BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 2546|
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THIRD READING
Bill No: AB 2546
Author: Salas (D)
Amended: 8/11/14 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 8-0, 6/18/14
AYES: Hernandez, Morrell, Beall, DeSaulnier, Evans, Monning,
Nielsen, Wolk
NO VOTE RECORDED: De León
SENATE GOVERNANCE & FINANCE COMMITTEE : 7-0, 6/25/14
AYES: Wolk, Knight, Beall, DeSaulnier, Hernandez, Liu, Walters
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 76-0, 5/19/14 - See last page for vote
SUBJECT : Kern County Hospital Authority
SOURCE : Author
DIGEST : This bill authorizes the Kern County Board of
Supervisors (Board) to establish the Kern County Hospital
Authority (Authority) to manage, administer, and control the
Kern Medical Center (KMC) and for the operation of additional
programs, facilities, care organizations, physical practice
plans, and delivery systems that may be affiliated or
consolidated with the medical center, and specifies the new
Authority's governance, powers, and procedures.
CONTINUED
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Senate Floor Amendments of 8/11/14 ensure that participation by
the Authority in public retirement plans will not jeopardize the
plan's tax-qualified or governmental plan status under federal
law and make various technical and clarifying changes to the
provisions of law governing the creation of the Kern County
Hospital Authority.
ANALYSIS :
Existing law:
1.Requires every county to be a "provider of last resort," by
supporting all incompetent, poor, indigent persons, and those
incapacitated by age, disease, or accident, who reside in the
county, when such persons are not supported and relieved by
their relatives or friends, by their own means, or by state
hospitals or other state or private institutions.
2.Permits the board of supervisors of each county to prescribe
rules that authorize the county hospital to integrate its
services with those of other hospitals into a system of
community service. Permits the board of supervisors of any
county to transfer the maintenance, operation and management
or ownership of the county hospital to the University of
California or any other public agency or community nonprofit
corporation empowered to operate a hospital facility upon a
finding that the community services provided by the hospital
could be more efficient, effectively or economically provided
by the transferee than the county.
3.Establishes the Alameda County Hospital Authority as a
separate public entity, established by the Alameda County
Board of Supervisors, to manage the Alameda County Medical
Center.
4.Defines "designated public hospital" as one of a list of
county and UC hospitals, including KMC.
5.Establishes the Medi-Cal program, which is administered by the
Department of Health Care Services (DHCS), under which
qualified, low-income individuals receive health care
services.
6.Defines a "local initiative" as the Medi-Cal prepaid health
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plan that is organized by a county government or by county
governments of a region designated by the director of DHCS, or
organized by stakeholders of the designated region, and
awarded a Medi-Cal contract by DHCS.
7.Requires, through regulation, in regions designated by DHCS,
eligible Medi-Cal beneficiaries to receive health care
services through one of two prepaid health plans (this is
known as the "two plan model").
This bill:
1.Authorizes the Board to establish, by ordinance, the Authority
as a separate public entity, specifies the Authority's
purpose, and charges it with the management, administration,
and control of KMC and other health-related resources.
2.Requires the enabling ordinance adopted by the Board to
establish the terms and conditions of the transfer to the
Authority from Kern County (County), including:
A. Any transfer of real and personal property, assets and
liabilities, including, medical center liabilities related
to county funds previously advanced but not repaid or
otherwise recovered.
B. Transfer of employees, including any necessary personnel
transition plan, as specified in a specified statute and
assignment of title to funded pension assets and
responsibility for any unfunded pension liabilities.
C. Maintenance, operation, and management or ownership of
the medical center.
D. Transfer of licenses.
E. Any other matters as the Board deems necessary,
appropriate, or convenient for the conduct of the
Authority's activities.
1.Directs that a transfer of the maintenance, operation, and
management of the KMC to the Authority does not empower the
Authority to transfer any County ownership interest except as
otherwise approved by the County.
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2.Allows the County to retain control of KMC's physical plant
and facilities except as otherwise specifically provided for
in the enabling ordinance, and that any lease agreement or
other agreement between the County and the Authority may
provide that the county premises shall not be sublet without
the County's approval.
3.Allows the County to contract with the Authority to provide
indigent care services on behalf of the County, and specifies
conditions that must apply to that contractual agreement.
