BILL ANALYSIS Ó ----------------------------------------------------------------- |SENATE RULES COMMITTEE | AB 684| |Office of Senate Floor Analyses | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ----------------------------------------------------------------- THIRD READING Bill No: AB 684 Author: Alejo (D) and Bonilla (D) AmendedAmended:9/4/15 in Senate Vote: 21 PRIOR SENATE VOTES NOT RELEVANT SENATE APPROPRIATIONS COMMITTEE: 5-0, 8/27/15 AYES: Lara, Beall, Hill, Leyva, Mendoza NO VOTE RECORDED: Bates, Nielsen SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 8-0, 9/10/15 (pursuant to Senate Rule 29.10) AYES: Hill, Bates, Block, Galgiani, Hernandez, Jackson, Mendoza, Wieckowski NO VOTE RECORDED: Berryhill ASSEMBLY FLOOR: Not relevant SUBJECT: State Board of Optometry: optometrists: nonresident contact lens sellers: registered dispensing opticians SOURCE: Author DIGEST: This bill authorizes the establishment of landlord-tenant relationships between a registered dispensing optician (RDO), optometrist and an optical company as specified; transfers the regulation of RDOs from the Medical Board of California (MBC) to the California State Board of Optometry (CBO); replaces an optometrist with a RDO on the CBO; establishes a RDO advisory committee; and establishes a three-year period for the transition of direct employment of AB 684 Page 2 optometrists to leasing arrangements. ANALYSIS: Existing law: 1) Prohibits optometrists from having any membership, proprietary interest, co-ownership, landlord-tenant relationship or any profit-sharing arrangement in any form, directly or indirectly, either by stock ownership, interlocking directors, trusteeship, mortgage, trust deed or otherwise with those who manufacture, sell, or distribute lenses, frames, optical supplies, optometric appliances or devices or kindred products to physicians and surgeons, optometrists, or dispensing opticians. (Business and Professions Code (BPC) § 655) 2) Prohibits optometrists and RDOs from having any membership, proprietary interest, co-ownership, landlord-tenant relationship or any profit-sharing agreement with each other. (BPC § 655) This bill: 1) Prohibits an optometrist from having any membership, proprietary interest, co-ownership, or any profit-sharing arrangement, either by stock ownership, interlocking directors, trusteeship, mortgage, or trust deed, with any RDO or any optical company, except as specified. 2) Permits a RDO or optical company to operate, own, or have an ownership interest in a health plan so long as the health plan does not directly employ optometrists to provide optometric services directly to enrollees of the health plan, and permits a RDO or optical company to provide, direct or indirectly, products and services to the health plan or its contracted providers, enrollees, or to other optometrists. 3) Permits, for purposes of this bill, an optometrist to be employed by a health plan as a clinical director or to perform services related to utilization management, quality assurance, or other similar related services that do not require the optometrist to directly provide health care services to enrollees. Prohibits an optometrist serving as a AB 684 Page 3 clinical director from employing optometrists to provide health care services to enrollees of the health plan. 4) Prohibits the RDO or optical company from interfering with the professional judgment of the optometrist. 5) Permits an optometrist, a RDO, an optical company, or a health plan to enter into a direct or indirect landlord-tenant relationship with an optometrist under specified conditions, including: a) The practice shall be owned by the optometrist and in every phase be under the optometrist's exclusive control, as specified; b) The optometrist's records shall be the sole property of the optometrist. Only the optometrist and those persons with written authorization from the optometrist shall have access to the patient records and the examination room, except as otherwise provided by law; c) The optometrist's leased space shall be definite and distinct from space occupied by other occupants of the premises, have a sign designating that the leased space is occupied by an independent optometrist and be accessible to the optometrist after hours or in the case of an emergency, subject to the facility's general accessibility. This shall not require a separate entrance to the optometrist's leased space; d) All signs and displays shall be separate and distinct from that of the other occupants and shall have the optometrist's name and the word "optometrist" prominently displayed; e) Except as otherwise permitted by this bill, the RDO or optical company shall not link its advertising with the optometrist's name, practice, or fees. However, a health plan may advertise its products and associated premium costs and any copayments, coinsurance, deductibles, or other forms of cost-sharing, and the names and locations of the health plan's providers, including any optometrists or RDOs that provide professional services, in compliance with the Knox-Keene Health Care Service Plan Act of 1975 AB 684 Page 4 (Knox-Keene); f) The optometrist shall not be precluded from collecting fees for services that are not included in a health plan's products and services, subject to any patient disclosure requirements contained in the health plan's provider agreement with the optometrist or that are not otherwise prohibited by the Knox-Keene; g) The term of the lease shall be no less than one year and shall not require the optometrist to contract exclusively with a health plan; and, h) The lease, rent terms, or payments shall not be based on the number of eye exams performed, prescriptions written, patient referrals, or the sale or promotion of the products of a RDO or an optical company. 