The Loss of a Giant

CMA's 2004 Legislative Wrap-Up
by Dustin Corcoran, Interim Vice President of Government Relations

This year is the first time in many years that this commentary is not being written by Steve Thompson. Steve who served the physicians of this state for more than twelve years passed away in August after a short, but valiant, fight with cancer. Steve is survived by his wife Nancy and four children Skye, Peter, Haley and Scott.

He left an enormous hole not only at CMA but also in California. He was one of the most respected legislative advocates who was widely acknowledged in Sacramento as the expert on healthcare. Every Legislator looked to him for guidance and in the era of term limits he had become the leading repository for the history of healthcare policy in California. The respect and admiration for Steve was reflected in the heartfelt memorials delivered by Legislators as they honored him. It is simply impossible to quantify the level of expertise that left with Steve’s passing.

Steve was also an incredible teacher. Many of those that continue to work in health care policy and legislation trained under Steve. He always had time to spend with young staffers and lobbyists trying to learn the trade. He made himself available to Senate and Assembly fellows and had an open door policy to anyone who wanted to pick his brain. He had an incredible desire to teach the art of politics and policy that he loved so much and many benefited from his lesson. Hopefully his students (and there are many) will be able to build upon his legacy and apply the lessons he taught them.

Steve’s death came at a particularly tough time for CMA. He passed away a week and a half before the end of the legislative session while CMA still had a number of bills remaining to be acted upon by the Legislature. Incredibly, the CMA Government Relations team was able to secure a number of key victories for physicians in the closing days of the legislative session. I certainly felt that it was a tribute to Steve that his staff was able to continue to work diligently on behalf of medicine despite difficult circumstances.

The following are a few of the acknowledgements of Steve’s death that show the respect he commanded and the void he leaves in CMA and the State Capitol:

"Steve will always be remembered for his passion and his life long commitment to serving this great state." —Gov. Arnold Schwarzenegger

"His passion for health care is like none other that we have ever seen. His knowledge of health care is like none other that we have ever seen. He was a premiere legislative advocate, and did for the California Medical Association what we want legislative advocates to do for all of their organizations, and that is to help guide them to move beyond their special interests." —Sen. Jackie Speier (D-San Francisco)

"I didn't agree with him on hardly anything at all politically, but he was always and unfailingly a gentleman. Our conversations invariably ended with the phrase, 'Always a pleasure.' That's how it was with Steve." —Sen. Ross Johnson (R-Irvine)

"He was brilliant in every way. He was one of those rare, rare human beings who never lost his idealism and his commitment. Although he always thought he was my boss, not the other way around." —Former Assembly Speaker Willie Brown

The Year of the “Governator”
Arnold Schwarzenegger was swept into office with the mother of all mandates. Not only was Governor Davis recalled but Schwarzenegger was also elected overwhelmingly out of a crowded field of candidates. This legislative year was particularly insightful because it was the first time the new Governor acted and deliberated on legislative measures. No one was quite sure how he would act and just where he would come down on a range of issues, particularly those in the healthcare arena. Perhaps the only certainty was that he would not limit himself to the usual constraints of conventional wisdom.

The Governor appears to be driven by an ideology that is largely conservative on economic issues and liberal on social issues. Governor Schwarzenegger clearly established himself as an independent willing to sign measures by Legislators of both political parties and defy some of the major interest groups in Sacramento. The new Administration occasionally feuded with the Democratic Legislature but seemed to develop a much stronger relationship with Senate President Pro Tempore John Burton than former Governor Gray Davis ever had. Governor Schwarzenegger was successful in a number of key legislative victories but fell short of his lofty expectations.

The state budget is still a mess and we will once again be faced with a multi-billion dollar shortfall next year. While savings were realized in the workers compensation reform package, they were not at the level the Governor had hoped. These two issues comprised the two largest challenges the new Governor tackled and he was partially successful. His handling of these issues was generally regarded as fair, balanced and bi-partisan and that, perhaps more than anything else, bodes well for Sacramento.

CMA Key Legislative Issues

SB 1325 (Kuehl) – Medical Staff Self-Governance
SB 1325 recognizes the independence of medical staffs. This bill was a tremendous victory for CMA and medical staffs in California. This bill recognizes the rights and responsibilities of the medical staff and clarifies their ability to seek an injunction against the hospital if their independence is threatened.

