BILL ANALYSIS Ó SENATE COMMITTEE ON BUSINESS, PROFESSIONS AND ECONOMIC DEVELOPMENT Senator Jerry Hill, Chair 2015 - 2016 Regular Bill No: AB 2024 Hearing Date: June 6, 2016 ----------------------------------------------------------------- |Author: |Wood | |----------+------------------------------------------------------| |Version: |May 23, 2016 | ----------------------------------------------------------------- ---------------------------------------------------------------- |Urgency: |No |Fiscal: |Yes | ---------------------------------------------------------------- ----------------------------------------------------------------- |Consultant|Sarah Mason | |: | | ----------------------------------------------------------------- Subject: Critical access hospitals: employment SUMMARY: Authorizes a federally certified critical access hospital (CAH) to employ physicians and charge for their services until 2024 and requires the Medical Board of California (MBC) to provide a report to the Legislature on the impact of authorizing CAHs to employ physicians. Existing law: 1)Provides for the licensure and regulation of physicians and surgeons by the MBC pursuant to the Medical Practice Act (Act). (Business and Professions Code (BPC) § 2000 et seq.) 2)States that corporations and other artificial legal entities shall have no professional rights, privileges, or powers. Provides that the MBC may in its discretion, and under regulations adopted by it, grant approval of the employment of licensees on a salary basis by licensed charitable institutions, foundations, or clinics, if no charge for professional services rendered patients is made by any such institution, foundation, or clinic. (BPC § 2400) 3)Establishes exceptions to the ban on the corporate practice of medicine (CPM), thereby allowing certain types of facilities to employ physicians, including: AB 2024 (Wood) Page 2 of ? 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; and, d) A hospital that is owned and operated by a licensed charitable organization that offers only pediatric subspecialty care, as specified. (BPC § 2401) 4)Establishes the following protections against retaliation for health care practitioners who advocate for appropriate health care for their patients pursuant to Wickline v. State of California (192 Cal. App. 3d 1630): a) It is the public policy of the State of California that a health care practitioner be encouraged to advocate for appropriate health care for his or her patients. For purposes of this section, "to advocate for appropriate health care" means to appeal a payer's decision to deny AB 2024 (Wood) Page 3 of ? payment for a service pursuant to the reasonable grievance or appeal procedure established by a medical group, independent practice association, preferred provider organization, foundation, hospital medical staff and governing body, or payer, or to protest a decision, policy, or practice that the health care practitioner, consistent with that degree of learning and skill ordinarily possessed by reputable health care practitioners with the same license or certification and practicing according to the applicable legal standard of care, reasonably believes impairs the health care practitioner's ability to provide appropriate health care to his or her patients. b) The application and rendering by any individual, partnership, corporation, or other organization of a decision to terminate an employment or other contractual relationship with or otherwise penalize a health care practitioner principally for advocating for appropriate health care consistent with that degree of learning and skill ordinarily possessed by reputable health care practitioners with the same license or certification and practicing according to the applicable legal standard of care violates the public policy of this state. c) This law shall not be construed to prohibit a payer from making a determination not to pay for a particular medical treatment or service, or the services of a type of health care practitioner, or to prohibit a medical group, independent practice association, preferred provider organization, foundation, hospital medical staff, hospital governing body, or payer from enforcing reasonable peer review or utilization review protocols or determining whether a health care practitioner has complied with those protocols. (BPC § 510) 5)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 regulation that the organization of a health plan must include separation of medical services from AB 2024 (Wood) Page 4 of ? fiscal and administrative management. (Health and Safety Code §§ 1340 et seq.) This bill: 1) Until 2024, authorizes a federally certified critical access hospital (CAH) to employ physicians and charge for professional services rendered by those licensees if the medical staff concur by an affirmative vote that the physician's employment is in the best interest of the communities served by the hospital and the hospital does not interfere with, control, or otherwise direct the physician's professional judgment. 