SENATE RULES COMMITTEE Office of Senate Floor Analyses (916) 651-1520 Fax: (916) 327-4478 SB 396 THIRD READING Bill No: Author: Amended: Vote: SB 396 Hill (D) 5/5/15 21 SENATE BUS, PROF. & ECON. DEV. COMMITTEE: 9-0, 4/20/15 AYES: Hill, Bates, Berryhill, Block, Galgiani, Hernandez, Jackson, Mendoza, Wieckowski SENATE HEALTH COMMITTEE: 9-0, 4/29/15 AYES: Hernandez, Nguyen, Hall, Mitchell, Monning, Nielsen, Pan, Roth, Wolk SENATE APPROPRIATIONS COMMITTEE: 7-0, 5/28/15 AYES: Lara, Bates, Beall, Hill, Leyva, Mendoza, Nielsen SUBJECT: Health care: outpatient settings and surgical clinics: facilities: licensure and enforcement SOURCE: Author DIGEST: This bill (1) allows ambulatory surgical clinics (ASC) which are Medicare certified to have the option of being licensed by the California Department of Public Health (DPH) regardless of physician, podiatrist, or dentist ownership and states that they are deemed to be licensed if already Medicare certified; (2) specifies that each licensee who performs procedures in an accredited outpatient setting be peer reviewed, as specified, at least every two years and that the findings of the peer review be reported to the accrediting body of the outpatient setting; (3) requires an ASC or outpatient setting to request a report from Medical Board of California (MBC) or state other licensing body to determine if there have been any restrictions or changes to a licensee’s staffing privileges; (4) requires that all subsequent inspections after the initial inspection for accreditation of the outpatient setting be unannounced; and (5) requires an outpatient setting and SB 396 Page 2 Medicare certified clinic to report specific data to the Office of Statewide Health Planning and Development (OSHPD) ANALYSIS: Existing law: 1) Defines a clinic as an organized outpatient health facility that provides direct medical, surgical, dental, optometric, or podiatric advice, services, or treatment to patients who remain less than 24 hours, and that may also provide diagnostic or therapeutic services to patients in the home as incident to care provided at the clinic facility. (Health and Safety Code (HSC) § 1200) 2) Defines an outpatient setting as any facility, clinic, unlicensed clinic, center, office, or other setting that is not part of a general acute care facility where anesthesia is used in compliance with the community standard of practice, in doses that, when administered have the probability of placing a patient at risk for loss of the patient’s life-preserving protective reflexes. (HSC § 1248 (b)(1)) 3) Defines an ASC to mean any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization and in which the expected duration of services will not exceed 24 hours following an admission. (Title 42, Code of Federal Regulations (CFR) § 416.2) 4) Specifies that an ASC means any distinct entity that operates exclusively for the purpose of providing surgical services to patients not requiring hospitalization and in which the expected duration of services would not exceed 24 hours following an admission. (42 CFR § 416.2) 5) Requires that an ASC must have an agreement with the Centers for Medicare and Medicaid Services (CMS) and must meet specified requirements to participate in Medicare. (Id.) 6) Provides that an ASC may have the option of becoming Medicare certified on the basis of receiving accreditation by a CMS approved accrediting organization instead of a survey by CMS or the state as long as they are in compliance with the coverage conditions of CMS. (42 CFR § 416.28) SB 396 Page 3 7) Provides that as a condition of Medicare coverage, an ASC must comply with state licensure requirements and provide for specified requirements. (CFR §§ 416.40 - 416.52) This bill: 1) Includes an ambulatory surgical center certified to participate in the federal Medicare program and an accredited outpatient setting in the facilities required to request a report from the MBC, the Board of Psychology, the Osteopathic Medical Board of California, or the Dental Board of California prior to granting or renewing staff privileges for any physician and surgeon, psychologist, podiatrist, or dentist to determine if any report has been made indicating that the applying physician and surgeon, psychologist, podiatrist, or dentist has been denied staff privileges, been removed from a medical staff, or had his or her staff privileges restricted. 2) Requires an accredited outpatient setting and an ASC certified to participate in the federal Medicare program to report specified information to the OSHPD. 3) Extends by one year, until March 1, 2016, the due date for the report regarding the vertical enforcement and prosecution model required of the MBC, in consultation with the Department of Justice and the Department of Consumer Affairs. 4) Authorizes a physician, podiatrist, or dentist to, at his or her option, apply for licensure of a surgical clinic by the DPH, and states that a surgical clinic shall be eligible for licensure by the DPH regardless of physician, podiatrist, or dentist ownership. States that a surgical clinic that has met the federal certification standards and requirements for an ASC, as specified, shall be eligible for licensure by DPH. 5) States that a surgical clinic is deemed to have met specified licensure requirements upon presenting documentation that the surgical clinic has met the ASC federal certification standards in the three years prior to applying for licensure until DPH adopts regulations. 6) Requires each licensee who performs procedures in an outpatient setting that requires accreditation to be peer reviewed at least every two years. The peer review shall be a process in which the basic qualifications, staff privileges, employment, medical outcomes, or professional conduct of a licensee is reviewed to make recommendations for quality improvement and education, if SB 396 Page 4 necessary, including when the outpatient setting has only one licensee. The peer review shall be performed by licensees who are qualified by education and experience to perform the same types of, or similar, procedures. The findings of the peer review shall be reported to the accrediting body who shall determine if the licensee continues to meet the specified requirements. 