After passage in the Senate, CMA was able to negotiate an agreement with the California Healthcare Association, which represents California hospitals. Despite this agreement a number of hospitals led by the United Hospital Association continued to oppose this SB 1325 nearly jeopardizing the outcome of this historic measure. In the face of continued opposition from these hospitals Governor Schwarzenegger ultimately signed the measure delivering a huge victory for medical staffs. SB 1325 should prevent future intrusions against medical staff independence by hospital administrators.

SB 1325 specifically recognizes the following rights:

The medical staff's right of self-governance shall include, but not be limited to, all of the following:

• Establishing, in medical staff bylaws, rules, or regulations, criteria and standards, consistent with Article 11 (commencing with Section 800) of Chapter 1 of Division 2, for medical staff membership and privileges, and enforcing those criteria and standards.
• Establishing, in medical staff bylaws, rules, or regulations, clinical criteria and standards to oversee and manage quality assurance, utilization review, and other medical staff activities including, but not limited to, periodic meetings of the medical staff and its committees and departments and review and analysis of patient medical records.
• Selecting and removing medical staff officers.
• Assessing medical staff dues and utilizing the medical staff dues as appropriate for the purposes of the medical staff.
• The ability to retain and be represented by independent legal counsel at the expense of the medical staff, provided that medical staff at the University of California have the right to retain and be represented by independent legal counsel at the expense of the medical staff upon approval by the Regents of the University of California or their designee in accordance with the bylaws of the Regents, which approval shall not be unreasonably denied.
• Initiating, developing, and adopting medical staff bylaws, rules, and regulations, and amendments thereto, subject to the approval of the hospital governing board, which approval shall not be unreasonably withheld.
  

SB 1336 (Burton) – Oral and Maxillofacial Surgeon-Scope of Practice
SB 1336 proposed to expand the ability of Oral and Maxillofacial surgeons to perform facial cosmetic surgery. Despite heavy opposition to this measure by CMA and the California Society of Plastic Surgeons it moved through the Legislature fairly easily due to the fact that it was co-authored by Senate President Pro-Tempore John Burton and former Senate Republican leader Jim Brulte. This bill was also one of the highest priorities for the California Dental Association. After and overwhelming 33-0 vote by the Senate and 67-2 vote in the Assembly most predicted that the Governor would sign the measure. However, the Governor defied conventional wisdom and vetoed SB 1336. This was a surprising victory considering the level of support in the Legislature for this measure and it may be predictive of the way this Governor will act on future scope of practice expansion issues.

SB 1782 (Aanestad) – Physician Practice Investigations and Prescribing Guidelines
SB 1782 marked a major step forward in protecting physicians from inappropriate law enforcement intrusion into the practice of medicine. This bill provides greater peace of mind to physicians practicing in pain management that they will not be unfairly targeted by law enforcement. This bill requires the California District Attorneys Association, in conjunction with CMA, the Attorney General, local law enforcement and various specialty societies to develop and implement protocols and investigation guidelines to balance between inappropriate prescribing behavior of physicians and protections for physicians when allegations occur. SB 1782 also requires that these guidelines establish a timely return of seized medical records when an allegation of wrongdoing is being investigated and that appropriate clinical review of the case is conducted to ensure that chronically ill patients continue to receive the needed medical attention they deserve.

SB 1569 (Dunn) – Physician Reimbursement
SB 1569 was one of the most bitterly contested bills this legislative session. Authored by Senator Joe Dunn, SB 1569 would have clarified the right of physicians to bring a court action against a health plan for failure to pay claims properly. After passage in the Senate by a single vote, SB 1569 met even more ferocious opposition from the health plans in the Assembly.

The bill failed passage the first time in the Assembly but was given an opportunity for reconsideration on the final day of the Legislature session. After several unsuccessful votes SB 1569 was ultimately approved again by a single vote. The passage of SB 1569 was due in large part to the incredible work of the physicians who called, faxed and wrote their Legislator. Unfortunately the Governor vetoed SB 1569 under heavy pressure from the opposition.

AB 262 (Chan) – Physician Prescribing Habits
AB 262 would have prevented pharmacists from selling, and pharmaceutical salesmen from using, the prescribing information of physicians who do not want that information sold and marketed. After months of tense negotiations with the pharmaceutical industry AB 262 was finally brought back to the Assembly for a final vote. Despite lengthy negotiations some pharmaceutical and biotech companies continued to launch a bitter opposition effort. AB 262 was the third to last bill to be acted on by the Assembly in the wee hours of the final day of session and was subjected to a devastating combination of misinformation and the lack of sleep by and focus of Legislators. This combination led to its narrow and very disappointing defeat on the floor of the Assembly.