2) Requires MBC, on or before July 1, 2023, to provide a report to the Legislature containing data about the impact of employing physicians on CAHs and their ability to recruit and retain physicians. FISCAL EFFECT: Unknown. This bill is keyed "fiscal" by Legislative Counsel. COMMENTS: 1. Purpose. The Author is the Sponsor of this bill. According to the Author, in April 2016, the California Research Bureau (CRB) published a report "The Corporate Practice of Medicine in a Changing Healthcare Environment" which raised questions as to whether the existing exemptions are already so broad that the original intent of the ban, to assure clinical decisions remain independent, has been seriously diluted. The Author notes that the report reviewed key policy issues associated with the ban including the impact on rural access. According to the Author, the report noted the need for additional data to assess how the CPM ban affects physicians and access, and the Author notes that this bill can provide that additional data. AB 2024 (Wood) Page 5 of ? According to the Author, the shortage of physicians is well documented and notes that in 2008, the Council on Graduate Medical Education (CGME) estimated there were 63 primary care physicians per 100,000 persons. By CGME estimates, up to 80 primary physicians are needed per 100,000 people. Using the CGME metric, only 16 California counties fall within the needed supply range meaning less than one third of Californians live in a county with adequate health access. Strategies, such as increased funding for residency and loan forgiveness programs, are being actively pursued to address this crisis. The Author notes that those funding strategies provide hope for long term solutions but more can be done to make rural communities and the hospitals located in them inviting places to practice medicine. According to the Author, CAHs are small (25 or less beds) and located in remote, rural areas. They suffer significant challenges in recruiting and retaining physicians. The difficulty in attracting physicians has serious implications for public health. Maintaining these hospitals is necessary for both the health of residents and the viability of the community. The Author states that allowing these hospitals to employ physicians would provide physicians with the economic security and financial stability that comes with employment and assist in the ability to attract physicians. The Author also notes that medical practice models have changed over the years. The private practitioner is now just one option available to new physicians. While medical residents identify geographic location, personal time and lifestyle as the most important considerations in evaluating practice opportunities, 92 percent of residents prefer an employment situation and the income guarantee it provides. Younger physicians are comfortable with an employment setting and extending those opportunities to hospitals in rural California provides benefits to the physicians, hospitals and communities. 2. Ban on the Corporate Practice of Medicine (CPM). CPM is usually referred to in the context of a prohibition, banning hospitals from employing physicians. The ban on CPM evolved in the early 20th century when mining companies had to hire physicians directly to provide care for their employees in remote areas. However, problems arose when physicians' AB 2024 (Wood) Page 6 of ? loyalty to the mining companies conflicted with patients' needs. Eventually, physicians, courts, and legislatures prohibited CPM in an effort to preserve physicians' autonomy and improve patient care. Over the years, various state and federal statutes have weakened the CPM prohibition. According to the 2007 CRB report, "California's CPM doctrine has been defined largely through lawsuits and Attorney General opinions over decades, and then riddled by HMO and other legislation; its power and meaning are now inconsistent?. Although some non-profit clinics may employ physicians, California applies the CPM doctrine to most other entities.... Teaching hospitals may employ physicians, but other hospitals, including most public and non-profit hospitals, may not employ physicians. Professional medical corporations are expressly permitted to engage in the practice of medicine, and may employ physicians. [However, t]hese medical corporations may operate on a for-profit basis, although the profit motive was one of the original rationales of the CPM prohibition." The 2016 CRB report notes that "since 2007, the provision of healthcare has undergone changes in California. The Affordable Care Act is responsible for an increase in insured patients across the state. In 2016-2017, 13.5 million Californians are expected to have enrolled in Medi-Cal, up from 7.9 million in 2012-2013, and 1.5 million people will be enrolled in Covered California at the end of 2015-2016. As a result, more insured patients than ever are accessing healthcare services without a commensurate increase in healthcare practitioners." The report suggested assessing changing financial incentives; considering whether other methods of protecting physician autonomy are sufficient; increasing patient access to data about physician-hospital relationships and hospital metrics; determining whether the current alignment strategies used by physicians and hospitals are more costly than direct employment models; and collecting additional data to better understand the impact of CPM. California is one of only five remaining states that adhere to some form of the ban. The American Medical Association (AMA), historically the driving force behind the CPM prohibition, no longer views physician employment as a violation of medical ethics and has removed the doctrine from AB 2024 (Wood) Page 7 of ? its ethical code. 3. Health Care Access and the Changing Healthcare Employment Landscape. California currently has a physician shortage. As the 2016 CRB report notes, "AMA figures show that, on average, California has 80 primary care physicians and 138 specialty physicians per 100,000 residents. This is in the upper range for primary care physicians (60-80) and above the range for specialty care physicians (85-105) recommended by the Department of Health and Human Services. However, when disaggregated by region, there is a coverage disparity. California's rural regions have lower numbers of physicians than its urban areas. For instance, the San