BILL ANALYSIS �
AB 678
Page 1
Date of Hearing: April 30, 2013
ASSEMBLY COMMITTEE ON HEALTH
Richard Pan, Chair
AB 678 (Gordon and Dickinson) - As Amended: April 15, 2013
SUBJECT : Health care districts: community health needs
assessment.
SUMMARY : Requires local health care districts (HCDs) that
lease or transfer assets to a corporation, as specified, to
conduct assessments of community health needs every five years
with opportunity for public input. Specifically, this bill :
1)Requires a HCD that leases or transfers its assets to a
corporation, as specified, to conduct an assessment of the
community's health needs every five years, with opportunities
for the involvement and input of citizens, public agencies,
civic organizations, local agencies, and other community
groups through public hearings and other means that the HCD
deems appropriate.
2)Allows HCDs to include, in the assessment in 1) above,
information gathered from reports generated by other agencies
that address health needs within the geographic area.
3)Commencing January 1, 2019, requires the assessment in 1)
above to be used for a currently required annual report on the
progress being made in meeting the community's health needs.
4)Requires any assessment in 1) above to be included by a local
agency formation commission (LAFCO) conducting a municipal
service review (MSR) of a HCD.
EXISTING LAW :
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)Allows a HCD to include incorporated or unincorporated
territory, or both, or territory in any one or more counties,
and allows the territory comprising the HCD to not be
contiguous, as specified.
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3)Authorizes a HCD to transfer, for the benefit of the
communities served by the HCD, any part of its assets to one
or more nonprofit corporations to operate and maintain the
assets. Prior to the transfer, requires the HCD board to
submit a measure to the voters of the HCD proposing the
transfer. Requires that for a transfer of 50% or more of a
HCD's assets to be deemed to benefit the community, a HCD
must:
a) Fully discuss the transfer agreement in at least five
properly noticed public meetings before the HCD board's
decision to transfer the assets;
b) Provide in the transfer agreement that the HCD must
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 HCD upon termination of
the transfer agreement;
d) Commit the nonprofit corporation, in the transfer
agreement, to operate and maintain the HCD's healthcare
facilities and its assets for the benefit of the
communities served by the HCD; and,
e) Require, in the transfer agreement, that any funds a
corporation receives from the HCD be used only for
specified activities that would further a valid public
purpose if undertaken directly by the HCD.
4)Enumerates various powers and duties for HCDs, including but
not limited to the following:
a) Operating health care facilities such as hospitals,
clinics, skilled nursing facilities (SNFs), nurses'
training schools, and child care facilities;
b) Operating ambulance services within and outside of the
HCD;
c) Operating programs that provide chemical dependency
services, health education, wellness and prevention,
rehabilitation, and aftercare;
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d) Carrying out activities through corporations, joint
ventures, or partnerships;
e) Establishing or participating in managed care;
f) Contracting with and making grants to provider groups
and clinics in the community; and,
g) Other activities that are necessary for the maintenance
of good physical and mental health in communities served by
the HCD.
5)Requires a HCD that leases or transfers its assets to a
corporation in accordance with specified provisions to act as
an advocate for the community to the operating corporation and
to annually report to the community on the progress made in
meeting the community's health needs.
6)Establishes the powers and duties of a LAFCO, as per the
Cortese-Knox-Hertzberg Local Government Reorganization Act of
2000, to include, among others, the power to initiate
proposals by resolution of application for the consolidation
of a HCD, the dissolution of a HCD, a merger, the
establishment of a subsidiary HCD, the formation of a new HCD
or HCDs, and a specified reorganization.
7)Requires a LAFCO to conduct a service review of the municipal
services provided in order to prepare and to update spheres of
influence. Among other things, the law requires the commission
to prepare a written statement of its determinations.
FISCAL EFFECT : This bill has not yet been analyzed by a fiscal
committee.
COMMENTS :
1)PURPOSE OF THE BILL . According to the author, HCDs were first
authorized by the Local Hospital District Act to build
hospitals in 1945. SB 1169 (Maddy), Chapter 696, Statutes of
1994, made several changes in law to reflect the shift in
responsibility of these HCDs from hospital construction and
operation to other services. Currently, only 43 of
California's 73 HCDs still operate hospitals. Others operate
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clinics or ambulance services, but 14 do not directly operate
any health care facilities. The author states that these HCDs
have few restrictions on how they spend the public tax dollars
they receive (which were intended to fund hospital
construction and operation), and some HCDs have engaged in
activities with a questionable nexus to community health.
Existing law requires a HCD leasing or transferring its assets
to a corporation to act as an advocate for the community to
the operating corporation and to annually report to the
community on the progress made in meeting the community's
health needs. Unfortunately, the author states, there is
currently no direction given on the development or nature of
this annual reporting requirement.
Thus, the goal of this bill is to establish a baseline and
framework for already required annual reports by providing an
analysis of community needs to help guide investments and
activities while also engaging the public and generating
public support and awareness. Additionally, it makes
information available for the LAFCOs to use in completing
MSRs.
2)HEALTH CARE DISTRICTS . Near the end of World War II,
California faced a severe shortage of hospital beds. To
respond to the inadequacy of acute care services in the
non-urban areas of the State, the Legislature enacted the
Local Hospital District Law, with the intent to give rural,
low income areas without ready access to hospital facilities a
source of tax dollars that could be used to construct and
operate community hospitals and health care institutions, and,
in medically underserved areas, to recruit physicians and
support their practices.
