BILL NUMBER: SB 804 ENROLLED
BILL TEXT
PASSED THE SENATE AUGUST 29, 2012
PASSED THE ASSEMBLY AUGUST 28, 2012
AMENDED IN ASSEMBLY JUNE 6, 2012
AMENDED IN SENATE JANUARY 4, 2012
INTRODUCED BY Senator Corbett
FEBRUARY 18, 2011
An act to amend Section 32121 of the Health and Safety Code,
relating to health care districts.
LEGISLATIVE COUNSEL'S DIGEST
SB 804, Corbett. Health care districts: transfers of assets.
Existing law authorizes a health care district to transfer, for
the benefit of the communities served by the district, in the absence
of adequate consideration, any part of the assets of the district to
one or more nonprofit corporations to operate and maintain the
assets. Existing law deems a transfer of 50% or more of the district'
s assets to be for the benefit of the communities served only upon
the occurrence of specified conditions.
This bill would include among the above-described conditions the
inclusion within the transfer agreement of the appraised fair market
value of any asset transferred to the nonprofit corporation, as
specified.
Existing law requires the board, by resolution, to submit a
measure to the voters of the district for approval, prior to the
transfer of 50% or more of the district's assets.
This bill would require the resolution to include specified
information.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. Section 32121 of the Health and Safety Code is amended
to read:
32121. Each local district shall have and may exercise the
following powers:
(a) To have and use a corporate seal and alter it at its pleasure.
(b) To sue and be sued in all courts and places and in all actions
and proceedings whatever.
(c) To purchase, receive, have, take, hold, lease, use, and enjoy
property of every kind and description within and without the limits
of the district, and to control, dispose of, convey, and encumber the
same and create a leasehold interest in the same for the benefit of
the district.
(d) To exercise the right of eminent domain for the purpose of
acquiring real or personal property of every kind necessary to the
exercise of any of the powers of the district.
(e) To establish one or more trusts for the benefit of the
district, to administer any trust declared or created for the benefit
of the district, to designate one or more trustees for trusts
created by the district, to receive by gift, devise, or bequest, and
hold in trust or otherwise, property, including corporate securities
of all kinds, situated in this state or elsewhere, and where not
otherwise provided, dispose of the same for the benefit of the
district.
(f) To employ legal counsel to advise the board of directors in
all matters pertaining to the business of the district, to perform
the functions in respect to the legal affairs of the district as the
board may direct, and to call upon the district attorney of the
county in which the greater part of the land in the district is
situated for legal advice and assistance in all matters concerning
the district, except that if that county has a county counsel, the
directors may call upon the county counsel for legal advice and
assistance.
(g) To employ any officers and employees, including architects and
consultants, the board of directors deems necessary to carry on
properly the business of the district.
(h) To prescribe the duties and powers of the health care facility
administrator, secretary, and other officers and employees of any
health care facilities of the district, to establish offices as may
be appropriate and to appoint board members or employees to those
offices, and to determine the number of, and appoint, all officers
and employees and to fix their compensation. The officers and
employees shall hold their offices or positions at the pleasure of
the boards of directors.
(i) To do any and all things that an individual might do that are
necessary for, and to the advantage of, a health care facility and a
nurses' training school, or a child care facility for the benefit of
employees of the health care facility or residents of the district.
(j) To establish, maintain, and operate, or provide assistance in
the operation of, one or more health facilities or health services,
including, but not limited to, outpatient programs, services, and
facilities; retirement programs, services, and facilities; chemical
dependency programs, services, and facilities; or other health care
programs, services, and facilities and activities at any location
within or without the district for the benefit of the district and
the people served by the district.
"Health care facilities," as used in this subdivision, means those
facilities defined in subdivision (b) of Section 32000.1 and
specifically includes freestanding chemical dependency recovery
units. "Health facilities," as used in this subdivision, may also
include those facilities defined in subdivision (d) of Section 15432
of the Government Code.
(k) To do any and all other acts and things necessary to carry out
this division.
(l) To acquire, maintain, and operate ambulances or ambulance
services within and without the district.
