BILL ANALYSIS �
SB 1274
Page 1
Date of Hearing: July 3, 2012
ASSEMBLY COMMITTEE ON HEALTH
William W. Monning, Chair
SB 1274 (Wolk) - As Amended: April 26, 2012
SENATE VOTE : 36-0
SUBJECT : Healing arts: hospitals: employment.
SUMMARY : 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.
Specifically, this bill :
1)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 CPM, if the following
conditions are met:
a) The hospital does not increase the number of salaried
licensees by more than five licensees each year;
b) The hospital does not expand its scope of services
beyond pediatric subspecialty care;
c) 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;
d) 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,
e) The hospital does not interfere with, control, or
otherwise direct a physician and surgeon's professional
judgment in a manner prohibited by existing law.
EXISTING LAW :
1)Prohibits corporations and other artificial legal entities
from having any professional rights, privileges, or powers
(known as the "prohibition against CPM,") and further provides
that the Division of Licensing of the Medical Board of
California (MBC) may, pursuant to regulations, grant approval
for the employment of physicians on a salaried basis by a
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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, including:
a) Clinics operated primarily for the purpose of medical
education by a public or private nonprofit university
medical school, to charge for professional services
rendered to teaching patients by licensed physicians who
hold academic appointments on the faculty of the
university, if the charges are approved by the physician in
whose name the charges are made;
b) Certain nonprofit clinics organized and operated
exclusively for scientific and charitable purposes, that
have been conducting research since before 1982, and that
meet other specified requirements, to employ physicians and
charge for professional services. Prohibits, however,
these clinics from interfering with, controlling, or
otherwise directing a physician's professional judgment in
a manner prohibited by the CPM prohibition or any other
provision of law;
c) A narcotic treatment program regulated by the Department
of Alcohol and Drug Programs to employ physicians and
charge for professional services rendered by those
physicians. Prohibits, however, the narcotic clinic from
interfering with, controlling, or otherwise directing a
physician's professional judgment in a manner that is
prohibited by the CPM prohibition or any other provision of
law;
d) Under the Knox-Keene Health Care Service Plan Act of
1975, authorizes licensed health care service plans to
employ or contract with health care professionals,
including physicians, to deliver professional services, and
requires health plans to demonstrate that medical decisions
are rendered by qualified medical providers unhindered by
fiscal and administrative management. Provides in
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regulation that the organization of a health plan must
include separation of medical services from fiscal and
administrative management; and,
e) In the Medi-Cal program, permits hospitals that submit
claims for hospital inpatient psychiatric services under
contract with Medi-Cal managed care plans to receive
reimbursement on a per diem basis for an array of services,
including a mental health professional's daily visit fee.
4)Authorized until January 1, 2011, a pilot project to allow
qualified district hospitals, as defined, to employ a
physician, if the hospital did not interfere with, control, or
otherwise direct the professional judgment of the physician.
To qualify for the project, a district hospital must have:
been in a county with population of 750,000 or less; have
reported net losses in 2000-01; and, have had at least 50% of
combined patient days from Medicare, Medi-Cal, and uninsured
patients.
FISCAL EFFECT : None
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill has
been carefully crafted to apply exclusively to the two
Shriners Hospitals for Children (Shriners) in California, the
only pediatric subspecialty care hospitals in California that
employ their own physicians. Shriners serves more than 34,000
children in California annually and is located in Los Angeles
and Sacramento. The author maintains that Shriners, under its
current CPM exemption, is not currently able to bill for
physician services even though they directly employ their
physicians. According to the author, the Shriners Endowment
Fund has fully supported the operations of the Shriners
hospitals since its inception, but due to the economic
downturn and decline in funding support, the hospitals are
struggling to serve all of the children and their families
that need the specialized medical services Shriners offers.
The author argues that this bill will allow Shriners to recoup
some of their costs by billing insurers for their services
rendered to patients with insurance coverage and will enable
them to continue delivering specialty services to children and
their families.
2)CPM . The CPM prohibition is also sometimes referred to as the
CPM doctrine, ban, or bar. According to a 1991 report by the
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United States Department of Health and Human Services Office
of Inspector General (OIG) entitled "State Prohibitions on
Hospital Employment of Physicians," state laws prohibiting
hospitals and other non-medical corporations from employing
physicians derive from laws requiring that individuals must be
licensed to practice medicine. In some states, including
California, judicial decisions dating back to the 1930's have
interpreted these laws to preclude hospitals, with some
exceptions, from employing physicians for the purpose of
practicing medicine. According to OIG, the rationale for the
prohibition on employment of physicians is based on the
potential for conflict between a physician's loyalty to the
patient and the financial interests of the corporation that
would employ the physician. OIG also reported that opponents
of the CPM bar contend that it is a vestige of an earlier era
and that in the current health care system hospitals need
authority to control all aspects of health care delivery and
personnel within their walls, including medical care.
According to OIG, only five states: California; Colorado;
Iowa; Ohio; and, Texas clearly prohibit hospitals from
employing physicians and even in these states, as in
California, certain types of hospitals and providers are
exempt from the CPM bar. In practice, states with CPM bars,
including California, permit professional service or medical
corporations to practice medicine, but only if controlled by
physicians.
