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California Health Care Legislative Update: Fall 2023

Governor Newsom signed 890 bills and vetoed 156 bills in 2023. Every year, California passes multiple laws that impact health care practitioners and health facilities and, as further described below, 2023 is no exception. From physician assistant supervision to nursing facility informed consent requirements, these laws will present various new compliance considerations for practitioners and facilities as soon as January 1, 2024.

Notably, among the vetoed bills were AB 616, the Medical Group Financial Transparency Act, which would have required physician organizations to disclose audited financial reports and comprehensive financial statements to the Office of Health Care Affordability (which would have been made public) and AB 1451, which would have required health plans and insurers to cover urgent and emergency mental health and substance use disorders without pre-authorization.

Health Care Practitioners

AB 1070: Reduces Physician Assistant Supervision Requirements for In Home Evaluations and Wellness Visits

AB 1070 creates an exception for in-home evaluations to California’s limitation on the number of physician assistants that a physician may supervise at any one time, which is usually no more than four. Effective January 1, 2024, physicians may supervise up to eight physician assistants at one time if they are solely performing certain “in home health evaluations,” including comprehensive physical exams, health condition and social determination of health assessments, medication reviews, screening tests, and health education. This new exception to California’s usual supervision requirements applies only if all physician assistants supervised are limited to performing health evaluations like Medicare “annual wellness visits” and do not involve direct patient treatment or prescribing medication.

AB 1369: Creates a Limited Licensing Exemption for Out of State Physicians to Treat Terminally Ill Patients

In 2016, California enacted the Right to Try Act (RTA), which authorized drug manufacturers to make investigational drugs (not approved by FDA) available to patients with a serious or immediately life-threatening disease outside of a clinical trial. To be eligible for such treatment under the RTA, a patient must have considered all other FDA approved treatment options and be unable to participate in a relevant clinical trial. Additionally, the investigational drug must be recommended by the patient's primary physician and a consulting physician.

According to the author of the bill, terminally ill patients’ access to treatment in California may still be limited if the physicians specializing in an investigational treatment are not licensed in the state. Under the new law, physicians without a California license may provide services relating to investigational treatments via telehealth to patients in California if the patient has:

  • an immediately life-threatening disease or condition as defined by the Right to Try Act;
  • given written informed consent (or as appropriate, the patient’s representative has given such consent) for the use of an eligible out-of-state physician and surgeon’s telehealth health care services and the release of certified medical records to the patient’s primary physician and surgeon by the out-of-state physician;
  • not been accepted to participate in the clinical trial nearest to the patient’s home for the immediately life-threatening disease or condition within one week of completion of the clinical trial application process, or, in the medical judgment of a California licensed physician, it is unreasonable for the patient to participate in that clinical trial due to the patient’s current condition and stage of disease; and
  • a written attestation from a California licensed physician confirming that the patient meets the above eligibility requirements.

AB 1557: Makes Permanent Authority of California Pharmacists to Conduct Medication Chart Order Reviews Outside of Hospitals

Existing law authorizes prescribers to electronically enter a prescription into a pharmacy’s or hospital’s computer system from a location outside of the pharmacy or hospital unless the prescription is for controlled substances classified in Schedule II, III, IV, or V. Effective January 1, 2024, prescribers (and their authorized agents) and pharmacists may electronically enter a prescription or an order into a pharmacy’s or hospital’s computer system from any location outside of the pharmacy or hospital for all prescription drugs including controlled substances so long as the facility has given permission. Additionally, the new law authorizes a pharmacist to verify medication chart orders for appropriateness before administration from outside the facility in accordance with the health care facility’s policies and procedures.

AB 1731: Creates New Exemption from Checking CURES Database

Existing law exempts a health care practitioner from the duty to consult the Controlled Substance Utilization Review and Evaluation System (CURES) database in certain circumstances, including when a health care practitioner prescribes, orders, administers, or furnishes a controlled substance in the emergency department of a general acute care hospital and the quantity of the controlled substance does not exceed a non-refillable 7-day supply of the controlled substance.

Effective January 1, 2024, a health care practitioner will also be exempt from the duty to consult the CURES database when the health care practitioner prescribes, orders, administers, or furnishes buprenorphine or other controlled substance containing buprenorphine in the emergency department of a general acute care hospital.

