BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 276
                                                                  Page  1

          Date of Hearing:   August 30, 2012

                       ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
                                Cameron Smyth, Chair
                    AB 276 (Alejo) - As Amended:  August 22, 2012
           
          SUBJECT  :   Central Coast Hospital Authority.

           SUMMARY  :  Authorizes the Monterey County Board of Supervisors 
          (Board of Supervisors) to establish the Central Coast Hospital 
          Authority (CCHA) as specified, and prohibits the Board of 
          Supervisors from establishing the CCHA until an agreement to 
          affiliate or consolidate the Natividad Medical Center (NMC) with 
          at least one other health care facility is reached.  

           The Senate amendments  delete the Assembly version of this bill, 
          and instead:

          1)Authorize the Board of Supervisors to establish the CCHA as a 
            public entity separate from the Monterey County (County) and 
            any other public entity, subject to specific requirements.  

          2)Require the CCHA to provide management, administration, and 
            other controls to continue to operate as a designated public 
            hospital and provide health care to maintain the viability of 
            the health care safety net in the County.  

          3)Prohibit the Board of Supervisors from establishing the CCHA 
            until an agreement is reached with the governing board of at 
            least one other health facility on terms and conditions 
            satisfactory to both parties to affiliate or consolidate the 
            facilities.  
          
          4)Require the terms and conditions of the agreement to be 
            binding upon the CCHA and require the Board of Supervisors, 
            after an agreement is reached, to adopt an ordinance to 
            establish the CCHA that authorizes the CCHA to exercise its 
            powers and duties, as specified.  

          5)Permit the governing board or the Board of Supervisors and the 
            CCHA with mutual consent to amend the agreement as 
            appropriate.
              
          6)Permit the agreement to include, but not be limited to, the 
            transfer of the following:








                                                                  AB 276
                                                                  Page  2


             a)   Real estate and personal property, and assets and 
               liabilities from the County and the other health care 
               facility to the CCHA;

             b)   Employees from the County and the other health facility 
               to the CCHA; 

             c)   Maintenance, operation, and management or ownership of 
               the medical center, pursuant to provisions of existing law, 
               or of the other health care facility; and, 

             d)   Other matters the Board of Supervisors and the governing 
               board deem necessary and appropriate.  

          7)Require the agreement to include provisions addressing the 
            following:

             a)   Require the CCHA to take title to all assets associated 
               with the medical center, including, but not limited to all 
               real and personal property, funded pension assets, and 
               accounts receivable;

             b)   Require the CCHA to either assume or immediately 
               extinguish, defease, or satisfy, all obligations and 
               liabilities directly or indirectly associated with the 
               medical center, including, but not limited to related or 
               associated debt, accounts payable, accrued liabilities, 
               unfunded pension liabilities, or financial or contractual 
               obligations of any kind;
               
             c)   Require the CCHA to take any other actions necessary so 
               that the County has no continuing financial obligation or 
               responsibility over the CCHA or its operations;

             d)   Require any contract between the Public Employees 
               Retirement System (PERS) and the CCHA to be separate from 
               the County; and,

             e)   Prohibit the County from being in custody or control of 
               CCHA funds and prohibits the CCHA from depositing funds 
               with the County.  

          8)Require the agreement to include a transition plan for 
            personnel that includes the following:








                                                                  AB 276
                                                                  Page  3


             a)   Ongoing communication to employees and recognized 
               employee organizations regarding the impact of the 
               transition on existing medical center and other health care 
               facility employees and employee classifications;

             b)   Meeting and conferring by the County and the other 
               health care facility with affected employee bargaining 
               units on the following:

               i)     A timeframe for which the transfer of personnel 
                 occurs; and,
                  
               ii)    A specified period of time during which employees of 
                 the County affected by the establishment of the CCHA may 
                 elect to be considered for appointment to vacant 
                 positions and exercise reinstatement rights for which 
                 they are qualified and eligible.

             c)   Acknowledgment that the CCHA is bound by the terms of 
               the memoranda of understanding (MoU), to the extent 
               permitted by state and federal law, executed between the 
               County and its exclusive employee representatives that are 
               in effect as of the date the County adopts the ordinance 
               that establishes the CCHA.  Specifies that a subsequent MoU 
               is subject to approval only by the CCHA.  

          9)Provide rights and benefits for NMC employees upon transfer to 
            the CCHA, as follows:

             a)   To retain the existing or equivalent classification, 
               seniority status, job descriptions, salaries, and benefits, 
               including but not limited to accrued and unused vacation, 
               sick leave, personal leave, health and pension benefits, 
               retiree health benefits, and deferred compensation plans; 
               and,  
                  
             b)   To recognize the exclusive representative of the 
               employees bargaining unit.

