BILL ANALYSIS
SB 726
Page 1
Date of Hearing: June 30, 2009
ASSEMBLY COMMITTEE ON BUSINESS AND PROFESSIONS
Mary Hayashi, Chair
SB 726 (Ashburn) - As Amended: May 6, 2009
SENATE VOTE : 36-3
SUBJECT : District hospitals: employment of physicians and
surgeons.
SUMMARY : Revises an existing pilot project allowing qualified
district hospitals, as specified, to directly employ physicians
and extends the sunset date for the pilot project from January
1, 2011 to January 1, 2018. Specifically, this bill :
1)Removes the 20 physician and surgeon limit on the pilot
project.
2)Deletes prior provisions of the pilot project relating to:
a) The hospital's net losses; and,
b) The percentage of care a hospital provides to Medicare,
Medi-Cal, and uninsured patients.
3)States that a "qualified district hospital" is a hospital:
a) That is operated by the district itself, and is located
within a medically underserved population or medically
underserved area, as specified, or is a small and rural
hospital, as specified;
b) Whose medical staff and elected trustees concur by an
affirmative vote of each body that the physician and
surgeon's employment is in the best interest of the
communities served by the hospital, as specified;
c) That enters into or renews a written employment contract
with a physician and surgeon prior to December 31, 2017,
for a term not greater than 10 years, as specified;
d) That notifies the Medical Board of California (MBC) in
writing that it plans to enter into a written contract with
the licensee, and the MBC confirms that the licensee's
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employment is within the maximum number permitted; and,
e) That employs no more than two physicians, unless the MBC
authorizes the hospital to hire an additional three
licensees, if both of the following requirements are met:
i) The hospital makes a showing of clear need in the
community following a public hearing duly noticed to all
interested parties, including, but not limited to, those
involved in the delivery of medical care; and,
ii) The medical staff concurs by an affirmative vote
that employment of the additional licensee or licensees
is in the best interest of the communities served by the
hospital.
4)A district hospital may employee an licensee if:
a) The chief executive officer of the hospital has provided
certification to the MBC and the medical staff that the
hospital has been unsuccessful, using commercially
reasonable efforts, as specified, in recruiting a core
physician and surgeon for at least 12 consecutive months
during the period beginning on July 1, 2008, and ending on
July 1, 2009; or,
b) A hospital may request permission from the MBC to hire a
physician and surgeon in a specialized field other than
family practice, internal medicine, general surgery, or
obstetrics and gynecology if all of the following
requirements are met:
i) The hospital can demonstrate a pervasive inability
to meet the needs of the health care district in that
specialized field;
ii) The chief medical officer of the hospital provides
the certification described above regarding the
hospital's efforts to recruit a physician and surgeon in
the specialized field during the period of time
specified; and,
iii) The other applicable requirements of this bill are
satisfied.
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5)Requires the MBC to provide a preliminary report to the
Legislature no later than July 1, 2013, and a final report no
later than July 1, 2016, evaluating the effectiveness of the
pilot project in improving access to health care in rural and
medically underserved areas and the project's impact on
consumer protection as it relates to intrusions into the
practice of medicine.
6)Repeals the provisions of this bill on January 1, 2018, unless
a later enacted statute deletes or extends that date.
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 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)Provides certain additional exceptions to the prohibition
against CPM.
4)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 a 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.
5)Permits the establishment of local health care districts to
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provide health care services and authorizes health care
districts to establish, maintain, and operate, or provide
assistance in the operation of, one or more health facilities
or health services, including, but not limited to: outpatient
programs, services, and facilities; retirement programs,
services, and facilities; chemical dependency programs,
services, and facilities; or other health care programs,
services, facilities and activities at any location within or
outside the district for the benefit of the district and the
people served by the district.
