BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1274|
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THIRD READING
Bill No: SB 1274
Author: Wolk (D)
Amended: 4/26/12
Vote: 21
SENATE HEALTH COMMITTEE : 8-0, 4/18/12
AYES: Hernandez, Harman, Alquist, Anderson, De Le�n,
DeSaulnier, Rubio, Wolk
NO VOTE RECORDED: Blakeslee
SUBJECT : Healing arts: hospitals: employment
SOURCE : Shriners Hospital for Children
DIGEST : This bill permits a hospital that is owned and
operated by a charitable organization and offers only
pediatric subspecialty care to begin billing health
carriers for physician services rendered, notwithstanding
the prohibition in the "Corporate Practice of Medicine"
(CPM), if specified conditions are met.
ANALYSIS : Existing law:
1.Prohibits corporations and other artificial legal
entities from having professional rights, privileges or
powers in relation to the practice of medicine (CPM
prohibition), and prohibits hospitals and other entities
from employing licensed physicians and surgeons, and
podiatrists (collectively "licensees") to provide
professional services.
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2.Permits the Medical Board of California to adopt
regulations granting the approval of the employment of
licensees on a salary basis by licensed charitable
institutions, foundations, or clinics, if no charge for
professional services rendered to patients is made by any
such organization.
3.Permits through regulations, without requiring prior
approval of the Medical Board of California, any licensed
charitable institution, foundation, or clinic to employ
physicians, with no limit on the number of employed
physicians, so long as such an organization does not
require a charge for professional medical services
rendered to patients.
4.Permits further exceptions to the employment prohibition
for certain teaching hospitals, nonprofit organizations
engaged in medical research, and narcotic treatment
programs.
This bill permits a hospital that is owned and operated by
a licensed charitable organization, and that offers only
pediatric subspecialty care, to begin charging for
professional services rendered to patients by physicians
employed on a salary basis, notwithstanding the prohibition
in the CPM, if all of the following conditions are met:
The hospital does not increase the number of
salaried licensees by more than five each year;
The hospital does not expand its scope of services
beyond pediatric subspecialty care;
The hospital accepts each patient needing its scope
of services regardless of his or her ability to pay,
including whether the patient has any form of health
care coverage;
The medical staff concur by an affirmative vote
that the licensee's employment is in the best interest
of the communities served by the hospital; and
The hospital does not interfere with, control, or
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otherwise direct a physician's professional judgment
in a manner prohibited by CPM or other laws.
Background
Corporate Practice of Medicine . In 2007, the California
Research Bureau (CRB) issued a report entitled "The
Corporate Practice of Medicine Doctrine" describing CPM,
its evolution and current status in California and other
states, and implications for California.
According to CRB, the involvement of corporations in
medical practice gained attention in the early part of the
20th century, when mining companies needed to hire
physicians to provide care for employees in remote areas.
Problems arose when physicians' loyalties to their
employers conflicted with patients' medical needs. With
the aid of state legislatures and the courts, physicians
seeking to promote and protect their profession and
autonomy succeeded in prohibiting the CPM. In many states,
however, the CPM prohibition was not explicitly codified in
statutes. Instead, the application of the doctrine
developed over time through interpretations of medical
licensing statutes and other laws, and in courts as a
matter of public policy. The policy concerns cited were
the incongruity of a profit motive in medicine, division of
physician loyalty between employer and patient, and lay
control over physicians.
CRB states that by the 1950s, hospitals had come to depend
increasingly on physicians, thus raising the question of
hospital employment of physicians. The CPM prohibition was
applied to for-profit and nonprofit hospitals as corporate
entities, resulting in bans on hospital employment of
physicians, albeit unevenly, across the nation. CRB adds
that most states, including California, allow an exemption
for professional medical corporations to employ physicians,
and some no longer enforce the CPM doctrine at all.
California also allows physician employment by teaching
hospitals, certain community clinics, narcotic treatment
programs, and some nonprofit organizations. Yet in other
respects, California maintains the prohibition more
rigorously than most states and is one of only a few which
still prohibits most hospital employment of physicians.
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FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 4/26/12)
Shriners Hospital for Children (source)
ARGUMENTS IN SUPPORT : This bill is sponsored by Shriners
to create a narrow exemption to California's CPM
prohibition that would only apply to Shiners and that will
ensure that Shriners will continue to serve as many
children as possible with highly specialized medical care
needs regardless of the ability of a patient or family to
pay for those services. Shriners states that it is seeking
this exemption because its Endowment Fund, which has
supported all pediatric services provided by Shriners since
1923, experienced a very significant decrease in value in
the fiscal year 2008-09 economic downturn. While it has
continued to serve children and their families through
deficit spending, Shriners states that this is an
unsustainable model, and this bill will allow Shriners to
recoup some of its costs from third party payors.
CTW:nl 4/26/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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