(m) To establish, maintain, and operate, or provide assistance in
the operation of, free clinics, diagnostic and testing centers,
health education programs, wellness and prevention programs,
rehabilitation, aftercare, and any other health care services
provider, groups, and organizations that are necessary for the
maintenance of good physical and mental health in the communities
served by the district.
(n) To establish and operate in cooperation with its medical staff
a coinsurance plan between the hospital district and the members of
its attending medical staff.
(o) To establish, maintain, and carry on its activities through
one or more corporations, joint ventures, or partnerships for the
benefit of the health care district.
(p) (1) To transfer, at fair market value, any part of its assets
to one or more corporations to operate and maintain the assets. A
transfer pursuant to this paragraph shall be deemed to be at fair
market value if an independent consultant, with expertise in methods
of appraisal and valuation and in accordance with applicable
governmental and industry standards for appraisal and valuation,
determines that fair and reasonable consideration is to be received
by the district for the transferred district assets. Before the
district transfers, pursuant to this paragraph, 50 percent or more of
the district's assets to one or more corporations, in sum or by
increment, the elected board shall, by resolution, submit to the
voters of the district a measure proposing the transfer. The measure
shall be placed on the ballot of a special election held upon the
request of the district or the ballot of the next regularly scheduled
election occurring at least 88 days after the resolution of the
board. If a majority of the voters voting on the measure vote in its
favor, the transfer shall be approved. The campaign disclosure
requirements applicable to local measures provided under Chapter 4
(commencing with Section 84100) of Title 9 of the Government Code
shall apply to this election.
(2) To transfer, for the benefit of the communities served by the
district, in the absence of adequate consideration, any part of the
assets of the district, including, without limitation, real property,
equipment, and other fixed assets, current assets, and cash,
relating to the operation of the district's health care facilities to
one or more nonprofit corporations to operate and maintain the
assets.
(A) A transfer of 50 percent or more of the district's assets, in
sum or by increment, pursuant to this paragraph shall be deemed to be
for the benefit of the communities served by the district only if
all of the following occur:
(i) The transfer agreement and all arrangements necessary thereto
are fully discussed in advance of the district board decision to
transfer the assets of the district in at least five properly noticed
open and public meetings in compliance with Section 32106 and the
Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part
1 of Division 2 of Title 5 of the Government Code).
(ii) The transfer agreement provides that the hospital district
shall approve all initial board members of the nonprofit corporation
and any subsequent board members as may be specified in the transfer
agreement.
(iii) The transfer agreement provides that all assets transferred
to the nonprofit corporation, and all assets accumulated by the
corporation during the term of the transfer agreement arising out of,
or from, the operation of the transferred assets, are to be
transferred back to the district upon termination of the transfer
agreement, including any extension of the transfer agreement.
(iv) The transfer agreement commits the nonprofit corporation to
operate and maintain the district's health care facilities and its
assets for the benefit of the communities served by the district.
(v) The transfer agreement requires that any funds received from
the district at the outset of the agreement or any time thereafter
during the term of the agreement be used only to reduce district
indebtedness, to acquire needed equipment for the district health
care facilities, to operate, maintain, and make needed capital
improvements to the district's health care facilities, to provide
supplemental health care services or facilities for the communities
served by the district, or to conduct other activities that would
further a valid public purpose if undertaken directly by the
district.
(vi) The transfer agreement includes the appraised fair market
value, from an independent consultant with expertise in methods of
appraisal and valuation and in accordance with applicable
governmental and industry standards for appraisal and valuation, of
any asset transferred pursuant to this paragraph.
(vii) The appraisal that is used to determine the fair market
value that is included within the transfer agreement is performed
within the six months preceding the date on which the district
approves the transfer agreement.
(B) A transfer of 10 percent or more but less than 50 percent of
the district's assets, in sum or by increment, pursuant to this
paragraph shall be deemed to be for the benefit of the communities
served by the district only if both of the following occur:
(i) The transfer agreement and all arrangements necessary thereto
are fully discussed in advance of the district board decision to
transfer the assets of the district in at least two properly noticed
open and public meetings in compliance with Section 32106 and the
Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part
1 of Division 2 of Title 5 of the Government Code).