          10)Require the CCHA for 24 months after the term end date of any 
            medical center MoU in existence when the County establishes 
            the CCHA to continue to:

             a)   Recognize each exclusive representative of each 








                                                                  AB 276
                                                                  Page  4

               bargaining unit;

             b)   Provide at least the same level of employee benefits to 
               CCHA employees who were medical center employees; and,

             c)   Be bound by any existing medical center MoU including 
               the level of wages and benefits, unless modified by mutual 
               agreement with each of the exclusive representatives, and 
               specifies any conflicts in the existing agreement as to 
               wages and other terms and conditions of employment to be 
               resolved only by mutual agreement between the CCHA and each 
               of the exclusive representatives.  

          11)Authorize the CCHA to determine the number of employees, the 
            number of full-time equivalent positions, job descriptions, 
            the nature and extent of classified employment positions and 
            salaries of employees, except as provided in the transfer 
            agreement described in 8) and 26).  

          12)Specify that an agreement for the maintenance, operation and 
            management or ownership of NMC, whether accompanied by a 
            change in licensing, shall not relieve the County of the 
            ultimate responsibility for indigent care pursuant to 
            provisions of existing law.  

          13)Exempt the CCHA from the jurisdiction of a local agency 
            formation commission, pursuant to the Cortese-Knox-Hertzberg 
            Local Government Reorganization Act of 2000.  

          14)Require the CCHA to contract with PERS, to the extent 
            permitted by federal law, to provide membership for CCHA 
            employees.

          15)Prohibit the CCHA from participating in PERS if the PERS 
            Board determines that their participation could jeopardize the 
            PERS tax qualified or governmental plan status under federal 
            law.

          16)Require the CCHA be governed by a board of trustees who must 
            reflect the expertise necessary to maximize the quality and 
            scope of care at the CCHA in a fiscally responsible manner and 
            to reflect the communities of interest that they serve.

          17)Specify that the membership of the board of trustees is nine 
            members, appointed as follows:








                                                                  AB 276
                                                                  Page  5


             a)   By the Board of Supervisors, one trustee for a two-year 
               term, two trustees for a three-year term, two trustees for 
               a four-year term; and,

             b)   By the governing board, two trustees for a two-year 
               term, one trustee for a three-year term, and one trustee 
               for a four-year term.  

          18)Require the governing board and the Board of Supervisors to 
            continue appointments to the trustee positions for which they 
            made initial appointments, including to fill a vacancy. 

          19)Permit the Board of Supervisors and the governing board to 
            remove their respective appointee for cause, with a majority 
            vote.  

          20)Permit the Board of Supervisors and the governing board to 
            modify the number and length of terms, either during or after 
            the formation of the CCHA, if the following conditions are 
            met:

             a)   The board of trustees consists of at least five members; 
               and,

             b)   The board of trustees includes appointees of the Board 
               of Supervisors and the governing board.

          21)Requires the board of trustees to adopt bylaws with a 
            majority vote for the CCHA that specify the officers of the 
            board of trustees, time place and conduct of meetings, and 
            other matters deemed necessary and appropriate to conduct the 
            CCHA's activities.

          22)Provide the CCHA with the following powers: 

             a)   To incur indebtedness and to borrow money and issue 
               tax-free bonds, including revenue bonds, (if pursuant to 
               state law any indebtedness, notes, bonds, or other 
               securities require voter approval than the approval of the 
               Board of Supervisors is required);

             b)   To request that the Board of Supervisors levy a tax on 
               behalf of the CCHA, with the approval of the Board of 
               Supervisors to place the measure on the ballot and subject 








                                                                  AB 276
                                                                  Page  6

               to voter approval;
                
             c)   To have the duties and rights of a local unit of 
               government;
                
             d)   To have perpetual existence;

             e)   To sue and be sued;
                
             f)   To purchase, lease, hold or sell real and personal 
               property of any kind necessary;
                
             g)   To appoint and employ a chief executive officer and 
               other employees as necessary and to establish compensation, 
               retirement, and other benefits for those employees;
                
             h)   To provide sufficient funds for achieving its purposes;
                
             i)   To pursue its own credit rating;

             j)   To engage in contracts or agreements;

             aa)  To establish policies relating to its purpose;

             bb)  To contract for and to accept grants, gifts, loans of 
               funds, property, or any other aid from the federal 
               government, state, state agency, or other source;

             cc)  To invest surplus money in its own treasury, manage 
               investments, and engage third-party investment managers; 
             dd)  To establish nonprofit, for profit, or other entities 
               necessary to carry out its duties;
                
             ee)  To enter into joint powers agreements; 

             ff)  To contract with the County for the provision of 
               indigent care services; and,

             gg)  To engage in other activities that may be in the best 
               interests of the CCHA in order to respond to changes in the 
               health care industry, as determined by the board of 
               trustees.