Joaquin Valley has only 45 primary care physicians and 74 specialty physicians per 100,000 residents, compared with the Bay Area's 78 primary care physicians and 155 specialists per 100,000 residents. The number of healthcare providers, including primary care physicians, in California is not anticipated to dramatically increase soon." The nationwide trend in healthcare is toward direct employment. According to a 2011 survey from the consulting firm Accenture: "U.S. physicians continue to sell their private practices and seek employment with healthcare systems, according to a new survey from Accenture. As physicians migrate from private practice to larger health systems, the new landscape will require healthcare information technology (IT), medical device manufacturers, pharmaceutical companies and payers to revise their business models and offerings. At the same time, hospitals will need to determine how to retain and recruit the correct mix of physicians, especially in high-growth service lines, including cardiovascular care, orthopedics, cancer care and radiology. Patients will increasingly move to large health systems, as opposed to the current trend of visiting doctors in private, small practice settings. "'Health reform is challenging the entire system to deliver improved care through insight driven health,' said Kristin Ficery, senior executive, Accenture Health. 'We see an increasing number of physicians leaving private practice to join hospital systems, which will force all stakeholders to AB 2024 (Wood) Page 8 of ? revise and refine their business models, product offerings and service strategies.'" Benefits to employment include: Relief from administrative responsibilities, especially those relating to insurance billing. Malpractice insurance. Greater access and support for healthcare IT tools, facilities, and medical equipment. A predictable work week. Economic stability. 4. SB 376 Pilot Program. In 2003, the Legislature established a pilot project to allow qualified hospital districts to directly employ physicians (SB 376, Chesbro, Chapter 411, Statutes of 2003). As the 2016 CRB report notes, hospital districts were established in California in 1945 in an attempt to give rural, low income areas without ready access to hospital facilities a source of tax dollars that could be used to construct and operate community hospitals and healthcare institutions, and, in medically underserved areas, to recruit physicians and support their practices. SB 376 allowed each hospital district to hire two physicians, for a total of 20 physicians throughout the state. To qualify for the pilot project, a hospital district was required to meet certain criteria, including population numbers and numbers of uninsured patients. During the pilot project, five participating hospital districts recruited and hired six physicians, whose employment contract periods ran three to four years. SB 376 required MBC to report to the Legislature on the evaluation of the effectiveness of the pilot project in improving access to health care in rural and medically underserved areas and the project's impact on consumer protection as it relates to intrusions into the practice of medicine. In the report, MBC estimated that a total of 20 physician participants were needed to conduct a valid analysis of the project. Only six physicians were hired by AB 2024 (Wood) Page 9 of ? eligible hospitals. Further, MBC had difficulty gathering information from the participants on the success of the plan. Only three of the five participating hospitals and five of the six participating doctors responded to MBC's inquires. MBC stated that it regrets the lack of participation in the project. According to the report, MBC held discussions with numerous interested parties, even beyond those participating in the project and found widespread concern over the lack of physicians in rural areas. MBC stated that due to the "limited extent" of participation, it was unable to fully evaluate the project. In the report, MBC stated that it does not support the complete removal of the limitations on the corporate practice of medicine, but concluded that there may be justification to continue the project. MBC stated that it might be appropriate to expand the pilot project to allow more hospitals to participate; but until more information is available it does not recommend amending the statues that govern the corporate practice of medicine. 5. Arguments in Support. Supporters note how difficult it is for hospitals to recruit and retain physicians to practice in rural and underserved areas and write that the ability to hire physicians as this bill allows will directly improve and increase access to quality health care services and the health of the communities rural hospitals serve. Supporters note that CAHs are the smallest, most remote rural hospitals in the state and face numerous challenges in being able to hire the physicians who would actually like to be hired. Supporters write that California continues to be the most restrictive state for employment of physicians by hospitals and that to remain competitive in an already challenging environment, CAHs should have the opportunity to offer physicians economic security and financial stability through employment, thereby ensuring that rural residents have access to medically necessary services. 