(ii) The transfer agreement meets all of the requirements of
clauses (iii) to (v), inclusive, of subparagraph (A).
(C) Before the district transfers, pursuant to this paragraph, 50
percent or more of the district's assets to one or more nonprofit
corporations, in sum or by increment, the elected board shall, by
resolution, submit to the voters of the district a measure proposing
the transfer. The resolution shall identify the asset proposed to be
transferred, its appraised fair market value, and the full
consideration that the district is to receive in exchange for the
transfer. The appraisal shall be performed by an independent
consultant with expertise in methods of appraisal and valuation and
in accordance with applicable governmental and industry standards for
appraisal and valuation within the six months preceding the date on
which the district approves the resolution. The measure shall be
placed on the ballot of a special election held upon the request of
the district or the ballot of the next regularly scheduled election
occurring at least 88 days after the resolution of the board. If a
majority of the voters voting on the measure vote in its favor, the
transfer shall be approved. The campaign disclosure requirements
applicable to local measures provided under Chapter 4 (commencing
with Section 84100) of Title 9 of the Government Code shall apply to
this election.
(D) Notwithstanding the other provisions of this paragraph, a
hospital district shall not transfer any portion of its assets to a
private nonprofit organization that is owned or controlled by a
religious creed, church, or sectarian denomination in the absence of
adequate consideration.
(3) If the district board has previously transferred less than 50
percent of the district's assets pursuant to this subdivision, before
any additional assets are transferred, the board shall hold a public
hearing and shall make a public determination that the additional
assets to be transferred will not, in combination with any assets
previously transferred, equal 50 percent or more of the total assets
of the district.
(4) The amendments to this subdivision made during the 1991-92
Regular Session, the amendments made to this subdivision and to
Section 32126 made during the 1993-94 Regular Session, and the
amendments made to this subdivision during the 2011-12 Regular
Session, shall only apply to transfers made on or after the effective
dates of the acts amending this subdivision. The amendments to this
subdivision made during those sessions shall not apply to either of
the following:
(A) A district that has discussed and adopted a board resolution
prior to September 1, 1992, that authorizes the development of a
business plan for an integrated delivery system.
(B) A lease agreement, transfer agreement, or both between a
district and a nonprofit corporation that were in full force and
effect as of September 1, 1992, for as long as that lease agreement,
transfer agreement, or both remain in full force and effect.
(5) Notwithstanding paragraph (4), if substantial amendments are
proposed to be made to a transfer agreement described in subparagraph
(A) or (B) of paragraph (4), the amendments shall be fully discussed
in advance of the district board's decision to adopt the amendments
in at least two properly noticed open and public meetings in
compliance with Section 32106 and the Ralph M. Brown Act (Chapter 9
(commencing with Section 54950) of Part 1 of Division 2 of Title 5 of
the Government Code).
(6) Notwithstanding paragraphs (4) and (5), a transfer agreement
described in subparagraph (A) or (B) of paragraph (4) that provided
for the transfer of less than 50 percent of a district's assets shall
be subject to the requirements of this subdivision when subsequent
amendments to that transfer agreement would result in the transfer,
in sum or by increment, of 50 percent or more of a district's assets
to the nonprofit corporation.
(7) For purposes of this subdivision, a "transfer" means the
transfer of ownership of the assets of a district. A lease of the
real property or the tangible personal property of a district shall
not be subject to this subdivision except as specified in Section
32121.4 and as required under Section 32126.
(8) Districts that request a special election pursuant to
paragraph (1) or (2) shall reimburse counties for the costs of that
special election as prescribed pursuant to Section 10520 of the
Elections Code.
(9) (A) Nothing in this section, including subdivision (j), shall
be construed to permit a local district to obtain or be issued a
single consolidated license to operate a separate physical plant as a
skilled nursing facility or an intermediate care facility that is
not located within the boundaries of the district.
(B) Notwithstanding subparagraph (A), Eastern Plumas Health Care
District may obtain and be issued a single consolidated license to
operate a separate physical plant as a skilled nursing facility or an
intermediate care facility that is located on the campus of the
Sierra Valley District Hospital. This subparagraph shall have no
application to any other district and is intended only to address the
urgent need to preserve skilled nursing or intermediate care
services within the rural County of Sierra.