1) Permits the landlord to terminate the lease for specified reasons, including the following: a) The optometrist's failure to maintain a license to practice optometry or the imposition of restrictions, suspension, or revocation of the optometrist's license, or if the optometrist or the optometrist's employee is or becomes ineligible to participate in state or federal government-funded programs; b) Termination of any underlying lease where the optometrist has subleased space, or the optometrist's failure to comply with the underlying lease provisions that are made applicable to the optometrist; c) If the health plan is the landlord, the termination of the provider agreement between the health plan and the optometrist, in accordance with the Knox-Keene; and, d) Other reasons pursuant to the terms of the lease or permitted under the Civil Code. 1) Authorizes the CBO to inspect, upon request, an individual lease agreement and requires the landlord or tenant, as applicable, to promptly comply with the request. AB 684 Page 5 2) Declares any financial information contained in the lease submitted to a regulatory entity to be considered confidential trade secret information and is exempt from disclosure under the California Public Records Act. 3) Permits a lease to include commercially reasonable terms, including those that: a) Require the provision of optometric services at the leased space during certain days and hours; and, b) Restrict the leased space from being used for the sale or offer for sale of spectacles, frames, lenses, contact lenses, or other ophthalmic products, except that the optometrist shall be permitted to sell therapeutic ophthalmic products if the RDO, health plan, or optical company located on or adjacent to the optometrist's leased space does not offer any substantially similar therapeutic ophthalmic products for sale. 4) States that any violation of this bill constitutes a misdemeanor. 5) Transfers the regulation of RDOs from the MBC to the CBO. 6) Authorizes the CBO to inspect any premises at which the business of a RDO is co-located with the practice of an optometrist. Requires the CBO to provide a copy of its inspection results, if applicable, to the Department of Managed Health Care. 7) Prohibits any individual, corporation, or firm operating as a RDO before January 1, 2016, or an employee of such an entity, from being subject to any action for engaging in conduct prohibited by specified current laws as they exist prior to this bill's enactment until January 1, 2019, except that a RDO shall be subject to discipline for duplicating or changing lenses without a prescription or order. 8) States that nothing in this bill shall be construed to imply or suggest that an RDO is in violation of or in compliance with the law. 9) States that the exemption shall not apply to any business AB 684 Page 6 relationships prohibited by current law commencing registration or operations on or after January 1, 2016. 10)Permits an individual, corporation, or firm operating as a RDO engaging in a business relationship with an optometrist at locations registered with the MBC before January 1, 2016 to continue to do so until January 1, 2019. 11)States that the three-year safe harbor period does not apply to any administrative action or litigation pending, cause for discipline, or cause of action accruing prior to September 1, 2015. 12)Requires any health plan, as specified, to report to the CBO in writing that: a) 15% of its locations no longer employ an optometrist by January 1, 2017; b) 45% of its locations no longer employ an optometrist by August 1, 2017; and, c) 100% of its locations no longer employ an optometrist by January 1, 2019. 13)Replaces one optometrist with an RDO on the CBO. 14)Establishes a RDO committee to advise and make recommendations to CBO regarding the regulation of a RDO. The committee shall consist of five members, two of whom shall be RDOs, two of whom shall be public members, and one of whom shall be a member of the CBO. 15)Makes other changes, as specified. Background RDOs and optometrists. This bill is a result of over a decade of litigation debating the legitimacy of current law prohibiting certain business relationships between an optometrist and a RDO. The final case, National Association of Optometrists & Opticians v. Harris, confirmed the constitutionality of California statutes. AB 684 Page 7 The plaintiffs in the case, the National Association of Optometrists and Opticians, LensCrafters, Inc., and Eye Care Centers of America, Inc., argued that the laws restricting business arrangements between opticians and optometrists violate the dormant Commerce Clause of the United States Constitution. The plaintiffs argued it was unfair that optometrists and ophthalmologists may set up a practice where patients may receive both eye examinations and prescription eyewear, but opticians may offer only the sale of eyewear, not eye examinations, and therefore are unable to offer the convenience of "one-stop shopping" in California. The Court upheld the California law as constitutional, stating that the law was not discriminatory and did not place a significant burden on interstate commerce "just because it precludes a preferred, more profitable method of operating in a retail market." While the decision placed a final affirmation on existing law, determining its impact on California's optical market was not concluded. The law did not anticipate the myriad leasing, co-locating, and employment relationships that rose during its debated legality. This bill authorizes leasing arrangements between an optometrist, RDO, and an optical company under specified terms, and establishes a three year transition period for entities not currently in compliance with the terms of this bill. Transition of RDOs from MBC to CBO. MBC began regulating individuals selling eyewear and related products in the 1930s. While it seems incongruous for the MBC to handle this population, the MBC has long been a catch-all for various license and registration types. Polysomnographic trainees, technicians, and technologists are currently regulated by the MBC, as are midwives and research psychoanalysts. Prior to getting its own board, the Physician Assistant Committee was also housed under the MBC. The MBC raised the possibility of transferring regulation of the RDO program to the CBO in its 2013 Sunset Review report. MBC indicated that many complaints it received involve optometrists and optometric assistants, in addition to RDOs, and moving the program to CBO may lead to more efficient complaint resolution. AB 684 Page 8 Stakeholder RDOs expressed concern over the combination of the professions' regulation in this bill because RDOs and optometrists may be in direct competition over the sale of eyewear and related products. However, this bill adds an RDO to the CBO, giving voice and vote to the regulated population - representation not available under the MBC -- and establishes an advisory committee with a requirement that the CBO hear its concerns. This bill directs the transfer of all funds, duties, powers, purposes, responsibilities, and records from the MBC to the CBO to regulate RDOs. FISCAL EFFECT: Appropriation: No Fiscal Com.:YesLocal: Yes According to the Senate Appropriations Committee, this bill will result in unknown additional costs for the CBO to assume licensing and enforcement responsibilities for dispensing opticians from the MBC (State Optometry Fund), offset by reduced costs to the MBC (Contingent Fund of the Medical Board of California). This bill will also result in unknown additional enforcement costs for the CBO to enforce licensing requirements on dispensing opticians and optometrists that enter into lease agreements (State Optometry Fund). SUPPORT: (Verified9/10/15) California Optometric Association Consumer Attorneys of California EYEXAM FirstSight Vision Services, Inc. LensCrafters National Association of Optometrists and Opticians National Vision, Inc. Wal-Mart Stores, Inc. OPPOSITION: (Verified9/10/15) AB 684 Page 9 California State Board of Optometry ARGUMENTS IN SUPPORT: The California Optometric Association writes, "Recent litigation prompted by issues of consumer safety created uncertainty. AB 684 solves that by allowing optometrists to lease space from an optician, optical company or health plan and includes sufficient protections to ensure the doctors who work in these settings can practice independently. Most importantly, it consolidates enforcement under one regulatory entity and authorizes new enforcement tools to ensure any violation of the law will be penalized." "National Vision and FirstSight have been part of a robust stakeholder process that included our industry partners, the Attorney General's office and the Governor's Office that has resulted in the language that was amended into AB 684 on September 4th, 2015. AB 684 will now ensure that the more than 2 million Californians who receive eye care at one of California's more than 600 vision care centers continue to have access to the high-quality care provided by the nearly 2,000 optometrists and support employees who work at these locations." Wal-Mart Stores, Inc., LensCrafters, and EYEXAM also express support for AB 684 and the opportunities for new business forms it will provide. ARGUMENTS IN OPPOSITION: The CBO writes, "We recognize that AB 684 now contains more than just an enforcement moratorium. However, the Board believes this late emerging solution both creates some problematic issues and leaves some key policy concerns unresolved, which cannot be addressed in the remainder of the legislative session. In order to put consumer protection first, the Board opposes this bill. While we acknowledge the substantial amount of effort that interested parties put into the current version of AB 684, the Board respectfully believes additional debate, meetings, and discussions with the Board and the Legislature is warranted." ASSEMBLY FLOOR: 76-0, 5/26/15 AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang, Chau, AB 684 Page 10 Chiu, Chu, Cooley, Cooper, Dababneh, Dahle, Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez, Gordon, Gray, Grove, Hadley, Roger Hernández, Holden, Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder, Lopez, Low, Maienschein, Mayes, McCarty, Medina, Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen, Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez, Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting, Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins NO VOTE RECORDED: Bloom, Chávez, Harper, Mathis Prepared by:Sarah Huchel / B., P. & E.D. / (916) 651-4104 9/10/15 23:08:56 **** END ****