4.Directs that, with specified exceptions, all of the
Authority's obligations are solely their obligations and are
not obligations of the state, County, or any other entity.
Requires the Authority's contracts to contain a provision that
liabilities or obligations of the Authority with respect to
its activities pursuant to the contract must be the
Authority's liabilities or obligations and must not be the
liabilities or obligations of the other contracting entity.
5.Exempts the Authority from the jurisdiction of a local agency
formation commission pursuant to the Cortese-Knox-Hertzberg
Local Government Reorganization Act of 2000 or any successor
statute.
6.Contains extensive provisions relating to the Authority's
effects on current KMC and County employees, including
requirements related to:
A. The adoption of a personnel transition plan containing
specified elements.
B. The qualifications and retention of current employees.
C. The maintenance of current employees' seniority and
benefits.
D. Changes in current employee classifications and job
descriptions.
E. Employees' eligibility for membership in the Kern County
Employee's Retirement Association.
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F. Recognition of exclusive representatives of employee's
bargaining units.
G. The continuation of an existing memorandum of
understanding or agreement covering the terms and
conditions, including the level of wages and benefits, of
current employees.
1.Directs that a board of governors, appointed by the Board,
will govern the Authority. Requires the Board to determine,
by ordinance, the number of members, the composition of
membership, the qualifications for individual members, the
term of office, the manner of appointment, selection, or
removal, and all other matters pertaining to the board of
governors.
2.Requires the Board to adopt bylaws for the Authority that must
specify the officers of the board of governors, the time,
place, and conduct of meetings, and other matters that the
board of supervisors deems necessary or appropriate to conduct
the Authority's activities. This bill specifies that the
bylaws become operative upon approval by a majority vote of
the Board and may be amended by a majority vote of the Board.
3.Specifies:
A. The manner in which the Authority's board members must
comply with state conflict of interest laws related to
contracts.
B. That the Authority's board members are not vicariously
liable for injuries caused by the act or omission of the
Authority, to the extent that specified statutory
protection applies to members of governing boards of local
public entities.
C. That the Authority's board is a duly constituted
governing body as the term is used specified sections of
the California Code of Regulations.
D. That, in the event of a change of license ownership, the
Authority's board must comply with specified obligations of
governing bodies of general acute care hospitals as well as
the terms and conditions of the license.
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1.Assigns corporate powers to the Authority, including
provisions relating to:
A. Real and personal property.
B. Lawsuits, claims, and liability.
C. Procurement and contracts.
D. Personnel, employee compensation, and benefits.
E. Financial management.
F. Joint powers agreements.
G. The creation of nonprofit, for profit, or other entities
to carry out the Authority's duties.
H. The use of a computerized management information system
and electronic health records.
1.Prohibits KMC's transfer to the Authority from disqualifying
the County or the Authority from participating in specified
local, state, or federal funding mechanisms, including
Medi-Cal disproportionate share hospital payments, Medi-Cal
supplemental reimbursements, the Low Income Health Program,
and any other funding source that would otherwise be available
to a county provider or designated public hospital.
2.Requires that the Authority must:
A. Be a government entity separate and apart from the
county and any other public entity. This bill declares
that the Authority cannot be considered to be an agency,
division, or department of the county or any other public
entity.
B. Be exempt from the county's civil service requirements.
C. Be exempt from the policies or operational rules of the
county or any other public entity, including policies or
rules relating to personnel and procurement.
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D. Adopt written rules, regulations, and procedures with
regard to basic human resource functions consistent with
memoranda of understanding covering employees represented
by employee organizations or specified provisions of state
law.
E. Be subject to state and federal taxation laws that are
applicable to public entities generally.
F. Comply with the Myers-Milias-Brown Act, the Public
Records Act, and the Ralph M. Brown Act.
G. Be subject to the jurisdiction of the Public Employment
Relations Board.
H. Carry professional and general liability insurance or
programs to the extent sufficient to cover its activities.
I. Comply with specified statutes relating to the
termination of employee contracts.
J. Maintain financial and accounting records.
AA. Meet all local, state, and federal data reporting
requirements.
