BILL ANALYSIS                                                                                                                                                                                                    



                                                                     AB 684


                                                                    Page  1


          (Without Reference to File)





          CONCURRENCE IN SENATE AMENDMENTS


          AB  
          684 (Alejo and Bonilla)


          As Amended  September 4, 2015


          Majority vote


           -------------------------------------------------------------------- 
          |ASSEMBLY:  |76-0  |(May 26, 2015) |SENATE: |      |(September 11,   |
          |           |      |               |        |      |2015)            |
          |           |      |               |        |      |                 |
          |           |      |               |        |      |                 |
           -------------------------------------------------------------------- 
                                               (vote not available)




          Original Committee Reference:  B. & P.


          SUMMARY:  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 optometrists to leasing  
          arrangements.    








                                                                     AB 684


                                                                    Page  2




          The Senate amendments:


          1) Define the following terms: 
              a)    "Health plan" means a health care service plan  
                licensed pursuant to the Knox-Keene;
              b)    "Optical company" means a person or entity that is  
                engaged in the manufacture, sale, or distribution to  
                physicians and surgeons, optometrists, health plans, or  
                dispensing opticians of lenses, frames, optical supplies,  
                or optometric appliances or devices or kindred products;


            c)  "Optometrist" means a licensed person or an optometric  
              corporation, as specified;
            d)  "Registered dispensing optician" means a person so  
              licensed; and,


              e)    "Therapeutic ophthalmic product" means lenses or other  
                products that provide direct treatment of eye disease or  
                visual rehabilitation for diseased eyes.
          2) Prohibit 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.
          3) Permit 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. 


          4) Permit, 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  








                                                                     AB 684


                                                                    Page  3


             require the optometrist to directly provide health care  
             services to enrollees.  Prohibits an optometrist serving as a  
             clinical director from employing optometrists to provide  
             health care services to enrollees of the health plan. 


          5) Prohibit the RDO or optical company from interfering with the  
             professional judgment of the optometrist.


          6) Require the Department of Managed Health Care (DMHC) to  
             forward consumer complaints to the CBO and requires DMHC and  
             CBO to enter into an Inter-Agency Agreement regarding  
             information sharing.  


          7) Permit 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 the following  
             conditions:


             a)   The practice shall be owned by the optometrist and in  
               every phase be under the optometrist's exclusive control,  
               including:
              i)    Selection and supervision of optometric staff;
              ii)     Scheduling patients;


              iii)    Determining the amount of time the optometrist  
                spends with patients;


              iv)     Fees charged for optometric products and services;


              v)    The examination procedures and treatment provided to  
                patients; and,


              vi)     The optometrist's contracting with managed care  
                organizations.








                                                                     AB 684


                                                                    Page  4




             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.  This shall not prohibit the optometrist from  
               advertising the optometrist's practice location with  
               reference to other occupants or prohibit the optometrist or  
               RDO from advertising participation in any health plan's  
               network or the health plan's products in which the  
               optometrist or RDO participates;


             e)   There shall be no signs displayed on any part of the  
               premises or in any advertising indicating that the  
               optometrist is employed or controlled by the RDO, health  
               plan, or optical company;


             f)   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  








                                                                     AB 684


                                                                    Page  5


               the Knox-Keene.  However, a health plan shall not advertise  
               the optometrist's fees for products and services that are  
               not included in the health plan's contract with the  
               optometrist;


             g)   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;


             h)   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; 


             i)   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; and,


             j)   The landlord shall provide the optometrist with written  
               notice of the scheduled expiration date of a lease at least  
               60 days prior to the scheduled expiration date.  The  
               landlord shall not interfere with an outgoing optometrist's  
               efforts to inform the optometrist's patients, in accordance  
               with customary practice and professional obligations, of  
               the relocation of the optometrist's practice.


          8) Permit the landlord to terminate the lease for the following  
             reasons:
             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;








                                                                     AB 684


                                                                    Page  6


             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.
          9) Require the landlord to act in good faith in terminating the  
             lease and prohibits the landlord from terminating the lease  
             for reasons that constitute interference with the practice of  
             optometry.
          10)Prohibit the landlord from terminating the lease solely  
             because of a report, complaint, or allegation filed by the  
             optometrist against the landlord, a RDO or a health plan, to  
             the CBO, the DMHC, or any other law enforcement or regulatory  
             agency.


          11)Authorize the CBO to inspect, upon request, an individual  
             lease agreement and requires the landlord or tenant, as  
             applicable, to promptly comply with the request.  Failure or  
             refusal to comply with the request for a lease agreement  
             within 30 days of receiving the request constitutes  
             unprofessional conduct and is grounds for disciplinary action  
             by the appropriate regulatory agency.  This bill permits only  
             the redaction of personal information on the lease  
             agreements, as specified by Civil Code.  


          12)Declare 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.


          13)Permit a lease to include commercially reasonable terms that:  








                                                                     AB 684


                                                                    Page  7





            a)  Require the provision of optometric services at the leased  
              space during certain days and hours;
            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;


            c)  Require the optometrist to contract with a health plan  
              network, health plan, or health insurer; and,


            d)  Permit the landlord to directly or indirectly provide  
              furnishings and equipment in the leased space.


