A bill that would permit rural hospitals to directly employ physicians has been approved by the California State Assembly. Assembly Bill 2024, authored by Jim Wood (D-Healdsburg), will be considered next by the Senate Health Committee. The bill would waive the state’s ban on the corporate practice of medicine for 28 rural health clinics and critical access hospitals allowing them more freedom to hire doctors. The bill is a response to the difficulties rural areas have had attracting and retaining medical providers.

“We are experiencing a health crisis,” Wood said in a press release. “Rural California has 1 physician for every 3,500 people, and the average age of that one physician is 60. It is crucial that we find ways to convince physicians to practice in our small towns.” The press release noted a 2015 survey from Merritt Hawkins indicating that 92% of final year medical residents would prefer employment with a salary rather than practicing independently.

“Unfortunately in our rural communities it can be extremely challenging for physicians to make it,” said Wood. “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.” The bill has garnered the support of groups such as the California Hospital Association, which said the bill would address a problem common to many hospitals in remote regions of the state of California.

However, California has a statewide prohibition of the Corporate Practice of Medicine. This policy means that physicians cannot be employed by hospitals; they must act as independent contractors. According to the Medical Board of California, the ban on the Corporate Practice of Medicine is intended to “prevent unlicensed persons from interfering with or influencing the professional judgment of physicians.” If approved by the Senate and signed by Governor Brown, the bill would ease the restriction for certain rural hospitals –including Garberville’s Jerold Phelps Community Hospital and Redwood Memorial Hospital in Fortuna – in the hopes that doctors recently out of medical school will be attracted to stable salaried positions at remote hospitals. With that said, prior efforts to chip away at the California corporate practice of medicine doctrine have been defeated in the legislature in past years.