FISCAL EFFECT : Unknown
COMMENTS :
Purpose of this bill . According to the author's office, "Our
[district] hospitals have asked repeatedly for the ability to
recruit and hire physicians. Cost sharing advantages for
insurance premiums, facilities, billing, and other perks, would
provide incentives for doctors to locate in areas where they
would not normally be inclined to practice medicine. The need
for doctors in select areas of the state is a serious problem.
Artificially increasing salaries in order to encourage doctors
to serve in these regions is not a viable solution. However,
allowing hospitals in these areas to pool resources and save
money, thereby enabling them to attract doctors is a realistic
solution. It is time to look beyond special interests and
pursue the needs of Californians by passing this reasonable
legislation."
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.
California's 75 HCDs are voter-created local government entities
governed by publicly elected boards of trustees. HCDs currently
operate 46 of California's 72 public hospitals, providing health
care services to over 2 million Californians annually. HCDs are
subject to California's CPM prohibition. This bill would enable
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46 HCD hospitals and approximately 130 other public, independent
community nonprofit hospitals and clinics to hire physicians
directly.
Advocates argue that physician recruitment is essential to the
continued existence of HCDs. According to a 2007 California
Medical Association report, the average age of physicians in
rural and underserved urban communities is approaching 60, with
many of those planning to retire in the next two years.
Co-sponsors of this bill, the Association of California
Healthcare Districts reports, "In their struggle to recruit and
keep physicians, rural and underserved urban communities in
California must compete with large physician groups, Kaiser, the
state Department of Corrections, rural hospitals in almost every
other state in the nation as well as other entities that may
directly employ physicians."
Proponents of this bill argue that exempting HCDs from the CPM
ban will enable them to attract physicians by absorbing all of
the overhead and administrative duties of establishing a medical
practice, and providing a stable, competitive salary.
Opponents argue that the bar on CPM is an important public
policy provision to ensure physician independence and the
ability to practice in the patient's best interests. Some argue
that the difficulty in recruiting physicians in some parts of
California is more likely the result of declining reimbursement
than physicians' employment status. This decline in
reimbursement is driven by the increased market dominance of
large health care plans and insurers, which would in no way be
affected by this bill.
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 MBC to administer and evaluate the project
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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
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."
Related legislation . AB 648 (Chesbro) of 2009 would establish a
pilot project to permit certain rural hospitals to directly
employ physicians and surgeons, as specified. This bill is
pending in the Senate Business, Professions and Economic
Development Committee.
AB 646 (Swanson) of 2009 would permit HCDs to directly employ
physicians and surgeons, as specified. This bill is pending in
the Senate Business, Professions and Economic Development
Committee.
Prior legislation . AB 1944 (Swanson) of 2008 would allow health
care districts to employ a physician and surgeon. This bill was
held in the 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
physicians. This bill failed passage in the Assembly Business
and Professions Committee.
Double referred . This bill is double-referred to the Assembly
Health Committee.
Arguments in support . The California Commission on Aging (CCoA)
writes, "Over the past several years the CCoA has examined older
adults' access to health services in both rural and urban
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settings. Chief among barriers to access in rural communities
is the shortage of physicians, primarily due to the number of
uninsured residents and the high cost of setting up a private
medical practice. By providing a greater opportunity to
evaluate the effectiveness of hospital employment of physicians,
this bill will help to move California toward a more balanced
approach to providing care to underserved communities throughout
the state."
Arguments in opposition . The Central Valley Health Network
"fully recognizes the challenges brought about by the current
physician shortage, as our member health centers are directly
impacted by the lack of qualified physicians in the Central
Valley and Inland Empire. However, efforts such as loan payment
and scholarship programs; new medical schools; expanding
residency program slots, and creating residency programs in
underserved areas would provide a more prudent solution than
eliminating patient protections."
REGISTERED SUPPORT / OPPOSITION :
Support
California Commission on Aging
Opposition
Central Valley Health Network
California Primary Care Association
Darin M. Camarena Health Centers, Inc.
National Health Services, Inc.
Analysis Prepared by : Sarah Huchel / B. & P. / (916) 319-3301