California SB-642 Targets Hospitals and Management Service Organizations | Mintz – Perspectives on Healthcare

On May 3, 2021, the California Senate Health Committee approved SB-642 “Healthcare: Facilities: Medical Privileges”. The bill is currently pending in the California Senate. AB-705, which is substantially similar to SB-642, is also on hold at the California Assembly. If passed, the law will restrict the ability of hospital governing bodies to make decisions about medical services provided in the facility without the approval of medical staff, impose new limits on arrangements between management service organizations and professional corporations, and add additional factors to the Attorney General’s review. and the approval of transactions of not-for-profit health care facilities.

The author of the bills seems to respond to the existence of ethical and religious guidelines (DRE) which have been put in place by hospitals owned and operated by certain religious institutions which (among others) prohibit abortion, fertility in in vitro, medicine is the aid in dying and the “direct sterilization of men or women, unless their direct effect is the cure or relief of a present and serious pathology and a simpler treatment is available. “.

While the primary goal appears to be ensuring access to treatments and procedures prohibited by DREs, the analysis of the bill further notes that “CEOs can impose policies that prohibit physicians from providing services. medical evidence to patients, even when their health facilities are equipped and staffed. to provide these services … To maximize profits, companies also often reduce unprofitable medical procedures, set billing quotas, require internal referrals for medical services, and pressure providers to perform unnecessary procedures but lucrative.

SB-642 seeks to control the hospital over medical personnel by prohibiting hospitals from requiring a physician or surgeon, as a condition of obtaining or maintaining clinical privileges, “to agree to comply with criteria, rules, regulations or other policies or procedures that are not knowingly and explicitly ratified, issued or promulgated by medical personnel, which directly or indirectly prohibit, limit or restrict the ability of the physician or surgeon to provide a treatment or service medical care that falls within his privileges, or to require a physician or surgeon to obtain permission from a non-physician or non-surgeon to perform a particular medical treatment or service for which consent has been obtained from the patient or his representative ”, with some exceptions. In addition, statutes, policies, rules, contracts or other institutional requirements of healthcare facilities that conflict with the above prohibition cannot be applied to directly or indirectly affect a physician’s clinical privileges or rights, or medical staff membership privileges, except as required by federal or state law. Finally, SB-642 adds that the Attorney General must consider these additional factors before consenting to certain transactions in non-profit health facilities:

  • Reduce or limit the availability or accessibility of the full range of health care services to any group of individuals based on any characteristic listed or defined in the Unruh Civil Rights Act; and

  • Causing undue interference with patients’ access to medical care on the basis of improper or unlawful grounds, including, but not limited to, discrimination, profit at the expense of patient care or illegal or unfair grounds of competition .

The above changes are already a significant departure from current law when it comes to a hospital’s ability to make decisions about the services it provides, but the SB-642 doesn’t stop there! Management companies are also being criticized and the Management Services Organization (MSO) – a “friendly” professional society (PC) model that has been used in California for decades could take a direct hit. MSOs (unlike PCs) can be owned by unauthorized persons and provide administrative support services to a medical office in accordance with a written service agreement. In general, MSOs can provide anything that does not involve the “practice of medicine” including space, supplies, equipment, lay personnel, accounting, billing and collections, and collection. management of accounts payable. In some cases, MSOs provide a significant amount of technology and technical assistance, for example in telehealth services. As currently used, this model has many potential benefits, ranging from allowing physicians to focus on patients, not paperwork, to various financial benefits, including providing a vehicle for investors who don’t. are not doctors.

The Medical Board of California (Board) has issued a substantial amount of guidance regarding what it considers inappropriate control over the practice of medicine, and so far a carefully drafted agreement between OSM and CP could protect the interests. of MSO investors while ensuring that the PC retains control over the practice of medicine. It is unclear whether arrangements that have been carefully drafted in accordance with board practice guidelines will be permitted if SB-642 is promulgated.

SB-642 adds section 2408.5 to the Business and Professional Code, as follows:

2408.5. (a) The shareholders, directors and officers of a medical company as defined in Section 2408 shall manage and have ultimate control over the assets and business operations of the medical company and shall not be replaced, removed or otherwise controlled by a layman. entity or individual, including, without limitation, through inventory transfer restriction agreements or other contractual agreements and arrangements.

(b) For the purposes of this section, “ultimate control” means and shall comply with the definition provided by generally accepted accounting principles.

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About Hector Hedgepeth

Hector Hedgepeth

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