Close Vote, Heated Talk on Physician Employment in Assembly

Five states in the nation prohibit hospitals from directly employing physicians, and California is one of them. The push to change that law to allow some health districts and hospitals to hire doctors directly came before the state Assembly last week, and the discussion heated up.

In the end, the legislation fell three votes shy of passing — including one vote that switched from a yes to a no at the last minute. That unusual vote change and the close final tally illustrate the divisive nature of this issue and are a harbinger of the fight to come. The proposal is expected to return for a rehearing and revote in the Assembly.

Goal: Improve Access to Care

SB 726 by Senate member Roy Ashburn (R-Bakersfield) would establish a pilot project that would allow some health care districts and hospitals in rural and underserved areas to hire their own physicians and surgeons. Currently, hospitals and health care districts contract with physician groups for provider services.

There are many theories about the benefits of direct hiring of physicians, including potentially lower costs and higher efficiency for health care institutions. In California’s case, the main push is to ensure that isolated communities — whether they’re underserved by economic status or geographic distance — get their share of primary care physicians.

Primary care physicians are in short supply across the country, including in California. The shortage is often more acute in underserved and rural areas.

When patients in rural areas have to travel great distances for care or only have access to expensive emergency departments rather than community clinics, their health is at risk, according to health advocates. Supporters of direct hiring of primary care physicians say that faced with the high cost of ED visits and the difficulty of transporting sick patients so far, many people opt for the painful choice of just not seeing a doctor at all. If rural hospitals and underserved health districts could hire their own primary care physicians, advocates say those California communities would be healthier and more productive.

“We need to provide quality medical care for people in rural communities,” Assembly member Audra Strickland (R-Moorpark) said. “It will provide much needed access, and it will improve the quality of care.”

The reason to prohibit hospitals from directly hiring physicians is much more straightforward. Some physicians and policymakers are worried about corporate interference in the practice of medicine. The concern is that accountants and administrators would pressure in-house doctors to make financially expedient choices, rather than patient-centered decisions.

“We have a bright-line delineation between the professionals [who] are the physicians and the professionals [who] are our hospital administrators,” Assembly member Anthony Adams (R-Hesperia) said. “Intermingling these is not the way to go.”

Crossing Political Lines

The debate over direct hiring of physicians seems to be completely non-partisan. Republicans on the Assembly floor last week were divided over the issue, and so were Democrats. It made for an odd dynamic, where many politicians last week found themselves in full agreement with their usual adversaries, and in opposition to their allies.

The issues boiled down to a few main points:

  • Access: Moving primary care physicians into a rural hospital or health district increases access in that area. But does this plan rob Peter to pay Paul by diverting physicians out of community clinics? Does it affect access elsewhere? And would those primary care physicians move to that underserved area with other incentives if they weren’t directly hired by hospitals or health districts? 
  • Power: Should hospitals and health districts have more direct control over the physicians they hire, fire and supervise?
  • Need: A broad issue in California is the need for more primary care physicians. How those physicians distribute themselves across California is what this legislation is trying to address. But many politicians brought up the underlying need to train more physicians, possibly at a new medical center, and to offer physicians incentives to practice where they’re most needed.

Assembly member Mary Hayashi (D-Castro Valley) put it this way: “This measure does not increase a single physician in underserved communities. It will in fact hurt access to health care. You hear a lot about the shortage of physicians in rural areas, in underserved areas. This bill does not address that issue. And this bill amends the most important law we have in our state that protects the patient and physician.”

But Assembly member Sandré Swanson (D-Alameda), who presented the bill, had a different take. “This bill is a modest step — a modest step — to address a growing health care crisis facing California, and it wouldn’t cost the state a dime,” Swanson said. “It is time for us to stand up for these patients, and for the doctors who want to work in these areas, but cannot afford to do so.”

What Some Physicians Want

The California Medical Association has lobbied against this bill — though at one point, CMA spokesman Andrew LaMar said the association helped craft amendments to the bill that made it more palatable to its physician members. But those amendments were not included in SB 726, LaMar said.

At its root, he said, physicians balk at medical decisions being overseen by bureaucrats.

“The main thing here is to make certain the patient’s best served,” LaMar said. “If there’s not a firewall between the financial management of hospital and physicians providing care, there’s a scenario where there could be ulterior motives, where care might not be what a physician would recommend, and that’s not a situation we want to create.”

At the same time, he said, physicians see the need for more primary care doctors and surgeons in rural and underserved areas. LaMar pointed to CMA’s involvement in developing California’s program to forgive medical student loans in exchange for new doctors setting up practices in underserved areas.

Some hospitals and physicians sign exclusive contracts. In the Kaiser Permanente system, Kaiser Foundation Health Plans and Kaiser Permanente Hospitals have an exclusive contract with the Permanente Medical Group, made up of physicians and some other providers.

Status of Legislation

SB 726, approved by the Senate a year ago this month, has been stuck in Assembly committees since then. After failing by three votes last week on the Assembly floor, it is up for reconsideration, but no timetable for bringing it back to the Assembly has been set.

Two other bills — AB 646 by Assembly member Sandré Swanson (D-Alameda) and AB 648 by Assembly member Wesley Chesbro (D-Santa Rosa) — with similar language and intentions are in the Assembly Business, Professions and Economic Development Committee.

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