The Local Hospital District Law (now called the Local Health
Care District Law) allowed communities to create a new
governmental entity, independent of local and county
jurisdictions, that had 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 HCD started with citizens in a community
identifying the need for improved access to medical care. The
hospital district's boundaries were usually based on the
distance between communities and the closest available acute
care hospital services. A petition for formation was then
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filed by the community to the county board of supervisors, and
then residents of the proposed hospital district were needed
to vote in favor of the measure to create the hospital
district. In 1963, the Knox-Nisbet Act was passed, which
created LAFCOs and clarified and formalized the process for
establishing a HCD.
According to the 2006 California HealthCare Foundation report
(CHCF Report), "California's Health Care Districts," in
response to health care market changes and to allow HCDs to
keep pace and remain competitive, the Legislature began
amending the original law. HCDs' power has been expanded to
do anything that is "necessary for the maintenance of good
physical and mental health in the communities served by the
HCD." Specifically, HCDs can support the following: health
care facilities, including substance abuse and mental health
programs; outpatient services and free clinics; programs for
seniors, including transportation; nurse training; physician
recruitment; ambulance services; health education programs;
and, a variety of wellness and rehabilitation activities.
According to the Association of California Healthcare Districts
(ACHD), there are currently 74 HCDs, of which 30 are rural, 20
are critical access, 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 of the State and are mainly funded by
Medicare, Medi-Cal, and HCD tax dollars. HCDs are typically
governed by boards of five elected directors who are required
to serve without compensation except for payments of $100 per
meeting not to exceed five meetings per month. Directors also
may be reimbursed for travel and incidental expenses incurred
in the performance of official business.
Of the 74 HCDs in the State, 30 HCDs do not currently operate
hospitals. Some HCDs have never operated a hospital, while
others that previously operated hospitals, no longer operate
them. Of the HCDs still supporting hospitals, a variety of
arrangements have been made to keep these hospitals solvent
and competitive. Some HCDs continue to operate independent
institutions, governed by the local elected board, while many
have chosen to enter into agreements with both for-profit and
not-for-profit hospital management organizations.
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According to the CHCF Report, one of the challenges facing HCDs
without hospitals is the public perception that the HCDs were
formed to operate hospitals, and, once they cease to operate
the hospital, they should be dissolved. Local grand juries,
city council members, boards of supervisors, newspaper
editors, and concerned residents in many of the HCDs have
publicly questioned the continued existence of these tax
collecting entities. Some argue, however, that in many cases,
the HCDs have filled gaps in local health services, resulting
from the funding constraints faced by local public health
departments. It is also argued that HCDs play a vital role in
physician recruitment and nurse training, in light of the
shortages of medical professionals in most regions of
California.
In a May 2000 study of special districts, the Little Hoover
Commission noted that two dozen HCDs no longer operated their
own hospitals, having leased or sold them to corporations.
The report found that about half of the HCDs monitored how the
corporations operated the hospitals, while the other half did
not. In response, the Legislature passed AB 1941 (Strom
Martin), Chapter 798, Statutes of 2000, to make HCD officials
advocates to the hospitals' corporate operators, including the
requirement for an annual report to the community on progress
in meeting's the community's health needs.
3)SUPPORT . ACHD, in support, writes that this bill will ensure
that specified HCDs are assessing the health care needs of the
communities they serve. ACHD believes this bill fosters good
governance by codifying best practices for HCDs and the
communities in which they serve. ACHD states that its
analysis of the bill concludes that 13 HCDs will be impacted
by these new requirements. While many of these HCDs are
currently conducting needs assessments, this bill will ensure
HCDs are using a formalized and objective process to develop
strategies for addressing community needs.
4)PREVIOUS LEGISLATION .
a) AB 2418 (Gordon) of 2012 would have required HCD to
spend 95% of any property tax revenue on "current community
health care benefits" and limited the annual set-aside of
property tax revenues to reserves at no more than 30%.
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b) SB 804 (Corbett), Chapter 684, Statutes of 2012,
requires HCDs to include, in an agreement transferring more
than 50% of the HCD's assets, the appraised fair market
value of any asset transferred to a nonprofit corporation,
as defined.
c) SB 894 (Corbett), Chapter 699, Statutes of 2010, made
permanent the requirement that HCDs get majority-voter
approval before they transfer or lease 50% or more of their
assets to corporations.
d) SB 1351 (Corbett) of 2008 would have required voter
approval before a HCD can transfer, for the benefit of the
communities served by the HCD and in the absence of
adequate consideration, any part of the assets of the HCD
to one or more nonprofit corporations to operate and
maintain the assets, as opposed to 50% or more of the HCD's
assets. The bill was vetoed by Governor Arnold
Schwarzenegger, whose veto message read: "I cannot support
placing additional restrictions on a local hospital HCD,
especially when they are elected by, and accountable to,
their local community."
e) AB 1941 requires a HCD that leases or transfers its
assets to a corporation to act as an advocate for the
community to the operating corporation, and to annually
report to the community on the progress made in meeting the
community's needs.
f) SB 1169 renamed hospital districts "health care
districts," reflecting that health care was increasingly
being provided outside of the hospital setting.
g) SB 1771 (Russell and Kopp), Chapter 1359, Statutes of
1992, defines the terms and conditions under which a
district may transfer, without adequate consideration, any
part of its assets to one or more nonprofit corporations,
including that the transfer must be for the benefit of the
community served by the district, provide for the transfer
back to the district of the assets at the end of the lease,
and be approved by a majority of the voters in the district
if the transfer is 50% or more of the district's assets.
REGISTERED SUPPORT / OPPOSITION :
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Support
Association of California Healthcare Districts
California Association of Local Agency Formation Commissions
California Special Districts Association
Health Access California
Opposition
None on file.
Analysis Prepared by : Hammad Khan / HEALTH / (916) 319-2097