BILL ANALYSIS Ó
AB 130
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CONCURRENCE IN SENATE AMENDMENTS
AB 130 (Alejo)
As Amended June 3, 2013
Majority vote
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|ASSEMBLY: |75-0 |(May 13, 2013) |SENATE: |39-0 |(June 24, |
| | | | | |2013) |
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Original Committee Reference: L. GOV.
SUMMARY : Enacts changes to a contract of employment between a
healthcare district and a hospital administrator.
1)Prohibits a healthcare district from entering into or renewing
a contract, on or after January 1, 2014, with a hospital
administrator that authorizes retirement plan benefits to be
paid prior to his or her retirement.
2)Allows a healthcare district to renew a contract before
expiration, for a term of no more than four years.
The Senate amendments make minor, technical changes and add
co-authors.
EXISTING LAW :
1)Establishes the Local Health Care District Law.
2)Allows a local hospital district to enter into a contract of
employment with a hospital administrator, the duration of
which shall not exceed four years, but which may periodically
be renewed upon expiration for not more than four years.
3)Requires, if a healthcare district and hospital administrator
enter into a written employment agreement that the written
agreement include specific information regarding all material
terms and conditions including compensation, deferred
compensation, retirement benefits, severance or continuing
compensation after termination of the agreement, vacation,
pay, other paid time off for illness or personal reasons, and
other employment benefits that differ from those available to
other full time employees.
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FISCAL EFFECT : Unknown. This bill is keyed non-fiscal by the
Legislative Counsel.
COMMENTS : This bill prohibits contracts, entered into or
renewed on or after January 1, 2014, from authorizing the
payment of retirement plan benefits to a hospital administrator
prior to his or her retirement. This bill also allows
healthcare districts to renew employment contracts with a
hospital administrator before expiration, for up to four years.
This bill is author-sponsored.
The Local Hospital District Law (now called the Local Health
Care District Law) allows communities to create a new
governmental entity - independent of local and county
jurisdictions - that have the power to impose property taxes,
enter into contracts, purchase property, exercise the power of
eminent domain, issue debt, and hire staff. In general, the
process of creating a hospital district started with citizens in
a community identifying the need for improved access to medical
care.
According to the Association of California Healthcare Districts,
there are currently 78 districts, of which 30 are rural
hospitals, 20 are critical access hospitals, 54 are rural
districts (with or without hospitals), five have stand-alone
clinics, and three have stand-alone skilled nursing facilities.
These institutions provide a significant portion of the medical
care to minority populations and the uninsured in medically
underserved regions. The Salinas Valley Memorial Healthcare
System, in the County of Monterey, was founded in 1947 under the
provisions of the Local Hospital District Law.
The author notes that "In recent years, local healthcare
districts have come under scrutiny for allegations of
administrative waste, wrong doing, and inappropriate spending
priorities." The author sites the Bureau of State Audits' (BSA)
examination of Salinas Valley Memorial Health Care System as the
justification for the bill.
The BSA audit, released in March 2012, concluded the following
in the opening letter to the Governor and legislative leaders:
This report concludes that the [Salinas Valley Memorial]
Health Care System's board of directors, when making
decisions regarding executive compensation, violated the
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Ralph M. Brown Act, which requires legislative bodies of
local public agencies to conduct their meetings in an
open manner. In an environment characterized by a lack
of an executive compensation policy and limited
transparency, the Health Care System granted compensation
for its executives at the upper end of the range for the
health care industry. In addition, the former chief
executive officer received generous retirement and
severance benefits totaling $4.9 million between 2008 and
2011, most of which were paid to him before he retired.
This bill builds upon similar legislation to address the
findings from the BSA audit regarding executive compensation.
AB 2115 (Alejo) of 2012 would have required a local healthcare
district, if the district employs or contracts for a hospital
administrator, to enter into a written employment contract, not
to exceed four years. Current law allows healthcare districts
to enter into and renew an employment contract upon expiration
for up to four years. AB 2115 was vetoed by the Governor citing
that most healthcare districts already have written contracts,
and those that do not should adopt the practice without the
state having to pay for it. Additionally, AB 2180 (Alejo),
Chapter 322, Statutes of 2012, requires, if a healthcare
district and hospital administrator enter into a written
employment agreement, that the written agreement include
information regarding retirement benefits and severance or
continuing compensation after termination of the agreement.
Support arguments: Supporters argue that in a time of rapid
changes within the healthcare industry, healthcare districts
should prioritize scarce funds to benefit public health.
Prohibiting healthcare districts from giving retirement benefits
to its Chief Executive Officers before they retire will improve
transparency and accountability for the policies that healthcare
districts use to manage retirement benefits to their top
executives.
Opposition arguments: None.
Analysis Prepared by : Misa Yokoi-Shelton / L. GOV. / (916)
319-3958 FN:
0001148
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