BILL ANALYSIS                                                                                                                                                                                                    Ó

          |SENATE RULES COMMITTEE            |                        AB 684|
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                                   THIRD READING 

          Bill No:  AB 684
          Author:   Alejo (D) and Bonilla (D)
          AmendedAmended:9/4/15 in Senate
          Vote:     21  


           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  


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          optometrists to leasing arrangements.    

          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  


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             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  

             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  


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             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. 


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          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  

          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  


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             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,  

          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. 

          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  


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          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.   


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          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  

          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
          FirstSight Vision Services, Inc.
          National Association of Optometrists and Opticians
          National Vision, Inc.
          Wal-Mart Stores, Inc.

          OPPOSITION:   (Verified9/10/15)


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          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,  


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                                                                    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

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