with meaningful penalties on the all-too-common incursion into
the practice of medicine by corporate business models that
attempt to circumvent the existing bar on CPM by creating the
'appearance' of compliance with existing California law that
allows for delegation of the practice of medicine by physicians
and surgeons to mid-level practitioners. However, the
arrangements are unlawful from their inception - as either
direct physician employment by a corporation, or contracted
status as 'medical director' of a medical practice that the
physician does not own. These garden variety fraud cases are
difficult to prioritize for prosecution for either the MBC, or
for local law enforcement agencies as violations of the MPA,
owing, largely, to the rather paltry existing penalties for
entities (other than physicians which violate the bar to CPM) in
existing law."
Background . 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. The Attorney General's (AG's) office states, "In
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a professional corporation, it is not always possible to divide
the 'business' side of the corporation from the part which
renders professional services; the subject is treated as a
whole."
This bill would enhance the penalty for corporations violating
the ban on CPM to a public offense, punishable by imprisonment
for six months to five years, or by a fine not exceeding $50,000
or double the amount of the fraud, whichever is greater, or by
both that imprisonment and fine. Current law states that a
violation of the MPA is punishable as a misdemeanor and/or a
fine of up to $1,200 and imprisonment up to 180 days.
The MBC has determined that the following health care decisions
should be made by a licensed physician and surgeon. While a
physician may consult with unlicensed persons in making the
"business" or "management" decisions described, the physician
must retain the ultimate responsibility for, or approval of,
those decisions.
1)Selection, hiring, and firing (as it relates to clinical
competency or proficiency) of physicians, allied health staff
and medical assistants.
2)Setting the parameters under which the physician will enter
into contractual relationships with third-party payers.
3)Decisions regarding coding and billing procedures for patient
care services.
4)Approving of the selection of medical equipment and medical
supplies for the medical practice.
The following types of medical practice ownership and operating
structures also are prohibited:
1)Non-physicians owning or operating a business that offers
patient evaluation, diagnosis, care and/or treatment.
2)Physician(s) operating a medical practice as a limited
liability company, a limited liability partnership, or a
general corporation.
3)Management service organizations arranging for, advertising,
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or providing medical services rather than only providing
administrative staff and services for a physician's medical
practice (non-physician exercising controls over a physician's
medical practice, even where physicians own and operate the
business).
4)A physician acting as "medical director" when the physician
does not own the practice.
While this bill does not necessarily reprioritize AG
investigations into CPM violations, the goal is to elevate the
penalties so that offenders reconsider their business models.
Previous legislation . AB 252 (Carter) 2009 authorized the
revocation of a physician and surgeon's license who provides
elective cosmetic medical procedures or treatments (in violation
of the prohibition against CPM). This bill was vetoed by the
Governor, who stated, "This bill is duplicative of existing law
and unnecessary. MBC already has significant legal authority
to take action against physicians that violate the MPA."
AB 2398 (Nakanishi), 2008, authorized the revocation of the
license of a physician and surgeon who practices medicine with a
business organization that provides outpatient elective cosmetic
medical procedures or treatments, knowing that the practice is
owned or operated in violation of the prohibition against CPM,
and (2) provides that a business organization that offers to
provide cosmetic procedures that may only be provided by the
holder of a valid physician's and surgeon's certificate, in
violation of the prohibition against CPM and contracts with a
physician and surgeon to facilitate the provision of cosmetic
procedures is guilty of a violation of the prohibition against
knowingly making or causing to be made any false or fraudulent
claims for payment of a health care benefit. This bill was held
on the Senate floor.
REGISTERED SUPPORT / OPPOSITION :
Support
The American Society for Dermatologic Surgery Association
(sponsor)
American Academy of Dermatology Association
The American Academy of Facial Plastic and Reconstructive
Surgery
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American Society of Plastic Surgeons
California Academy of Physician Assistants
California Medical Association
Massachusetts Medical Society
Opposition
None on file.
Analysis Prepared by : Sarah Weaver / B.,P. & C.P. / (916)
319-3301