AB 2547 (Lowenthal) – Mandatory Reporting
AB 2547 by Assemblyman Alan Lowenthal would have repealed the mandatory reporting requirements of patients suffering from conditions characterized by lapses of consciousness. This bill would have made reporting by physicians voluntary except for patients suffering from dementia-related disorders. This measure would have greatly improved patient communication by removing a patient’s fear of being unnecessarily reported for a controllable condition. Despite most pundits giving it a zero percent chance of passing out of its first legislative committee, AB 2547 passed three Assembly committees, the Assembly floor and a Senate committee before finally falling short in the Senate Judiciary committee. This measure will be reintroduced next year as a result of the incredible progress made this year.

AB 932 (Koretz) – Podiatry-Scope of Practice
AB 932 by Assemblyman Koretz marks an instance in which a bill, with CMA starting out in full opposition, was successfully negotiated to the point where CMA was able to support the final version. The author accepted amendments negotiated by CMA, the California Orthopedic Association (COA) and the California Society of Dermatology. These amendments increased the education and testing requirements in order for a podiatrist to perform limited amputations, assist in surgical procedures and perform foot, ankle and tendon surgical procedures. In addition, these amendments do not allow a podiatrist to treat conditions of the lower extremity or perform an admitting history and physical examination unless allowable in the Medicare program.

SB 1853 (Perata) – Clinical Social Workers-Scope of Practice
SB 1853 would have allowed clinical social workers to engage in the “diagnosis and treatment of mental, emotional, and behavior disorders, conditions, and addictions.” This bill was carried by the newly anointed Senate President Pro-Tempore Don Perata but was nonetheless defeated by CMA on the Assembly floor in the waning days of the legislative session.
Budget

The Budget
Months before the Governor unveiled his revised budget in May, Schwarzenegger began negotiating deals with powerful interest groups to reduce expenditures and create new revenue for the General Fund. This effort, a compact agreement worth $1 billion with gambling tribes, a change to state worker pensions, and a slowing of the prison guard pay increase granted in last year’s budget, all contributed to the Governor’s ability to reduce cuts he proposed in January. This enabled him to begin negotiations on better footing with Democrats who would not agree to many of the cuts he originally proposed to social services, healthcare and education. The Governor also kept his word that he would not raise taxes, which would have been a deal breaker for Republicans.

Three weeks into the fiscal year, Legislators finally struck a deal to pass the $103 billion budget. A partisan standoff left Legislators from both parties staking out issues important to them that resulted in unexpected lengthy negotiations.

For the Republicans, it was the desire to repeal two laws passed by former Governor Gray Davis allowing workers to sue their employers over labor violations. The budget deal includes an agreement to “soften” this law. In addition, talks regarding the current law that restricts school districts from contracting with private business until the budget is passed will be discussed apart from the budget.

The main sticking point for the Democrats was the Governor’s proposal that would have impacted local government funding. However, on that issue a compromise was reached (Proposition 1A) and the budget passed more than three weeks into the fiscal year.

For the most part, healthcare was left relatively unscathed during budget negotiations this year compared to previous years. The Governor eliminated many of his January-proposed budget cuts with the release of the May Revise and the Joint Budget Committee eliminated almost all of the remaining healthcare cuts. The state will run a deficit next year that could grow to $10 billion depending on some lofty revenue assumptions in the budget and the of course the economy.

In addition, the following issues were addressed during the budget cycle:

All proposed Medi-Cal provider rate cuts were eliminated
Due to the success of the lawsuit that CMA and other healthcare groups initiated against the Department of Health and Human Services to stop the 5 percent Medi-Cal rate cut passed in 2003, the 10 percent Medi-Cal rate cut that Schwarzenegger proposed in January was eliminated in the May Revise.

In fact, some Medi-Cal providers (health plans, state only Medi-Cal programs and community based Medi-Cal managed care systems) weren’t included in the preliminary injunction granted by CMA v. Bonta for a variety of technical reasons. Thankfully, they were also relieved of a 10 percent cut due to the precedent set by the judge’s decision in the successful CMA lawsuit.

State-only funded Medi-Cal programs, 5% cut repealed
Because the CMA v. Bonta preliminary injunction protected only Medi-Cal programs that received federal matching funds, the following state-only funded Medi-Cal programs received the 5 percent cut:
· 25 percent of the California Children’s Services program,
· Genetically Handicapped Persons Program
· The Breast and Cervical Cancer Screening Program

During budget committee hearings Legislators voted to repeal the 5 percent cut for these Medi-Cal providers so that they would again have the same reimbursements as all other Medi-Cal providers. Because the CMA v. Bonta case was brought in Federal court the judge had no jurisdiction over these programs and the cut had to be repealed through legislation.