Health Facilities

AB-853: Requires Pre-Closing Notice of Certain Retail Pharmacy Transactions to Attorney General

Effective January 1, 2024, the California Attorney General (AG) must be notified in advance of certain pharmacy transactions involving the acquisition of voting securities or assets. The parties involved in mergers or other changes of control of “retail drug firms” that either require a notice to the Federal Trade Commission (FTC) or United States Department of Justice (DOJ) under the federal Hart-Scott-Rodino Antitrust Improvements Act of 1976 (HSR) or involve the acquisition of twenty (20) or more retail drug firms will be responsible for filing a written notice to the AG no less than 180 days before the acquisition is “made effective.” For transactions that have “commenced” prior to January 1, 2024, written notice must be submitted to the AG at least 30 days before the transaction is “made effective.”

The AG will have 180 days to review the transaction, during which time the effective date of the transaction will be tolled. Based on the language of the statute, it appears that transactions that are already in process but do not close by the end of the year (2023) will have closing time lines significantly extended to allow for the 180-day AG review period.

The new law does not include an express approval requirement, but the AG may use the notice, documents, and information disclosed during this process in a judicial action in state or federal court or an administrative action involving the merger or acquisition, and thus transactions are unlikely to close without an indication from the AG that no such action will be taken.

If the parties are required to file notice to the FTC or US DOJ, a copy may be submitted to the AG. For transactions that do not require notice under the HSR, the notice must include, among other things:

  • a description of the business services, structure, management and governance;
  • the source, nature, and amount of the consideration used or to be used in effecting the merger or other acquisition of control;
  • fully audited financial information for the past 5 years;
  • any plans or proposals that an acquiring party may have to liquidate, merge, or to make any other material change in its business or corporate structure or management;
  • information required to assess the competitive effects of the proposed acquisition; and
  • information required to assess the economic and community impact of any planned divestiture or store closures.

“Retail drug firms” are defined to include multiple individuals and entity types that are located in California and are identified as retail businesses or establishments in the North American Industry Classification System within the retail trade category 45611. What qualifies as “commencing” or making a transaction “effective” is not explained, nor is it clear what qualifies as a single “firm” for purposes of determining when the 20-firm threshold has been met. The new law authorizes the AG to adopt regulations, which are expected to, and that we hope will, offer clarity on many of the open questions that currently exist with respect to the implementation of this new law. With respect to non-compliance and enforcement of the law, the AG may recover attorney’s fees and costs and assess civil penalties of up to $20,000 for each day of non-compliance.

AB 1392: Requires Hospital Minority, Women, LGBT, and Disabled Veteran Business Enterprise Procurement Plans

Effective July 1, 2025, and annually thereafter, licensed hospitals with $50 million or more in operating expenses and licensed hospitals with operating expenses of $25 million or more that are part of a hospital system will be required to submit annual plans to the Department of Health Care Access and Information (HCAI) detailing how they will increase procurement (Procurement Plans) from minority, women, LGBT, and veteran business tier 1 and tier 2 enterprises (Business Enterprises). Hospitals that are not legally required to submit a plan are “encouraged” to submit Procurement Plans.

Among other things, Procurement Plans must include the hospital’s supplier diversity policy statement, short and long term goals and timetables for increasing procurement from Business Enterprises, the methods used to encourage procurement from and support Business Enterprises, the methods the hospital will use to resolve issues that may limit or impede such an enterprise from becoming a supplier, and the planned and past implementation of relevant recommendations made by the hospital diversity commission (Commission).

Hospitals may request a 30-day extension due to unforeseen delays, but generally hospitals may be fined $100 per day for failure to submit Procurement Plans by the annual deadline.

HCAI may review Procurement Plans for completeness but may not impose quotas or set supplier preferences. HCAI will establish a link on its website providing public access to the contents of each hospital’s Procurement Plan.

The new law also requires that HCAI, in consultation with the Commission, establish guidelines for hospitals to voluntarily utilize when pursuing procurement efforts, activities, and programs, and undertake outreach and provide assistance to hospitals, manufacturers, vendors, and group purchasing organizations based on the Commission’s recommendations for purposes of increasing procurement from Business Enterprises.

AB 242: Makes Physician Employment Exception for Critical Access Hospitals Permanent

The corporate practice of medicine (CPOM) prohibition in California prohibits many hospitals from employing physicians, but there are exceptions. In 2016, AB 2024 created a pilot program that permits critical access hospitals to employ physicians and charge for their services if both of the following conditions are met:

  • The medical staff approves physician employment as being in the best interest of the community served by the hospital; and
  • The hospital does not interfere with the physician’s professional judgment.

