BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                AB 276
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        ( Without Reference to File  )

        CONCURRENCE IN SENATE AMENDMENTS
        AB 276 (Alejo)
        As Amended  August 22, 2012
        Majority vote
         
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        |ASSEMBLY:  |     |(June 1, 2011)  |SENATE: |31-0 |(August 28,    |
        |           |     |                |        |     |2012)          |
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                 (vote not relevant)


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        |COMMITTEE VOTE:  |6-0  |(August 30, 2012)   |RECOMMENDATION: |concur    |
        |(L. GOV.)        |     |                    |                |          |
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        Original Committee Reference:   L. GOV.  

         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.  








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        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:

           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 








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             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:

           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 








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             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 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 








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          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:

           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 








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             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 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,








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           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:

           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, 








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          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. 

        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 








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          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. 

        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  :  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."  

        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.

        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 healthcare services 








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        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.  

        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.  

        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.  

        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 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.  








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        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.

        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. 

        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.  

        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.  

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

        Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916) 
        319-3958 


        FN: 
        0005807









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