3% rate increase for County Organized Health Systems
Given the shaky financial viability of a couple of the County Organized Health Systems (COHS) and the fact that without them a county would be forced to turn to more costly Fee-for-Service Medi-Cal, the Legislature and Governor decided it would be more cost effective to support the fiscally challenged COHS and therefore this increase will be granted upon the next contract renewal.

$24.8 million in Maddy Emergency Funds protected
The Maddy Fund is used by counties to reimburse emergency and on-call physicians who provide uncompensated emergency care. This state appropriation helps supplement local revenue generated from fines and forfeitures. Implementing language necessary to disperse these funds was inadvertently left out of the budget by the administration and Legislature but will be replaced when the Legislature reconvenes.

Cuts to Medi-Cal and Healthy Families
Even though physicians have come out of 3 historical budget deficits in a row, it was not possible to protect Medi-Cal providers and beneficiaries from every cut. After a long fight the following will affect physicians and beneficiaries:

• Enrollees in the Healthy Families program for children whose parents make more than 200 percent of federal poverty level (FPL) will have to pay a higher share of cost. The premium will go from $9 to $15 per month not to exceed $45 if more than three children are in the program.
• Because the Medi-Cal program currently pays Medi-Cal bills well within the federal and state-required timelines, a one-week check writing delay was initiated by the Department of Health Services (DHS) by issuance of a provider bulletin – this means that any bill for services after July 1, 2004 will be delayed by one week. Another one-week Medi-Cal payment delay will be triggered by the budget in the next fiscal year, beginning July 1, 2005.
  

Workers’ Compensation Reform
In mid-April the Governor signed SB 899 (Poochigian) that contains the compromise workers’ compensation reform proposal.
The law significantly redirects the focus of the California workers’ compensation system from a program that emphasizes the legal process to one that is designed to be more objective and based on physician assessment of injury.

This law is certainly not perfect, actually far from it, but CMA did successfully head off strong efforts by labor, business, and insurance interests to cut physician reimbursement and mandate a Medicare-based fee schedule. CMA also defeated unmanageable billing requirements and an “economic credentialing” program that would have excluded physicians based on the cost of care that they authorize. CMA also won legislative support for the independent medical review process, which places treatment decisions in the hands of qualified physicians with appropriate clinical knowledge, and the ability to integrate treatment of injured workers with other healthcare services.

Among the major changes to the workers’ compensation program are: development of medical provider networks, independent medical review, a very limited integrated 24-hour care option, and revised methodology for determining and compensating disability. The law also reaffirms and strengthens the utilization management provisions of last year’s workers’ compensation changes (SB 228), retains the caps on physical therapy and chiropractic services, and leaves unaltered existing fee schedule provisions. The new workers’ compensation rules will apply to all cases, regardless of the date of injury.

CMA will participate fully as new workers’ compensation regulations are written to ensure that the changes are evenhanded and do not hurt physicians or their patients. A key battleground will concern the criteria for creating provider networks and whether the networks will seek out the lowest-cost providers, as well as how the regulations will implement the legislative mandate to use scientific-based treatment guidelines instead of the existing standards of practice.

Wrap-Up
Arnold Schwarzenegger dominated this legislative year. From the state budget to worker compensation, Governor Schwarzenegger cast an enormous shadow. There is no doubt that Sacramento now revolves around him. The Democrats seem largely reactive to him and have not been able to clearly establish a separate agenda from his. The loss of Senator Burton will greatly exacerbate the inability of Democrats to push a comprehensive alternative to the Governor. Republican Legislators, meanwhile, are thrilled to have control of the Governor’s office but fume over the Governor’s liberal social views. It remains to be seen if Republican Legislators will continue to follow the Governor or begin to grow disillusioned with his social views. But, at this time, the Governor seems to be able to command the stage all on his own.

This past year the Governor sided with CMA on critical legislation such as SB 1325 and SB 1336 but he vetoed SB 1569. Most important however was the fact that he was open to physician input and given the scope of challenges facing California health care, that is critical. This coming legislative session will tell whether he can translate that presence and apply it to the major healthcare issues facing California. Critical issues such as MICRA, balance billing, and access to care loom large and the Governor will need to establish himself in a meaningful way on all of these issues. Next year will be a pivotal one in health care and CMA will engage early and often to ensure that physicians are well represented and their interests and those of their patients are protected.