(a) Each recipient of loan assumption assistance shall enter into a written contract with the commission, which shall be considered a contract with the State of California. In executing contracts, the commission shall give priority to those applicants who agree to provide primary care services for a minimum of three years in a medically underserved designated shortage area.

(b) The contract shall include all of the following terms and conditions:

(1) An unlicensed applicant shall apply for a license to practice medicine in California at the earliest practicable opportunity.

(2) Within six months after licensure and the completion of all requirements for the primary care specialty, the applicant shall engage in the practice of primary care medicine.

(3) The recipient shall agree to provide three consecutive years of service as a primary care physician in a medically underserved designated shortage area, or five consecutive years of service in an area not designated by the commission or the United States Department of Health and Human Services as a medically underserved area in order to receive loan assumption assistance made on his or her behalf directly to the lending institution. Loan assumption assistance shall be provided only for the principal amount of the recipient’s loan. If any recipient takes pregnancy or paternity leave or suffers temporary disability, the recipient shall perform an amount of service equal to the amount of service lost because of the pregnancy or paternity leave or temporary disability. Performance of that service by the recipient shall commence immediately upon his or her return to work following the leave or disability. Under a three-year term of service, 20 percent of the total grant shall be provided on behalf of the recipient upon completion of the first year of service; 30 percent shall be provided on behalf of the recipient upon completion of the second year of service; and 50 percent shall be provided to the recipient or to the lending institution on behalf of the recipient upon completion of three years of service as a primary care physician if the recipient received medical student loan deferment. If a recipient agrees to provide five years of service pursuant to this paragraph, 20 percent of the total grant shall be provided on behalf of the recipient upon completion of the first year of service; 10 percent shall be provided upon completion of the second year of service; 10 percent shall be provided upon completion of the third year of service; 10 percent shall be provided upon completion of the fourth year of service; and 50 percent shall be provided to the recipient or to the lending institution on behalf of the recipient upon completion of five years of service as a primary care physician if the recipient received medical student loan deferment.

(4) The physician shall treat patients in the area who are eligible for medicaid, Medicare, Medi-Cal, and county reimbursement for low-income and medically indigent adults in addition to fee-for-service patients and shall develop a sliding fee scale for low-income patients.

(5) Those applicants who agree to practice in underserved areas shall practice full time in the medically underserved designated shortage area.

(6) The physician shall permit the commission to monitor his or her practice to determine compliance with the terms of the contract.

(7) The commission shall certify compliance with the terms of the contract for purposes of receipt by the physician of the loan assumption assistance for years subsequent to the initial year of loan assumption assistance.

(8) If the recipient dies or becomes totally or permanently disabled, the commission shall nullify the service obligation of the recipient and the commission shall repay the student loan in full.

(9) If the recipient is convicted of a felony or misdemeanor involving moral turpitude, commits an act of gross negligence in the performance of service obligations, or his or her license to practice is revoked or suspended by the appropriate licensing board, the commission may demand repayment of any funds expended as loan assumption assistance on behalf of the physician.

(10) Any recipient of loan assumption assistance who fails to fulfill the obligations for which he or she contracted shall pay to the commission the full amount received plus interest from the date of the original contract at the rate of 2 percent above the prime rate at the time of the breach. The director may recover all costs and attorney fees incurred as a result of collecting payments resulting from the breach.

(11) The loan assumption program provided by this section shall apply only to government loans, or those loans insured or made available by federal or state government.

(12) Not more than 10 percent of the funds obtained from alternative sources, as specified in Section 128290, may be used to cover the administrative costs incurred by the Office of Statewide Health Planning and Development to implement the loan assumption program.

(Added by Stats. 1996, Ch. 1023, Sec. 360. Effective September 29, 1996. Section conditionally operative as prescribed in Section 128290.)