          14)Prohibit a RDO from having any membership, proprietary  
             interest, coownership, or profit sharing arrangement either  
             by stock ownership, interlocking directors, trusteeship,  
             mortgage, or trust deed, with an optometrist, except as  
             permitted under this bill.
          15)Clarify that nothing in this bill shall prohibit a physician  
             and surgeon or his or her professional corporation from  
             contracting with or employing optometrists, ophthalmologists,  
             or optometric assistants and entering into a contract or  
             landlord tenant relationship with a health plan, optical  
             company, or RDO, as specified.


          16)State that any violation of this bill constitutes a  
             misdemeanor.


          17)Permit the CBO to promulgate regulations that impose  
             administrative fines, which may be assessed in addition to  








                                                                     AB 684


                                                                    Page  8


             any other applicable fines, citations, or administrative or  
             criminal actions.


          18)Transfer the regulation of RDOs from the MBC to the CBO. 


          19)Require an RDO to display specified consumer information  
             related to the CBO. 


          20)Require an optometrist who practices in a setting with a RDO  
             to report the business relationship to the CBO, as determined  
             by the CBO. 


          21)Authorize 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 DMHC.


          22)Prohibit 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.


          23)State 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.


          24)State that the exemption shall not apply to any business  
             relationships prohibited by current law commencing  
             registration or operations on or after January 1, 2016.


          25)Permit an individual, corporation, or firm operating as a RDO  








                                                                     AB 684


                                                                    Page  9


             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. 


          26)State 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.


          27)Require any health plan, as specified, to report to the CBO  
             in writing that:


            a)  Fifteen percent of its locations no longer employ an  
              optometrist by January 1, 2017;
            b)  Forty five percent of its locations no longer employ an  
              optometrist by August 1, 2017; and,
            c)  One hundred percent of its locations no longer employ an  
              optometrist by January 1, 2019. 


          28)Require the CBO to provide health plans' compliance reports  
             to the director of the DCA and the Legislature. 
          29)Replace one optometrist with an RDO on the CBO. 


          30)Permit the RDO member of the CBO to be a stockholder in,  
             owner of, or a member of the board of trustees of any school  
             of optometry, or financially interested, directly or  
             indirectly, in any concern manufacturing or dealing in  
             optical supplies at wholesale.


          31)Establish 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.  Initial appointments to the committee  
             shall be made by the CBO. 









                                                                     AB 684


                                                                    Page  10



          32)State that the RDO committee shall be responsible for:


             a)   Recommending registration standards and criteria for the  
               registration of dispensing opticians;
            b)  Reviewing of the disciplinary guidelines relating to RDOs;
            c)  Recommending to the CBO changes or additions to  
              regulations; and,


             d)   Carrying out and implementing all responsibilities and  
               duties imposed upon it pursuant to this bill or as  
               delegated to it by the CBO.
          33)Require the RDO committee to meet at least twice a year and  
             as needed.
          34)Require recommendations by the RDO committee regarding scope  
             of practice or regulatory changes to be approved, modified,  
             or rejected by the CBO within 90 days of submission to the  
             CBO.  If the CBO rejects or significantly modifies the intent  
             or scope of the recommendation, the RDO committee may request  
             that the CBO provide its reasons in writing, which shall be  
             provided within 30 days.


          35)Require the Governor to appoint the RDO and public members to  
             the RDO committee after the initial appointments by the CBO.   
             The RDO committee shall submit a recommendation to the CBO  
             regarding which CBO member should be appointed to serve on  
             the RDO committee, and the CBO shall appoint the member to  
             serve.  Committee members shall serve a term of four years  
             except for the initial staggered terms.  A member may be  
             reappointed, but no person shall serve as a member of the  
             committee for more than two consecutive terms.


          36)Make clarifying and technical amendments.


          FISCAL EFFECT:  Unknown










                                                                     AB 684


                                                                    Page  11


          COMMENTS:  Purpose.  This bill is author sponsored.  According  
            to the author, "Co-located vision models have existed in  
            California for nearly three decades.  They serve millions of  
            patients annually and employ thousands of optometrists and  
            opticians.  With the conclusion of legal suits over the last  
            few years, the state is compelled to enforce a decades old law  
            that has found this business model to be unlawful.  AB 684 is  
            seeking a legislative solution that allows multiple models to  
            continue to operate, while also leveling the playing field for  
            both large and small operators, ensuring that consumers'  
            interests are protected, and optometrists' clinical judgment  
            is preserved.  This legislation would clarify and modernize  
            the law."


          Background.  In California, there are two eye care service  
          models: an optometrist's private office and a "co-location"  
          office, where an optical retail store is co-located with a  
          Department of Managed Health Care (DMHC)-regulated health plan,  
          also called a Knox-Keene plan, that provides optometry care.  At  
          co-location sites, patients receive an eye exam and can fill  
          their prescription for corrective eyewear during the same visit  
          at the co-located optical retail store [e.g. Walmart,  
          LensCrafters].  At private optometrist offices, patients receive  
          an eye exam and can take a prescription elsewhere or have the  
          optometrist send it out for them.  California law provides that  
          prescriptions are mobile, so the patient is not required in  
          either setting to have the prescription filled on site.  


