BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | SB 804|
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THIRD READING
Bill No: SB 804
Author: Corbett (D)
Amended: 1/4/12
Vote: 21
SENATE GOVERNANCE & FINANCE COMMITTEE : 6-3, 1/11/12
AYES: Wolk, DeSaulnier, Hancock, Hernandez, Kehoe, Liu
NOES: Huff, Fuller, La Malfa
SENATE HEALTH COMMITTEE : 5-1, 1/11/12
AYES: Hernandez, Alquist, De León, DeSaulnier, Wolk
NOES: Blakeslee
NO VOTE RECORDED: Strickland, Anderson, Rubio
SUBJECT : Health care districts: transfers of assets
SOURCE : Author
DIGEST : This bill requires health care districts to
include, in an agreement transferring more than 50 percent
of the health care districts assets, the appraised fair
market value of any asset transferred to a nonprofit
corporation, as defined. Further requires the appraisal of
the fair market value to be performed within the six months
preceding the date on which the district approves the
transfer agreement.
ANALYSIS :
Existing law:
CONTINUED
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1. Establishes the Local Health Care District Law which
authorizes
communities to form special districts to construct and
operate hospitals and other health care facilities to
meet local needs.
2. Authorizes a health care district to transfer, for the
benefit of the communities served by the district, any
part of its assets of the district to one or more
nonprofit corporations to operate and maintain the
assets. Prior to the district transfer, requires the
district board to submit a measure to the voters of the
district proposing the transfer.
3. Authorizes a district to transfer, at less than fair
market value, any part of the assets of the district to
one or more nonprofit corporations to operate and
maintain the assets, if the transfer benefits the
communities served by the district. Requires that for a
transfer of 50 percent or more of a district's assets to
be deemed to benefit a district's communities, a
district must:
A. Fully discuss the transfer agreement in at least
five properly noticed public meetings before the
district board's decision to transfer the assets;
B. Provide, in the transfer agreement, that the
district approve all initial board members of the
nonprofit corporation and any subsequent board
members as may be specified in the transfer
agreement;
C. Provide, in the transfer agreement, that specified
assets are to be transferred back to the district
upon termination of the transfer agreement;
D. Commit the nonprofit corporation, in the transfer
agreement, to operate and maintain the district's
health care facilities and its assets for the benefit
of the communities served by the district; and
E. Require, in the transfer agreement, that any funds
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a corporation receives from the district be used only
for specified activities that would further a valid
public purpose if undertaken directly by the
district.
4. Requires the district to report to the California
Attorney General, within 30 days of any lease of
district assets to one or more corporations, the type of
transaction and the entity to whom the assets were
leased.
This bill:
1. Requires health care districts to include, in an
agreement transferring more than 50 percent of the
health care district's assets, the appraised fair market
value of any asset transferred to the nonprofit
corporation.
2. Requires the fair market value be appraised 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 of any asset transfer.
3. Requires that the appraisal be performed within the six
months preceding the date on which the district approves
the transfer agreement.
Background
Health care districts were formed under state law to meet
local health needs not satisfied by other health care
resources or government programs in a given geographical
area. Districts formed pursuant to state law are financed
by assessments on real and personal property within the
district. A 2006 report published by the California
Healthcare Foundation found that 85 health care and
hospital districts have been formed in California since the
first hospital district enabling legislation was passed in
1946. Districts operate medical facilities, including
hospitals, public health clinics, and skilled nursing
facilities. Some also provide community-based education
programs to the residents of their districts. Responding
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to changes in health care delivery, districts explore
economic and organizational alternatives, including leasing
or selling their assets to nonprofit corporations or even
to for-profit companies.
Comments
According to the author's office, "SB 804 will help ensure
that the public has the information they need to decide
about the transfer of health care district's assets to an
outside entity for less than fair market value. Under
current law, a transfer of 50 percent or more of a
healthcare district's assets requires voter approval, but
there is no requirement to provide voters with an
independently verified valuation of the assets in question.
SB 804 remedies this problem, by requiring an independent
appraisal of the fair market value of the health care
district's assets and ensuring that information is provided
to the public."
Prior Legislation
SB 134 (Corbett), 2011-12 Session, contained provisions
substantially similar to the provisions of this bill. SB
134 was amended to delete these provisions in the Assembly.
SB 1240 (Corbett), 2009-10 Session, would have imposed
conditions on contracts between districts and other
entities to operate one or more health facilities owned by
the district. The bill was vetoed by Governor Arnold
Schwarzenegger, who stated that the bill would have limited
the discretion of a district when entering into a contract
with another operating entity and would have created the
unintended consequence of reducing the incentive for such
arrangements when hospitals are struggling to remain open.
SB 894 (Corbett), Chapter 699, Statutes of 2010, made
permanent the requirement that health care districts get
majority-voter approval before they transfer or lease 50
percent or more of their assets to corporations.
SB 1351 (Corbett), 2007-08 Session, would have required
voter approval before a district can transfer, for the
benefit of the communities served by the district and in
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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, as opposed
to 50 percent or more of the district's assets. The bill
was vetoed by Governor Arnold Schwarzenegger.
AB 1131 (Torrico), Chapter 194, Statutes of 2005, extended
the January 1, 2006 sunset date to 2011, permitting
districts to transfer or lease assets to for-profit
corporations, as specified.
FISCAL EFFECT : Appropriation: No Fiscal Com.: No
Local: No
AGB:mw 1/13/12 Senate Floor Analyses
SUPPORT/OPPOSITION: NONE RECEIVED
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