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