          Under Business and Professions Code (BPC) Sections 655 and 2556,  
          optometrists and RDOs cannot have any membership, proprietary  
          interest, co-ownership, landlord-tenant relationship or any  
          profit-sharing agreement with each other.  Optometrists also  
          cannot have any membership, proprietary interest, co-ownership,  
          landlord-tenant relationship or any profit-sharing arrangement  
          in any form with those who manufacture, sell, or distribute  
          lenses, frames, optical supplies, optometric appliances or  
          devices or kindred products to physicians and surgeons,  
          optometrists or RDOs.










                                                                     AB 684


                                                                    Page  12


          Under these code sections, it is also unlawful for RDOs to do  
          any of the following:


          1)Advertise the furnishing of, or to furnish, the services of a  
            refractionist, an optometrist or a physician and surgeon; 
          2)Directly or indirectly employ or maintain on or near the  
            premises used for optical dispensing, a refractionist, and  
            optometrist, a physician and surgeon or a practitioner of any  
            other profession for the purpose of any examination or  
            treatment of the eyes; or,


          3)Duplicate or change lenses without a prescription or order  
            from a person duly licensed to issue the same.


          The Pearle Case.  In February of 2002, Attorney General (AG)  
          Bill Lockyer brought suit against Pearle Vision, arguing that  
          the company had violated the Optometry Practice Act.  The AG   
          challenged the business relationship between the Knox-Keene  
          plan, Pearle VisionCare, and the optical sister company, Pearle  
          Vision, as well as the ownership of the Knox-Keene plan by an  
          optical company, claiming that such relationships violated BPC  
          Sections 655 and 2556.  


          The Snow Case.  In March 2002, a private plaintiff brought suit  
          against LensCrafters (the Snow case), raising some of the same  
          business relationship issues as those raised in the Pearle case.  
           LensCrafters and others subsequently filed a case in federal  
          district court to defend their business operations in  
          California, challenging the constitutionality of BPC Sections  
          655 and 2556.


          California Supreme Court Decision.  On appeal, the Pearle case  
          reached the California Supreme Court, which declared that the  
          Knox-Keene Act does not create an exemption from restrictions  
          that BPC Sections 655and 2556 impose on relationships between  
          optometrists and optical companies for Knox-Keene plans that  
          employ optometrists and affiliate with optical companies.  The  








                                                                     AB 684


                                                                    Page  13


          Supreme Court remanded the case to trial court for determination  
          of whether relationships involved in Pearle Vision's Knox-Keene  
          arrangement violate BPC Sections 655 and 2556.  The Pearle case  
          ultimately settled, with no determination on the  
          Knox-Keene/optical company co-location issue.  The Snow case  
          also settled, without a determination on the Knox-Keene/optical  
          company co-location issue.  


          Federal Court Decision.  The federal court, in December 2006,  
          struck down BPC Sections 655 and 2556 as unconstitutional,  
                                                                                        interpreting the California Supreme Court's ruling in the Pearle  
          case as a bar to LensCrafters' Knox-Keene plan arrangement  
          (National Association of Optometrists & Opticians v. Lockyer,  
          463 F.Supp.2d 1116 (E.D.Cal.2006).  The federal court  
          determined, "the challenged laws substantially effect and  
          discriminate against interstate commerce."  The Court also held  
          that "[a]lthough California has legitimate interests in  
          regulating the provision of health services, defendants have  
          failed to meet its burden of showing that it has no other means  
          to advance its legitimate interests."  The Court noted that the  
          Knox-Keene plan arrangement, if permitted by law, would be a  
          viable means for the State to achieve its legitimate interests  
          with less impact on interstate commerce.  


          Ninth Circuit Court of Appeals Decision.  On June 13, 2012, BPC  
          Section 655 was  upheld as constitutional by the Ninth Circuit  
          Court of Appeals in National Association of Optometrists &  
          Opticians v. Harris, 682 F.3d 1144 (9th Cir.2012).  The optical  
          industry plaintiffs then petitioned the Supreme Court of the  
          United States for certiorari review, but on February 19, 2013,  
          the United States Supreme Court declined to hear the case, and  
          the Ninth Circuit decision upholding the law became final.


          Other States.  There are 14 United States jurisdictions that  
          allow direct employment of optometrists by optical companies.   
          Direct landlord-tenant relationships are permitted in 47 states.  
           Additionally, 49 states allow optical companies to franchise to  
          optometrists.









                                                                     AB 684


                                                                    Page  14



          Need for This Legislation.  This bill clarifies and modernizes  
          modern law by allowing multiple models to continue to operate  
          for a three-year period during which the businesses will  
          transition from direct employment of optometrists to leasing  
          arrangements.  Without the transition period, these businesses  
          are under threat of closure, which would cause significant job  
          loss and cut off care for the more than two million California  
          patients served by these businesses every year. 


          Analysis Prepared by:                                             
                           Le Ondra Clark Harvey / B. & P. / (916)  
                          319-3301                                         
          FN: 0002394