The pilot program extended until January 1, 2024. The new law makes the exception to the CPOM prohibition for critical access hospitals permanent by deleting the sunset date.

AB 48: Nursing Facility Resident Informed Consent Protection Act of 2023

According to the bill’s author, nursing facilities such as Skilled Nursing Facilities and Intermediate Care Facilities have increasingly turned to psychotherapeutic drugs to sedate and control residents, and sometimes these medications are misused. For example, antipsychotic drugs designed to treat serious psychiatric disorders like schizophrenia are instead prescribed to residents with dementia, which can increase the risks of dangerous side effects and death without medical justification. The new law is intended to give nursing home residents and their families' the tools to help them decide whether a psychotherapeutic drug is right for them. “Psychotherapeutic drug” is defined by the new law as a drug to control behavior or to treat thought disorder processes, excluding antidepressants.

Effective January 1, 2024, a nursing facility resident has the right to receive the information that is material to an individual’s decision concerning whether to accept or refuse the administration of psychotherapeutic drugs. Prior to prescribing a psychotherapeutic drug for a nursing facility resident, prescribers will be required to personally examine and obtain the informed written consent of the resident or the resident’s representative. Additionally, nursing facility residents specifically have the right to be free from psychotherapeutic drugs used for the purpose of resident discipline or convenience and to be free from psychotherapeutic drugs used as a chemical restraint, except in an emergency. When used in an emergency, the psychotherapeutic drug must be the least intrusive treatment alternative for the resident, and used only for a specified and limited period of time.

Under the new law, the informed consent process may be completed using telehealth and electronic signatures and will eventually be documented by the nursing facility using the form that will be developed by the Department of Public Health and made available no later than December 31, 2025 (Consent Form). Once the Consent Form is available, the resident or the resident’s representative and the health care professional obtaining consent will need to sign the Consent Form, which must be maintained in the resident’s record.

Within six months after the Consent Form is signed, and every six months thereafter during which the resident receives a psychotherapeutic drug, the facility must provide a written notice to the resident and, if applicable, the resident’s representative, of any recommended dosage adjustments and the resident’s right to revoke consent and to receive gradual dose reductions and behavioral interventions in an effort to discontinue the psychotherapeutic drug.

The facility must provide the following information as part of the informed consent process:

  • possible non-pharmacologic approaches that could address the resident’s needs;
  • whether the drug has a current boxed warning label along with a summary of, and information about how to find, the contraindications, warnings, and precautions required by the United States Food and Drug Administration;
  • whether a proposed drug is being prescribed for a purpose that has or has not been approved by the United States Food and Drug Administration;
  • possible interactions with other drugs the resident is receiving; and
  • how the facility and prescriber will monitor and respond to any adverse side effects and inform the resident of side effects.

Once the Consent Form is available, facility staff must verify that the resident’s health record contains a written consent form with the signatures required before initiating treatment with psychotherapeutic drugs.

Behavioral Health

SB 43: Expands Definition of Gravely Disabled for Purposes of Involuntary Commitment

Under existing law, persons who are deemed to be a danger to self or others or are gravely disabled may be involuntarily detained for designated periods of time for evaluation and treatment by county-designated facilities. Additionally, persons who are gravely disabled may be involuntarily detained by general acute care and licensed acute care facilities that are not designated by the county for up to twenty four (24) hours. “Gravely disabled” under these laws is currently defined as a condition in which a person, as a result of a mental health disorder, is unable to provide for their basic personal needs for food, clothing, and shelter.

Under the new law, the definition of gravely disabled will also include severe substance use disorders (as defined under the current version of the Diagnostic and Statistical Manual of Mental Disorders) and co-occurring mental health disorder and severe substance use disorder, and take into account the ability to survive safely in the community without involuntary detention or treatment and medical care necessary to prevent serious deterioration of a medical condition likely to result in serious bodily injury.

A county, by adoption of a resolution of its governing body, may defer implementation of these changes until January 1, 2026.

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Lara Compton

Pat focuses his practice on advising health care organizations on regulatory, compliance, data privacy, and transactional matters. He is also a Certified Information Privacy Professional–US (CIPP–US).
Kathryn F. Edgerton is a Member at Mintz and a Certified Information Privacy Professional (CIPP-US) who advises hospitals and other health-related organizations on a broad range of transactional, regulatory, and strategic issues. Her clients include physician organizations, long-term and behavioral health providers, telemedicine providers, home health providers, and medical spas.