According to MBC, current California law generally prohibits
corporations or other entities that are not controlled by
physicians from practicing medicine, to ensure that lay
persons are not controlling or influencing the professional
judgment and practice of medicine by physicians.
According to a 2007 California Research Bureau report regarding
the CPM doctrine, California's CPM bar is the result of
statute, judicial decisions, and Attorney General (AG)
opinions over several decades. For example, the statute
exempts from the CPM bar the clinics of teaching hospitals and
California courts subsequently held that the CPM bar does not
apply to state university medical schools and hospitals,
specifically including hospitals operated by the University of
California, and that counties are generally exempt from the
CPM bar. A 1975 AG opinion (58 Ops.Cal.Atty.Gen. 291) found
that licensed community clinics may lawfully employ
physicians, including those community clinics which are a
subsidiary of a parent hospital organization, if specific
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conditions are met. In 1996, the California Court of Appeals
held that hospital districts may not have physician employees.
3)SHRINERS . Shriners Hospitals for Children is a health care
system comprised of 22 hospitals that provide pediatric
specialty care, research, and teaching programs for medical
professionals. Children up to age 18 with orthopaedic
conditions, burns, spinal cord injuries, and cleft lip and
palate are eligible for care and receive all services in a
family centered environment, regardless of the patients'
ability to pay. This year, Shriners celebrates 90 years of
giving help and hope to nearly one million children. Shriners
Hospitals for Children is a 501(c)(3) nonprofit organization
and primarily relies on the generosity of donors.
4)SUPPORT . Shriners, the sponsors of this bill, writes in
support that this bill narrowly expands the CPM exemption to
allow Shriners to recoup some of the patient care costs so
that it does not have to limit the services it provides. This
change, according to Shriners will allow the hospitals to
continue to focus their mission of serving as many children as
possible with highly specialized medical care needs.
5)RELATED LEGISLATION .
a) AB 1360 (Swanson) of 2011 would have permitted, until
December 31, 2022, a health care district to employ
physicians and surgeons and charge for their professional
services. AB 1360 failed passage in the Assembly Health
Committee.
b) AB 824 (Chesbro) of 2011 would have established, until
January 1, 2022, a pilot project authorizing specified
rural hospitals to employ up to 10 physicians and surgeons
at one time. AB 824 was held by the author is the Assembly
Health Committee.
c) AB 926 (Hayashi) of 2011 would have established, until
January 1, 2022, a pilot project to provide for direct
employment of a total of 50 physicians and surgeons by
qualified district hospitals in rural and other Medically
Underserved Areas. AB 926 was held in the Assembly
Business, Professions and Consumer Protection Committee.
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6)PREVIOUS LEGISLATION .
a) SB 726 (Ashburn) of 2009 would have revised and expanded
an existing pilot project which authorized a qualified
health care district to directly employ a limited number of
physicians and instead allowed for qualified health care
districts and rural hospitals that meet certain
requirements to employ up to two physicians and surgeons
within each district or rural hospital and to hire three
additional physicians and surgeons if they could have shown
a clear need in the community to the MBC. SB 726 failed
passage in the Senate Business, Professions and Economic
Development Committee.
b) AB 646 (Swanson) of 2009 would have expanded and
extended an existing pilot program to allow health care
districts to employ a specified number of physicians and
charge for their professional services subject to specified
conditions, including that the service area of the district
include an underserved area. AB 646 failed passage in the
Senate Business, Professions and Economic Development
Committee.
c) AB 648 (Chesbro) of 2009 would have established a
demonstration project to permit rural hospitals, as
defined, whose service areas include a medically
underserved or federally designated shortage area and which
meet certain specified requirements, to directly employ
physicians. AB 648 failed passage in the Senate Business,
Professions and Economic Development Committee.
d) SB 1640 (Ashburn) of 2008 would have revised and recast
existing law establishing a pilot project that permits a
hospital that is owned and operated by a health care
district to employ physicians and would have authorized a
qualified hospital that meets specified requirements to
employ an unlimited number of physicians and charge for
professional services rendered by those physicians. SB 1640
failed passage in the Senate Business, Professions and
Economic Development Committee.
e) SB 1294 (Ducheny) of 2008 would have revised and
extended a pilot project administered by the MBC that
allows specified hospitals owned and operated by local
health care districts to employ physicians and charge for
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professional services rendered by those medical
professionals. SB 1294 failed passage in the Senate
Appropriations Committee.
f) AB 1944 (Swanson) of 2008 would have authorized health
care district hospitals to directly hire and employ
physicians, eliminated a pilot program that established
standards and qualifications for health care district
hospitals to employ physicians, and eliminated limitations
on the total number of participating physicians, in
individual district hospitals, and statewide. SB 1944
failed passage in the Senate Health Committee.
g) SB 376 (Chesbro), Chapter 411, Statutes of 2003,
authorizes a hospital owned and operated by a health care
district meeting specified criteria to employ a physician,
and to charge for professional services rendered by the
physician, if the physician approves the charges.
7)DOUBLE REFERRAL . This bill was previously heard in Assembly
Business, Professions and Consumer Protection Committee, and
was approved on a 9-0 vote.
REGISTERED SUPPORT / OPPOSITION :
Support
Shriners Hospitals for Children
Medical Board of California
Opposition
None on file.
Analysis Prepared by : Tanya Robinson-Taylor / HEALTH / (916)
319-2097