          23)Specify that the CCHA must:









                                                                  AB 276
                                                                  Page  7

             a)   Be a government entity separate from the county and any 
               other public agency that is not governed by or subject to 
               the policies or operational rules of the county or any 
               other public entity;  

             b)   Be subject to state and federal taxation laws that are 
               applicable to public entities, except to apply from 
               exemption from social security taxation with an agreement 
               with the exclusive representatives of the affected 
               employees, pursuant to federal law;  

             c)   Comply with the Meyers-Milias-Brown Act, the Public 
               Records Act, the Ralph M. Brown Act, and other existing 
               laws that apply to public agencies and laws relating to 
               peer review;

             d)   Carry professional and general liability insurance or 
               programs to the extent sufficient to cover its activities; 

             e)   Comply with current law regarding the settlement of 
               terminated employment contracts;

             f)   Meet all local, state, and federal data reporting 
               requirements; and,
                
             g)   Be subject to the jurisdiction of the Public Employment 
               Relations Board.  

          24)Prohibit the liabilities or obligations of the CCHA from 
            becoming the County's responsibility.  

          25)Prohibit the transfer of NMC from the County to the CCHA from 
            affecting the eligibility of the County to authorize the CCHA 
            to participate in the financing of and receipt of funds that 
            would otherwise be available to a county provider or 
            designated public hospital, as specified.  

          26)Grant the board of trustees of the CCHA the authority over 
            procurement and contracts and to adopt written, rules, 
            regulations, and procedures regarding contacts.  

          27)Prohibit the CCHA from subcontracting work performed by 
            classifications represented by employee organizations, unless 
            the CCHA and exclusive representatives have reached a mutual 
            agreement. 








                                                                  AB 276
                                                                  Page  8


          28)Require the CCHA to be responsible for human resources 
            functions pursuant to written rules, regulations, and 
            procedures adopted.  

          29)Prohibit a member of the CCHA's administrative staff from 
            engaging in activities inconsistent and incompatible with his 
            or her duties as a result of prior employment or affiliation 
            with the County or the governing board.

          30)Establish the process for the board of trustees and Board of 
            Supervisors to terminate the CCHA.  

          31)Define the following terms:

             a)   "Governing board" to mean the governing body of any 
               other health care facility;

             b)   "Other health care facility" to mean one or more health 
               care facilities, districts, or systems in the County of 
               Monterey, including, but not limited to general acute care 
               hospitals, public hospital districts, and related health 
               care programs, facilities, care organizations, and delivery 
               systems, but does not include the medical center; and,  

             c)   "Medical center" to mean the NMC and related public 
               health care programs, facilities, care organizations, and 
               delivery systems that exist or are established by the board 
               of trustees.

          32)Make findings and declarations that a special statute is 
            necessary and that a general law cannot be made applicable 
            because of the particular needs of Monterey County.  

           EXISTING LAW  :

          1)Requires counties to relieve and support all incompetent, 
            poor, indigent persons, and those incapacitated by age, 
            disease, or accident, lawfully resident therein, when such 
            persons are not supported and relieved by their relatives or 
            friends, by their own means, or by state hospitals or other 
            state or private institutions.

          2)Defines a "designated public hospital" as one of a list of 
            county and UC hospitals, including NMC. 








                                                                  AB 276
                                                                  Page  9


          3)Establishes the Alameda County Hospital Authority as a 
            separate public entity, established by the Alameda County 
            Board of Supervisors, to manage the Alameda County Medical 
            Center.  

           AS PASSED BY THE ASSEMBLY  , this bill increased penalties for 
          local agencies, including specified joint powers agencies, that 
          fail to file their annual financial transaction reports with the 
          California State Controller's Office in a timely manner, and 
          makes other specified changes to local agency financial 
          reporting requirements.  


           FISCAL EFFECT  :  None


           COMMENTS :  

          1)According to Monterey County, "NMC is a 172 bed acute care 
            hospital that is owned and operated by Monterey County.  NMC 
            is a successful designated public safety net provider serving 
            the residents of Monterey County for over 126 years providing 
            health care access to all patients regardless of their ability 
            to pay.  As a county hospital, it is currently a department 
            within the County and is thus subject to all the rules, 
            regulation, policies and oversight inherent in being within a 
            county governmental structure." 

          2)The Board of Supervisors has determined that in the era of 
            health care reform and the competitive nature of the health 
            care environment, and in order to continue providing people of 
            the County access to affordable, high-quality health care 
            services, NMC needs the ability to function with increased 
            flexibility, responsiveness and innovation. To accomplish this 
            goal, the Board of Supervisors wants NMC to be affiliated or 
            consolidated with one or more healthcare facilities in 
            Monterey County and operated by a separate and distinct 
            Hospital Authority apart from the County.