1.Authorizes the Authority to incur indebtedness and to borrow
money and issue bonds, including notes and revenue bonds, to
provide sufficient funds for any of the Authority's purposes.
This bill exempts any notes, bonds, or other securities
issued, and the income from them, from taxation by the state
or any agency, political subdivision, or instrumentality of
the state. This bill prohibits the Authority from incurring
any indebtedness, notes, bonds, or other securities that
require voter approval pursuant to state law, without the
prior approval of the board of supervisors. This bill
specifies that any indebtedness incurred, or notes, bonds, or
other securities that require voter approval must be the
indebtedness, notes, bonds, or securities of the Authority and
not of the County. The Authority is prohibited from pledging
or relying upon the County's credit to incur the indebtedness,
or issue the notes, bonds, or other securities, unless the
Board explicitly authorizes the use of the County's credit.
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2.Allows the Authority to arrange for guarantees or insurance of
its bonds, notes, or other obligations and to pay the
associated premiums.
3.Allows the Authority to request that the Board levy a tax on
its behalf. If the Board approves the proposal to levy the
tax, it must call the election to seek voter approval and
place the appropriate measure on the ballot for that election.
The proceeds of these taxes must be tax proceeds of the
Authority and not of the County. The Authority must reimburse
the county for all costs associated with the county's
consideration of these taxes, and must defend, indemnify, and
hold harmless the county from any liability, costs, or
expenses arising from or related to the imposition of these
taxes.
4.Allows the Authority's board to hold meetings in closed
sessions for discussions of trade secrets, and exempts records
that reveal the Authority's trade secrets, or rates of
payment, from disclosure. This bill allows the Authority to
form peer review bodies, and exempts the activities of these
peer review bodies from disclosure, and extends other
confidentiality protections in existing law to the activities
of these peer review bodies.
5.Defines the Authority as a public agency that is a local unit
of government for purposes of eligibility with respect to
grants and other funding and loan guarantee programs. This
bill requires that contributions to the Authority must be tax
deductible to the extent permitted by state and federal law
and that the Authority's nonproprietary income must be exempt
from state income taxation.
6.Allows:
A. The Authority to engage in managed care contracting,
joint ventures, affiliations with other health care
facilities, other health care providers and payers,
management agreements, or to participate in alliances,
purchasing consortia, health insurance pools, accountable
care organizations, alternative delivery systems, or other
cooperative arrangements, with any public or private
entity.
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B. The Authority to enter into joint powers agreements,
including a joint powers agreement with a private
non-profit hospital located in the County, as authorized by
a specified statute.
C. The Authority and the County to engage in marketing,
advertising, and promotion of the medical and health care
services made available to the community by the Authority.
D. The Authority, or the County on behalf of the Authority,
to apply as a public agency for one or more licenses for
the provision of health care or the operation of a health
care service plan pursuant to statutes and regulations
governing licensing.
E. The Authority and its board to exercise specified
statutory authority to prescribe rules that authorize a
County hospital to integrate its services with those of
other providers into a system of community service that
offers free choice of hospitals to those requiring hospital
care.
F. The Authority, subject to restrictions in state law and
any limitations or conditions set forth in the enabling
ordinance, to borrow money from the county, repay debt it
owes to the county, and use the borrowed funds to provide
for its operating and capital needs.
1.Grants the board of trustees authority over the Authority's
procurement and contracts, pursuant to written rules,
regulations, and procedures that the Authority's board must
adopt. This bill allows contracts by and between the
Authority and any public agency, and contracts by and between
the Authority and providers of health care, goods, or
services, to be let on a non-bid basis and exempts those
contracts from specified provisions of the Public Contract
Code.
2.Declares that a member of the Authority's administrative staff
cannot be considered to be engaged in activities inconsistent
and incompatible with his/her duties as a result of prior
employment or affiliation with the County or the governing
board.
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3.Specifies how the Board may dissolve the Authority and provide
for the disposition of its assets, obligations, and
liabilities.
4.Contains legislative findings and declarations regarding the
need to establish a public hospital authority in the County.
5.Includes, as constitutionally required by Proposition 59
(2004), legislative findings and declarations regarding the
necessity of maintaining the confidentiality of the
Authority's discussions, deliberative processes, writings, and
other communications pertaining to trade secrets or other
strategic planning actions, its rates of payments for
providing or arranging for health care services, and its peer
review functions.