(C) Subparagraph (B) shall only remain operative until the Sierra
Valley District Hospital is annexed by the Eastern Plumas Health Care
District. In no event shall the Eastern Plumas Health Care District
increase the number of licensed beds at the Sierra Valley District
Hospital during the operative period of subparagraph (B).
(10) A transfer of any of the assets of a district to one or more
nonprofit corporations to operate and maintain the assets shall not
be required to meet paragraphs (1) to (9), inclusive, of this
subdivision if all of the following conditions apply at the time of
the transfer:
(A) The district has entered into a loan that is insured by the
State of California under Chapter 1 (commencing with Section 129000)
of Part 6 of Division 107.
(B) The district is in default of its loan obligations, as
determined by the Office of Statewide Health Planning and
Development.
(C) The Office of Statewide Health Planning and Development and
the district, in their best judgment, agree that the transfer of some
or all of the assets of the district to a nonprofit corporation or
corporations is necessary to cure the default, and will obviate the
need for foreclosure. This cure of default provision shall be
applicable prior to the office foreclosing on district hospital
assets. After the office has foreclosed on district hospital assets,
or otherwise taken possession in accordance with law, the office may
exercise all of its powers to deal with and dispose of hospital
property.
(D) The transfer and all arrangements necessary thereto are
discussed in advance of the transfer in at least one properly noticed
open and public meeting in compliance with Section 32106 and the
Ralph M. Brown Act (Chapter 9 (commencing with Section 54950) of Part
1 of Division 2 of Title 5 of the Government Code). The meeting
referred to in this paragraph shall be noticed and held within 90
days of notice in writing to the district by the office of an event
of default. If the meeting is not held within this 90-day period, the
district shall be deemed to have waived this requirement to have a
meeting.
(11) If a transfer under paragraph (10) is a lease, the lease
shall provide that the assets shall revert to the district at the
conclusion of the leasehold interest. If the transfer is a sale, the
proceeds shall be used first to retire the obligation insured by the
office, then to retire any other debts of the district. After
providing for debts, any remaining funds shall revert to the
district.
(12) A health care district shall report to the Attorney General,
within 30 days of any transfer of district assets to one or more
nonprofit or for-profit corporations, the type of transaction and the
entity to whom the assets were transferred or leased.
(q) To contract for bond insurance, letters of credit, remarketing
services, and other forms of credit enhancement and liquidity
support for its bonds, notes, and other indebtedness and to enter
into reimbursement agreements, monitoring agreements, remarketing
agreements, and similar ancillary contracts in connection therewith.
(r) To establish, maintain, operate, participate in, or manage
capitated health care service plans, health maintenance
organizations, preferred provider organizations, and other managed
health care systems and programs properly licensed by the Department
of Insurance or the Department of Managed Care, at any location
within or without the district for the benefit of residents of
communities served by the district. However, that activity shall not
be deemed to result in, or constitute, the giving or lending of the
district's credit, assets, surpluses, cash, or tangible goods to, or
in aid of, any person, association, or corporation in violation of
Section 6 of Article XVI of the California Constitution.
Nothing in this section shall be construed to authorize activities
that corporations and other artificial legal entities are prohibited
from conducting by Section 2400 of the Business and Professions
Code.
Any agreement to provide health care coverage that is a health
care service plan, as defined in subdivision (f) of Section 1345,
shall be subject to Chapter 2.2 (commencing with Section 1340) of
Division 2, unless exempted pursuant to Section 1343 or 1349.2.
A district shall not provide health care coverage for any employee
of an employer operating within the communities served by the
district, unless the Legislature specifically authorizes, or has
authorized in this section or elsewhere, the coverage.
Nothing in this section shall be construed to authorize any
district to contribute its facilities to any joint venture that could
result in transfer of the facilities from district ownership.
(s) To provide health care coverage to members of the district's
medical staff, employees of the medical staff members, and the
dependents of both groups, on a self-pay basis.