Medical Foundation Construct Hanging On

Nossaman Health Law Ticker

In a previous musing we wondered whether California medical foundations would "hold", given cited turbulence and possible over-reaches with the form. They seem to be hanging on just fine at mid-summer. Some developments:

1.  A proposed piece of legislation (SB 364) would have required an intense investigation by the Attorney General's Office and the preparation of a "patient impact report" or a "negative declaration" whenever a non-profit hospital proposed to establish a medical foundation.  The review regimen would have required public notices, hearings, comment periods, opportunities for challenges and the like. The measure was sponsored by the medical group that is locked in bitter litigation with the City of Hope Medical Center over the Center's plans to establish a medical foundation, as referenced in the previous musing. A classical collateral assault maneuver to be sure: sue the ba*tards, regulate ‘em too.

But at a recent legislative hearing the bill was drastically reduced to a "study" bill on, inter alia, the governance structures of medical foundations – but the Task Force that would be set up must find the funds to carry out the study. The California Hospital Association suggests that the focus of the Task Force be shifted to studying options for clinical integration of care delivery, in light of the recent federal reforms.  Seasoned legislative veterans caution that counter-attack gambits by the City of Hope Medical Group may crop up in the waning days of the session.

2.  Marin General Hospital and the Marin IPA recently announced that they are establishing a medical foundation to deliver care, in the wake of the bitter divorce that terminated Sutter Health's long-time contract to administer the Hospital. Since Sutter was one of the pioneers to deploy the medical foundation model, across a broad swath of Northern California, there is a certain irony that one upshot of its ouster from Marin County was the emergence of – a medical foundation. A lesson learned from a master.

3.  A related development lies in the California Assembly's passage of SB 726, which would give hospitals in underserved and rural areas the right to hire five doctors, in a nervously narrow exemption from California's prohibition on the "corporate practice of medicine" (B&P Code Sections 2052, 2400), which prevents hospitals and other "lay" entities from employing doctors. The California Medical Association opposes the bill, warning it will weaken the ban. It is this restriction that gave rise to medical foundations and their increasing popularity, as hospitals and physicians seek to integrate more closely through a tighter alignment of interests, to provide quality care in more efficient delivery modes. While the Legislature frets over such parsimonious permissions, the medical foundation model is moving ahead steadily in the work-around that has been underway for nearly two decades.

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