BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2180|
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THIRD READING
Bill No: AB 2180
Author: Alejo (D)
Amended: 6/20/12 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 8-1, 6/27/12
AYES: Hernandez, Harman, Alquist, Blakeslee, De León,
DeSaulnier, Rubio, Wolk
NOES: Anderson
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-1, 6/28/12
AYES: Wolk, Dutton, DeSaulnier, Hernandez, Kehoe, Liu, Yee
NOES: Fuller
NO VOTE RECORDED: La Malfa
ASSEMBLY FLOOR : 49-25, 5/21/12 - See last page for vote
SUBJECT : Local health care districts: employment
contracts
SOURCE : Author
DIGEST : This bill requires a written employment
agreement between a health care district and a hospital
administrator to include all material terms and conditions
agreed to between the district and the hospital
administrator regarding compensation and other benefits, as
specified, that differ from those available to other
full-time employees.
CONTINUED
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ANALYSIS :
Existing law:
1. Establishes "The Local Health Care District Law," under
which a local hospital district may be organized,
incorporated and managed. Permits a district to include
incorporated or unincorporated territory, or both, in
any one or more counties.
2. Permits a local hospital district to enter into a
contract of employment with a hospital administrator,
and limits the duration of this contract to four years,
but permits the contract to be renewed periodically upon
expiration.
3. Specifies that any reference to a "hospital
administrator" means "chief executive officer (CEO)."
This bill requires a written employment agreement between a
health care district and a hospital administrator to
include all material terms and conditions agreed to between
the district and the hospital administrator regarding
compensation, retirement benefits, severance or continuing
compensation after termination of the agreement, vacation
pay and other paid time off for illness or personal
reasons, and other employment benefits that differ from
those available to other full-time employees.
Background
State audit of the Salinas Valley Memorial Health Care
System (SVMHS) . In March 2012, the Bureau of State Audits
released its report on the fiscal mismanagement of SVMHS,
subtitling the report "Increased Transparency and Stronger
Controls Are Necessary as It Focuses on Improving Its
Financial Situation." SVMHS is an independent special
health care district with an elected five-member board of
directors that governs its activities. At the core of SVMHS
is the Salinas Valley Memorial Hospital, which employed
more than 1,700 employees as of June 20, 2011, and
maintains 269 beds. According to the report, "although as
a public agency SVMHS's decisions regarding compensation
for its top executives should be transparent, this has not
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been the case for such board decisions." The report goes
on to state that in an environment characterized by the
lack of an executive compensation policy and limited
transparency in executive compensation matters, SVMHS's
executives were granted compensation at the upper level of
industry practices. The former CEO, who retired in April
2011, received $4.9 million in retirement and severance
benefits between 2008 and 2011, the majority of which came
from multiple retirement investment plans that SVMHS
provided him as part of his overall retirement benefits
package.
The Bureau of State Audits made several recommendations as
part of this report, including recommending that SVMHS
develop a formal policy that establishes a process for
determining executive compensation that clearly documents
all executive compensation decisions. Additionally, the
report recommended, in order to ensure that the terms of
its CEO's employment and compensation are clear and to aid
the board in its oversight role, that SVMHS should engage
its next permanent CEO in a written employment contract.
Comments
According to the author, "In recent years, local health
care districts have come into public scrutiny with
allegations of administrative wrong doing and lack of
transparency. For example, a recent State audit of the
Salinas Valley Memorial Health Care System, located in my
district, highlighted the fact that the former CEO left the
hospital with $4.9 million from seven separate investment
plans; along with a severance package 18 times his average
monthly salary. In addition, he also collects $115,000
from his annual pension. During the 26 years that the CEO
worked for the hospital, board members were unclear about
the CEO's total compensation and what he was entitled to.
Requiring heath care district to disclose compensation
information in their contract agreements with CEOs and
hospital administrators will result in clarity,
transparency and accountability in terms of employment and
compensation."
Related Legislation
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AB 2115 (Alejo) requires a written employment agreement if
a local health care district employs or contracts with a
hospital administrator or CEO.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
SUPPORT : (Verified 8/7/12)
California Conference Board of the Amalgamated Transit
Union
California Conference of Machinists
California Labor Federation
California Nurses Association
California Teamsters Public Affairs Council
Engineers and Scientists of California
International Longshore & Warehouse Union
Monterey Bay Central Labor Council
National Union of Healthcare Workers
Operating Engineers, Local No. 3
Professional and Technical Engineers, Local 21
UNITE HERE
United Food and Commercial Workers Union, Western States
Council
Utility Workers Union of America, Local 132
OPPOSITION : (Verified 8/7/12)
Antelope Valley Healthcare District
Corcoran District Hospital
Fallbrook Healthcare District
Hospital Corporation of America
John C. Fremont Healthcare District
Lompoc Valley Medical Center
Los Medanos Community Healthcare District
Mayers Memorial Hospital District
Modoc Medical Center
North Sonoma County Healthcare District
Palomar Health
Petaluma Healthcare District
Southern Mono Healthcare District
ASSEMBLY FLOOR : 49-25, 5/21/12
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AYES: Alejo, Allen, Ammiano, Atkins, Beall, Block,
Blumenfield, Bonilla, Bradford, Brownley, Buchanan,
Butler, Charles Calderon, Campos, Carter, Cedillo, Davis,
Dickinson, Eng, Feuer, Fong, Fuentes, Galgiani, Gatto,
Gordon, Hall, Hayashi, Hill, Huber, Hueso, Huffman, Lara,
Bonnie Lowenthal, Ma, Mendoza, Mitchell, Monning,
Nestande, Pan, V. Manuel Pérez, Portantino, Skinner,
Solorio, Swanson, Torres, Wieckowski, Williams, Yamada,
John A. Pérez
NOES: Achadjian, Conway, Cook, Donnelly, Beth Gaines,
Garrick, Gorell, Grove, Hagman, Halderman, Harkey,
Jeffries, Jones, Knight, Logue, Mansoor, Miller, Morrell,
Nielsen, Norby, Olsen, Silva, Smyth, Valadao, Wagner
NO VOTE RECORDED: Bill Berryhill, Chesbro, Fletcher,
Furutani, Roger Hernández, Perea
AGB:m 8/8/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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