BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 678 HEARING: 6/19/13
AUTHOR: Gordon FISCAL: Yes
VERSION: 4/15/13 TAX LEVY: No
CONSULTANT: Ewing
HEALTHCARE DISTRICTS
Requires specified health care districts to conduct
periodic needs assessments and report progress in meeting
health needs.
Background and Existing Law
California's 82 local health care districts have broad
authority to establish and maintain services, and to assist
others in providing services, which are necessary for the
maintenance of good physical and mental health in the
communities they serve (SB 1169, Maddy, 1994). Health care
districts are governed by elected boards of directors. As
hospitals, they face market pressures to compete with other
health care providers. As local governments, they must
follow the Brown Act, the Public Records Act, the Political
Reform Act, public contracting laws, and other statutory
restrictions.
Responding to changes in community health needs and in
health care delivery, health care districts explore
alternatives to providing direct services through publicly
operated hospitals; including leasing or selling their
assets to other entities to better serve their communities.
A health care district may transfer its assets, for the
benefit of the communities it serves, to a non-governmental
entity, including a for-profit or non-profit corporation
(SB 1771, Russell & Kopp, 1992; AB 1131, Torrico, 2005; SB
894, Senate Local Government Committee, 2010). For a
transfer of 50% or more of a district's assets, a district
must meet specific obligations (SB 460, Kelley, 1998),
including:
Determining fair and reasonable value of the assets
to be transferred and fair and reasonable returns to
be received by the district in exchange.
Discussing the transfer agreement in at least five
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properly noticed public meetings before the district
board decides to transfer the assets.
Requiring, in the transfer agreement, that any
funds 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.
Submitting the proposal for approval by the voters.
For transfers to non-profit corporations, transfer
agreements also must:
Provide that the district approve all initial board
members of the nonprofit corporation and any
subsequent board members as specified in the transfer
agreement.
Provide that specified assets are to be transferred
back to the district upon termination of the transfer
agreement.
Provide for a commitment to operate and maintain
the district's health care facilities and its assets
for the benefit of the communities served by the
district.
Health care districts that transfer their assets must
continue to serve as an advocate for the community with the
entities operating the transferred assets.
The Legislature delegated its power to control the
boundaries of cities and special districts to local agency
formation commissions (LAFCOs). The courts call LAFCOs the
Legislature's watchdog over local boundary changes. Among
a LAFCO's statutory purposes is to encourage orderly
formation and development of local agencies based on local
conditions and circumstances (AB 2838, Hertzberg, 2000).
To guide boundary decisions, a LAFCO must prepare and
regularly revise a sphere of influence for each city and
special district, setting out future service areas and
boundaries. Before preparing a sphere of influence, a
LAFCO must conduct a municipal service review that examines
the area's demographics, the capacity of public facilities
and public services, financial abilities, opportunities for
sharing public facilities, and governmental accountability.
As health care districts have shifted operational control,
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or ownership, of public hospitals to non-governmental
entities, some elected officials are concerned that health
care districts may not have the information they need on
whether the physical and mental health care needs of their
communities are being met.
Proposed Law
Assembly Bill 678 directs a health care district that has
transferred assets to a corporation to conduct a community
needs assessment every five years and provide opportunity
for public involvement and input. Beginning January 1,
2019, annual progress reports must incorporate information
from those needs assessments.
AB 678 requires a LAFCO to prepare a written statement of
its determinations regarding any community health
assessment prepared by a health care district in a LAFCO's
municipal service review.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . California's health care
districts are authorized to provide direct services, and to
support the efforts of other entities, in addressing health
care needs in the communities they serve. When a district
transfers ownership or operation of a district's assets to
another entity, it retains the obligation to advocate on
behalf of the community's health needs. Assembly Bill 678
would fortify the capacity of those health districts to
pursue that advocacy. By performing periodic needs
assessments, with broad community consultation and input,
along with specific reporting on progress against needs,
health care districts will be better informed, and thus
better able to inform the public and advocate for meeting
community needs.
2. Good for all ? AB 678 would apply to 15 health care
districts that have leased or sold their hospitals. The
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requirements would extend to other agencies that, in the
future, elect to transfer their hospitals to a corporation.
If improved needs assessments and reporting are valuable
for some healthcare districts, it may be beneficial to
extend the requirement to all health care districts. The
Committee may wish to consider amendments that would extend
the provisions of AB 678 to all health care districts.
3. Double referral . The Senate Rules Committee has
ordered a double-referral of AB 678, first to the Senate
Governance & Finance Committee, which has policy
jurisdiction over the statutes governing local agencies,
and then to the Senate Health Committee, which has
jurisdiction over health-related legislation.
Assembly Actions
Assembly Local Government: 9-0
Assembly Health: 19-0
Assembly Appropriations: 17-0
Assembly Floor: 74-0
Support and Opposition (6/13/13)
Support : Association of California Healthcare Districts;
California Association of Local Agency Formation
Commissions; California Special Districts Association;
Health Access.
Opposition : Unknown.