          3)This bill is permissive and allows the Board of Supervisors to 
            establish the CCHA if an agreement is reached with another 
            health care facility to merge or consolidate those facilities. 
            This bill contains several provisions to ensure that 








                                                                  AB 276
                                                                  Page  10

            healthcare services remain accessible to patients regardless 
            of their ability to pay and that the CCHA as a separate entity 
            from the County will still continue to serve as a designated 
            hospital.  This bill also provides requirements for the CCHA 
            upon the transfer of NMC employees. The California Nurses 
            Association argues that this bill "ensures that the employees 
            have a seamless transition of wages, benefits, and contracts 
            without loss of rights or status." One may argue that these 
            protections are vital for both patients and NMC employees as 
            the bill establishes the board of trustees as the governing 
            board of the CCHA removing the immediate decision-making out 
            of the hands of the elected Board of Supervisors.  Supporters 
            argue that the board of trustees will be appointed and 
            skill-based therefore having the authority to effectively and 
            independently run the CCHA.


          4)According to the author, "This bill provides a viable solution 
            to maintain the hospital's mission of improving the health of 
            the people in Monterey County through access to affordable, 
            high quality health care services.  This Authority will also 
            allow the region to become more competitive for federal 
            dollars."  This bill is author-sponsored.


          5)The Legislature has granted several counties the ability to 
            create health authorities including Alameda, San Luis Obispo, 
            Santa Barbara, and Sonoma (for dental). 


          AB 2374 (Bates), Chapter 816, Statues of 1996 authorized the 
            County of Alameda to establish a hospital authority to manage 
            the respective county hospitals and county programs currently 
            known as the Alameda County Medical Center.  

          SB 538 (O'Connell), Chapter 899, Statues of 1999 authorized San 
            Luis Obispo County to establish a health authority to 
            administer its hospital and family health centers.

          6)This bill differs from past legislation to create hospital 
            authorities in several ways.  First, previous health 
            authorities were established with existing county-run and 
            operated hospitals and programs. This bill allows the Board of 
            Supervisors to establish the CCHA, but only if an agreement is 
            reached with the Board of Supervisors and another health care 








                                                                  AB 276
                                                                  Page  11

            facility to consolidate or merge the facilities.  The 
            definition for "other health care facility" includes 
            facilities that are not county-run or operated and does not 
            give a clear indication what facility will be consolidated to 
            establish the CCHA, unlike past legislation.  The second 
            difference is that this bill authorizes the CCHA to issue 
            bonds and levy taxes, subject to voter approval.  AB 2374 
            (Bates) initially provided the Alameda Hospital Authority with 
            the power to issue bonds without voter approval, but the 
            provision was removed in a later version of the enacting 
            legislation.


          7)This bill authorizes the CCHA to issue bonds and levy taxes.  
            While the Legislature has not yet granted this power to a 
            hospital authority, health care districts can levy taxes and 
            issue general obligation bonds subject to voter approval. 
            Health care districts like Salinas Valley Memorial Hospital 
            (which is part of the Salinas Valley Memorial Healthcare 
            System) already have the ability to utilize those financial 
            mechanisms. 


          8)On July 26, 2012, the Salinas Valley Memorial Hospital board 
            of directors unanimously rejected a proposal to merge with 
            NMC.  A local news station reported that Salinas Valley 
            Memorial Hospital voted to continue as a stand-alone public 
            district hospital, but are open to merging in the future. This 
            bill prohibits the CCHA from being established unless there is 
            an agreement reached between the Board of Supervisors and a 
            governing board.  Absent an agreement in place to consolidate 
            or merge, the Legislature may wish to consider whether there 
            is a need for this bill.  The author argues that NMC can 
            continue to pursue a merger in the future and that this bill 
            will help ease concerns by granting the Board of Supervisors 
            the ability to establish the CCHA in statute.  


          9)Support arguments:  Supporters argue that the formation of the 
            CCHA is the best long-term strategic and operational model for 
            the sustainability of NMC and its affiliation partners, and 
                              that the CCHA will continue the safety net mission of NMC, 
            including providing services to low income residents and 
            populations with special needs.  









                                                                  AB 276
                                                                  Page  12


          Opposition arguments:  With no agreement in place, a case could 
            be made that this legislation is unnecessary at this time.  

          10)This bill was substantially amended in the Senate and the 
            Assembly-approved provisions of this bill were deleted.  The 
            subject matter of this bill, as amended in the Senate, has not 
            been heard in any Assembly policy committee this legislative 
            session.

           
          REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          California Nurses Association
          Central California Alliance for Health
          Natividad Medical Center
          Monterey County Board of Supervisors
          Monterey County Registered Nurses' Association
          Service Employees International Union
          Service Employees International Union, Local 521

           Opposition 
           
          None on file
           
          Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916) 
          319-3958