6.Prohibits the Authority and employees of the Authority from
participating in public retirement systems if that
participation could jeopardize the retirement plans'
tax-qualified status under federal law.
7.Permits the board of governors of the Authority to hold a
meeting in closed session to consider and take action on
matters pertaining to contract negotiations on rates of
payment for health care services.
Background
KMC is a 222-bed acute care teaching hospital owned and operated
by the County. KMC serves a community of approximately 650,000
and employs approximately 1,800 staff members. KMC provides
care for over 16,000 inpatients annually, while the clinics
provide care and services for over 100,000 patients. The
emergency room experiences 43,000 visits per year. As one of
California's public safety-net hospitals, KMC serves a high
proportion of underinsured and uninsured patients, providing
health care access to all patients regardless of their ability
to pay.
As a public safety-net hospital, KMC faces significant
challenges. The recent economic slowdown has increased the
population of patients who rely on the hospital's safety-net
services while, at the same time, decreasing the reimbursements
that the hospital receives from the federal and state
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governments. KMC is confronting significant fiscal challenges,
which include monthly operating deficits and a total deficit in
the current year of $25.8 million. KMC's management team has
taken steps to reduce costs and has succeeded in significantly
reducing operating deficits in recent months.
Public hospitals also face the challenge of competing with
private health care providers while complying with statutes
governing procurement, hiring, public records, and other
restrictions imposed by state law. In response to similar
concerns, the Legislature granted the Alameda County Board of
Supervisors the power to establish a separate hospital authority
to govern the county's medical center (AB 2374, Bates, Chapter
816, Statutes of 1996). Recently, the Legislature granted
similar authority to the Monterey County Board of Supervisors
(AB 276, Alejo, Chapter 686, Statutes of 2012).
Comments
AB 2546 follows the precedent that the Legislature has
established in previous legislation for Alameda and Monterey
counties by allowing the County to establish a separate
authority to govern the county's medical center. Recent
investigations have revealed that KMC is in poor fiscal
condition, which has generated interest in modifying the way KMC
is governed. This bill will allow the County to benefit from
the cost savings that can be generated by operating under a
separate governance structure and provide opportunities for
increased flexibility, responsiveness, and innovation. At the
same time, AB 2546 contains extensive provisions intended to
guarantee that the medical center will continue to provide
affordable, high-quality health care services and that medical
center employees will have a seamless transition of wages,
benefits, and contracts without loss of rights or status.
Special Legislation . The California Constitution prohibits
special legislation when a general law can apply (Article IV,
Sec. 16). AB 2546 contains findings and declarations explaining
the need for legislation that applies only to Kern County.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: No
SUPPORT : (Verified 8/12/14)
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California Association of Public Hospitals and Health Systems
California Labor Federation
California State Association of Counties
California State Council of the Service Employees International
Union
Kern County Board of Supervisors
ASSEMBLY FLOOR : 76-0, 5/19/14
AYES: Achadjian, Alejo, Allen, Ammiano, Bigelow, Bloom,
Bocanegra, Bonilla, Bonta, Bradford, Brown, Buchanan, Ian
Calderon, Campos, Chau, Chávez, Chesbro, Conway, Cooley,
Dababneh, Dahle, Daly, Dickinson, Donnelly, Eggman, Fong, Fox,
Frazier, Beth Gaines, Garcia, Gatto, Gomez, Gonzalez, Gordon,
Gorell, Gray, Grove, Hagman, Hall, Harkey, Roger Hernández,
Holden, Jones, Jones-Sawyer, Levine, Linder, Logue, Lowenthal,
Maienschein, Medina, Melendez, Mullin, Muratsuchi, Olsen, Pan,
Patterson, Perea, John A. Pérez, V. Manuel Pérez, Quirk,
Quirk-Silva, Rendon, Ridley-Thomas, Rodriguez, Salas, Skinner,
Stone, Ting, Wagner, Waldron, Weber, Wieckowski, Wilk,
Williams, Yamada, Atkins
NO VOTE RECORDED: Mansoor, Nazarian, Nestande, Vacancy
JL:e 8/13/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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