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CA's Critical Access Hospitals Get Green Light to Employ Physicians

News  |  By HealthLeaders Media News  
   October 11, 2016

A new California law lifts a century-old ban on direct physician employment, and aims to end a 'doctor desert' among the smallest and most remote hospitals.

Gov. Jerry Brown has signed a bill that will allow critical access hospitals in the state to employ physicians starting in 2017. Brown signed off on a number of patient protection bills in September.

Assembly Bill 2024 authored by assembly member Jim Wood (D-Healdsburg) will allow the state's smallest and most remote hospitals to directly employ physicians rather than hire them as independent contractors.

Hospitals in the state are banned from directly employing physicians under a corporate medicine law designed to prevent hospital administrators from influencing the decisions of physicians.

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"Nearly the entire North Coast is a doctor desert," said Wood. "We have to find ways to recruit providers in our rural communities. It is a daunting task for young physicians, who are often tens of thousands of dollars in debt, to move to a small town and build a practice from the ground up."

AB 2024 will apply only to critical access hospitals, small hospitals with 25 or fewer beds typically located in remote areas of the state, and will go into effect on January 1, 2017. AB 2024 calls for an eight-year pilot program due to sunset in 2024.

Bills similar to AB 2024 have been considered in the past but most of those bills applied to rural hospitals, which make up a much larger group than critical access hospitals.

"I think this bill succeeded where others failed because assembly member Wood narrowed it down to just critical access hospitals," said Peggy Wheeler, vice president of Rural Health and Governance for the California Hospital Association (CHA).

"With rural hospitals, you're talking about a much larger group of about 67 hospitals."

Wheeler said the CHA has been advocating for a bill similar to AB 2024 for more than a decade.

The bill reflects the changing needs and attitudes of young physicians as much as it addresses a physician recruitment and retention at critical access hospitals, said David Perrott, MD, senior vice president and chief medical officer for the CHA.

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"You can look at this as a hospital bill but it's also about physicians and what they want," said Perrott. "Most young physicians would prefer to be employed by a hospital rather than go into a private practice."

He cited a 2015 survey from research firm Merritt Hawkins that found 92% of final-year medical residents would prefer to be employed directly by a hospital and earn a salary rather than be an independent contractor.

According to a state analysis of AB 2024, the state ban on corporate medicine dates back to the early 20th century, when mining companies in California hired physicians to care for workers.

That situation created problems when physician loyalty to the mining companies conflicted with the needs of patients, leading the state to ban corporate medicine.

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