6. Prior Related Legislation. AB 824 (Chesbro, 2011) was similar to bill language in AB 648 of 2009 below which would have extended the pilot project to January 1, 2022. ( Status: This bill failed passage in the Assembly Committee on Health.) AB 2024 (Wood) Page 10 of ? AB 926 (Hayashi, 2011) would have reenacted SB 376 pilot project but would have allowed all qualified district hospitals to employ not more than 50 physicians and surgeons until January 1, 2022. ( Status: This bill failed passage in the Assembly Committee on Business, Professions and Consumer Protection.) AB 1360 (Swanson, 2011) would have authorized a new pilot project that allowed a healthcare district and a clinic owned or operated by a healthcare district to employ physicians and surgeons if the service area included a medically underserved area or a medically underserved population or had been federally designated as a health professional shortage area. The bill would have provided that a district could extend any employee contracts up to 10 years and would have required a study of the program's effectiveness and a sunset date of January 1, 2022. ( Status: This bill failed passage in the Assembly Committee on Health.) SB 726 (Ashburn, 2009) would have extended the SB 376 pilot project to 2018 and would have revised the pilot to authorize the direct employment by qualified healthcare districts and qualified rural hospitals of an unlimited number of physicians and surgeons, and authorized such hospitals to employ up to five physicians and surgeons at a time with a term of contract not to exceed 10 years. ( Status: This bill failed passage in the Senate Committee on Business, Professions and Economic Development.) AB 646 (Swanson, 2009) was almost identical to AB 1360. ( Status: This bill failed passage in the Senate Committee on Business, Professions and Economic Development.) AB 648 (Chesbro, 2009) would have established a new pilot project that extended the scope of the first pilot and would have authorized a rural hospital to employ up to 10 physicians and surgeons at one time and to retain all or part of the income generated for medical services billed and collected, provided the physician and surgeon in whose name the charges are made approved the charges. The bill would have required a rural hospital to develop and implement a policy regarding the independent medical judgment of the physician and surgeon. This pilot would have expired January 1, 2020. ( Status: This bill failed passage in the Senate AB 2024 (Wood) Page 11 of ? Committee on Business, Professions and Economic Development.) SB 1294 (Ducheny, 2008) would have extended the SB 376 pilot project to January 1, 2017 and would have allowed district hospitals to hire an unlimited number of physicians and surgeons, subject to board approval. It would also have changed the definition of a qualified district hospital to a hospital that, among other things, is located in a medically underserved area or a rural hospital that had net losses in the most recent fiscal year. ( Status: This bill failed passage in the Assembly Appropriations Committee.) SB 1640 (Ashburn, 2008) would have extended the SB 376 pilot project to January 1, 2016 and revised it to authorize "general acute care hospitals" in rural or underserved areas, to employ an unlimited number of physicians and surgeons and to charge for professional services rendered by those physicians. ( Status: This bill failed passage in the Senate Committee on Business, Professions and Economic Development.) AB 1944 (Swanson, 2008) would have eliminated the SB 376 pilot project and instead would have permanently authorized healthcare districts to employ physicians to primarily treat Medi-Cal patients and bill for the physicians' services with their approval. It would have prohibited the hospital from interfering with the professional judgment of physicians and surgeons. ( Status: This bill failed passage in the Senate Health Committee.) 7. Who Should Report to the Legislature? This bill proposes to have MBC report on the impact of CAHs employing physicians. As noted above, MBC was required to provide a report to the Legislature under SB 376 and the same requirement for MBC was contained in legislation seeking to extend the pilot project, as well as legislation to extend and expand the pilot. Throughout those discussions, this Committee has been concerned about the role of MBC in making determinations about the unmet medical needs of communities and weighing in on the impacts of lifting CPM on health care access. MBC is primarily a licensing agency and an enforcement agency, with the primary mission to protect consumers and patients and to take necessary licensing actions against physicians and surgeons for violation(s) of the Medical Practices Act. AB 2024 (Wood) Page 12 of ? The role of making determinations about the unmet medical needs of communities in California and to what extent additional physicians and surgeons are needed in these communities would seem more appropriate for an agency such as the Office of Statewide Health Planning and Development (OSHPD). The Author may wish to consider amending the measure in the next committee to make this change. NOTE : Double-referral to Senate Committee on Health. SUPPORT AND OPPOSITION: Support: Adventist Health Alliance of Catholic Health Care Association of California Healthcare Districts Banner Lassen Medical Center California Hospital Association California Special Districts Association Catalina Island Medical Center Eastern Plumas Health Care Fairchild Medical Center Glenn Medical Center Health Access California Jerold Phelps Community Hospital Kern Valley Healthcare District Loma Linda University Health Mayers Memorial Hospital District Mendocino Coast District Hospital Modoc Medical Center Northern Inyo Healthcare District Rural County Representatives of California San Bernardino Mountains Community Hospital Santa Ynez Valley Cottage Hospital Sutter Lakeside Hospital Tehachapi Valley Healthcare District Trinity Hospital Opposition: AB 2024 (Wood) Page 13 of ? None on file as of June 1, 2016. -- END --