7) Requires that, after the initial inspection for accreditation, all subsequent inspections by the accreditation agency shall be unannounced. 8) Makes technical and minor clarifying changes. Background ASC regulation. ASCs are facilities for surgical patients who do not need to be admitted to a hospital and remain on site for less than 24 hours. As medical care continues to shift from inpatient (hospital) type settings to clinics, many patients are using ASCs or “same-day” surgery centers for a wide variety of procedures. According to a study of ASCs by the California Healthcare Foundation (CHF Study) there are at least 750 ASCs in California. This number is likely larger because there is no centralized source for data on ASCs due to their diffuse regulation. Generally, ASCs which are non-physician owned are regulated by DPH, and physician-owned ASCs are regulated by the MBC, which, in turn, requires accreditation by one of four approved accrediting agencies. Existing law was unclear as to the authority of DPH and MBC over ASCs until Capen v. Shewry (2007) 147 Cal.App.4th 680, which determined that physician owned and operated surgical clinics are not subject to licensing by DPH and are to be regulated by the MBC. However, MBC interpreted the law as giving it only the authority to approve accrediting agencies that are in compliance with existing state standards. Becoming Medicare certified either requires certification by CMS or by a CMS approved accreditation organization. Generally, the MBC and CMS approved accreditation organizations are the same. CMS also allows ASCs to be “deemed” certified if they meet the requirements of accreditation and other standards as required by CMS. Most ASCs are accredited as an outpatient setting, are Medicare certified, or both. This bill authorizes a physician, podiatrist, or dentist to voluntarily apply for licensure of a surgical clinic by the DPH, regardless of ownership. SB 396 Page 5 OSHPD reporting. Existing law requires clinics licensed by the DPH, including surgical clinics, to report aggregate data to OSHPD. This data includes number of patients served, number of patient visits by type of service, patient charges and other additional information. Before the Capen decision, this data was collected for the majority of ASCs. However, since Capen, the ASCs have become accredited through MBC instead of licensed by DPH and the reporting to OSHPD is no longer required. This has created a serious deficiency in the collection of important data regarding clinical care in California. This bill requires that all accredited and Medicare certified outpatient settings are to report specified data to OSHPD. This would provide similar data to OSHPD that is provided by other clinics and health facilities license by DPH. FISCAL EFFECT: Appropriation: No Fiscal Com.: Yes Local: Yes According to the Senate Appropriations Committee: Likely one-time costs of about $125,000 over two years for the adoption of regulations by DPH (Licensing and Certification Fund). Projected initial licensing costs of about $800,000 to review license application information and conduct initial site inspections of surgical clinics (Licensing and Certification Fund). This cost estimate assumes that the number of licensed surgical clinics under this bill will increase to approximately 500, the number that were previously licensed by DPH. These costs would be incurred once DPH completed the required regulations. After the initial increase in licensing activity due to the new ability for surgical clinics to be licensed, the ongoing costs should be substantially reduced. Unknown costs for data collection and analysis by OSHPD. Any costs incurred by OSHPD under this bill would be reimbursed by fees paid by licensed surgical clinics SUPPORT: (Verified 5/29/15) California Ambulatory Surgery Association Medical Board of California OPPOSITION: (Verified 6/1/15) California Medical Association SB 396 Page 6 California Society of Plastic Surgeons ARGUMENTS IN SUPPORT: The California Ambulatory Surgery Association (CASA) is in support of this bill and indicates that even though existing law provides adequate oversight for ASCs utilizing certain levels of anesthesia, the Capen decision has prohibited DPH from issuing state licenses to physician and surgeon owned ASCs, which make up the vast majority of ASCs in California. As a result, accreditation and Medicare certification are the only other regulatory oversight options for ASCs. The Medical Board of California (MBC) is also in support of this bill. In terms of peer review, the MBC believes that peer review is important to ensure consumer protection, and that procedures that are being done in ASCs should be subject to peer review, as those in hospitals are. The requirement for reporting to OSHPD for both accredited outpatients settings and Medicare certified ASCs will ensure that there are no serious deficiencies of important ASC data. Requiring also that initial accreditation certificates will be valid for two years instead of three will ensure that new outpatient settings are inspected in a more timely manner, and requiring subsequent inspections to be unannounced will help ensure that facilities do not have time to prepare for an inspection and will be in line with inspections on other types of ASCs. ARGUMENTS IN OPPOSITION: The California Society of Plastic Surgeons is opposed to this bill and is primarily concerned with the reporting of economic data information to OSHPD, unannounced inspections by the MBC, as well as reducing the amount of time the initial accreditation is approved from three years to two years. They argue that it creates additional onerous data reporting with no obvious need or plan for use of the data, that the use of unannounced inspections would put patient safety at risk, as staff and physician attention would be diverted from patient care by the inspectors and their reviewing manuals, logs and patient records. They basically believe that these requirements would not result in any improvement of the accreditation process or enhance patient safety and only increase costs for the accredited facility. Prepared by: Sarah Huchel / B., P. & E.D. / (916) 651-4104 6/1/15 11:45:11 **** END ****