BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 2546
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          CONCURRENCE IN SENATE AMENDMENTS
          AB 2546 (Salas)
          As Amended  August 11, 2014
          Majority vote
           
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          |ASSEMBLY:  |76-0 |(May 19, 2014)  |SENATE: |34-0 |(August 14,    |
          |           |     |                |        |     |2014)          |
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           Original Committee Reference:    L. GOV.  

           SUMMARY  :  Authorizes the Kern County Board of Supervisors (Board  
          of Supervisors) to establish the Kern County Hospital Authority  
          (Authority), and specifies the Authority's governance, powers,  
          and procedures.  

           The Senate amendments  :  

          1)Delete the requirement that the Board of Supervisors must  
            reach an agreement to affiliate or consolidate the Kern  
            Medical Center (KMC) with at least one other health care  
            facility in order to establish the Authority, and instead  
            authorize the Board of Supervisors to establish, by ordinance,  
            the Authority, a public agency that is a local unit of  
            government separate and apart from Kern County (County) and  
            any other public entity for all purposes.  

          2)Delete the definition of "other health care facility" and any  
            references to "other health care facility" in this bill.  

          3)Add the following to the list of defined powers for the  
            Authority:

             a)   To incur indebtedness and to borrow money and issue  
               tax-free bonds, including revenue bonds, (and specify,  
               pursuant to state law, any indebtedness, notes, bonds, or  
               other securities require voter approval than the approval  
               of the Board of Supervisors is required);

             b)   To request that the Board of Supervisors levy a tax on  
               behalf of the Authority, with the approval of the Board of  
               Supervisors to place the measure on the ballot and subject  
               to voter approval;









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             c)   Maintain financial and accounting records; 

             d)   Be subject to the jurisdiction of the Public Employment  
               Relations Board; and,

             e)   Allow the Authority to enter into a joint powers  
               agreement as described in existing law as though that  
               section applied to hospitals and other health care  
               facilities in the County.  

          4)Prohibit the Authority from being governed by or subject to  
            other policies or operational rules of the County, medical  
            center, or any other public entity, including, but not limited  
            to those relating to personnel and procurement.  




          5)Revise the purpose of the Authority to include:

             a)   Operation of additional programs, clinics and other  
               facilities, care organizations, health care service and  
               physician practice plans, and delivery systems that may be  
               affiliated or consolidated with KMC; and,  

             b)   Management, administration, and other controls  
               consistent to negotiate and enter into contracts to provide  
               health care services, as specified.

          6)Require the Board of Supervisors in the enabling ordinance to  
            establish the terms and conditions of the transfer to the  
            Authority from the County, including but not limited to the  
            following:

             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, and assignment of title to  
               funded pension assets and responsibility for any unfunded  
               pension liabilities under the Kern County Employees'  
               Retirement Association or other retirement plans, and  
               funding of the accrued benefits for employees of the  








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               Authority in the event of withdrawal from the plan or  
               dissolution of the Authority, as specified;  

             c)   Maintenance, operation, and management or ownership of  
               KMC;

             d)   Transfer of licenses; and,

             e)   Any other matters the Board of Supervisors deems  
               necessary, appropriate, or convenient for the conduct of  
               the Authority's activities.  

          7)Authorize, notwithstanding any other law, a transfer of  
            maintenance, operation, and management or ownership or lease  
            of KMC to the Authority to be made with or without the payment  
            of a purchase price by the Authority, and upon the terms and  
            conditions found necessary by the Board of Supervisors  
            specified in the enabling ordinance.  

          8)Prohibit a transfer of the maintenance, operation, and  
            management or ownership or lease of KMC to the Authority from  
            being construed as empowering the Authority to transfer any  
            ownership interest of the County in any portion of KMC except  
            as otherwise approved by the Board of Supervisors.  

          9)Prohibit the Authority from transferring the maintenance,  
            operation, and management or ownership or lease of KMC to any  
            other person or entity without the prior written approval from  
            the Board of Supervisors. 

          10)Allow 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.  
          11)Make changes to the governing body of the Authority and  
            require the Authority to be governed by a Board of Governors  
            appointed both initially and continually by the Board of  
            Supervisors.  Delete all prior language relating to a board of  
            trustees.  

          12)Require the Board of Supervisors to specify in the enabling  
            ordinance the number of members and the composition of  
            membership, the qualifications for individual members, the  








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            manner of appointment, selection, or removal of members, their  
            terms of office, and all other matters the Board of  
            Supervisors deems necessary.  

          13)Allow, at the discretion of the Board of Supervisors, the  
            Board of Governors to consist entirely of members of the Board  
            of Supervisors, or may include any number of members of the  
            Board of Supervisors or county officers or employees appointed  
            to represent the interest of the County.  

          14)Authorize the Board of Supervisors, during or after formation  
            of the Authority, to modify the number, length of terms,  
            qualification, method of appointment, and provision for all  
            other matters pertaining to the Board of Governors by  
            subsequent ordinance.  

          15)Require the Board of Supervisors to adopt bylaws for the  
            Authority that specifies the offices of the Board of  
            Governors, time, place, and conduct of meetings.  Require a  
            majority vote of Board of Supervisors for the bylaws to become  
            operative.  

          16)Specify requirements for the Board of Governors to comply  
            with state conflict of interest laws related to contracts.  

          17)Require the Board of Governors, in the event of a change of  
            license ownership, to comply with specified obligations of  
            governing bodies of general acute care hospitals as well as  
            the terms and conditions of the license.

          18)Provide that the Board of Governors is a duly constituted  
            governing body as the term is used specified sections of the  
            California Code of Regulations.

          19)Require the Board of Governors to adopt written rules,  
            regulations and procedures for basic human resource functions  
            not inconsistent with the Memorandum of Understanding (MoU)  
            covering employees represented by employee organization or the  
            provisions of this bill.  

          20)Allow the Board of Governors to hold meetings in closed  
            sessions for discussions of trade secrets, and exempt records  
            that reveal the Authority's trade secrets, or rates of  
            payment, from disclosure.  Allow the Authority to form peer  
            review bodies, and exempt the activities of these peer review  








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            bodies from disclosure, and extend other confidentiality  
            protections in existing law to the activities of these peer  
            review bodies.  

          21)Define "District" in the County Employees Retirement Law of  
            1937, which governs 20 independent county retirement  
            associations, to include the Authority.  

          22)Prohibit employees and officers of the Authority from  
            automatically becoming members of the Kern County Employees'  
            Retirement Association and requires their eligibility for  
            membership to be established pursuant to the Kern County  
            Hospital Authority Act, established by this bill.  Prescribe  
            the participation of employees in the Kern County Employees'  
            Retirement Association, as specified.  

          23)Require the State Department of Health Care Services to take  
            all necessary steps to ensure the following: 

             a)   The Authority is permitted to operate KMC;

             b)   KMC continues its status as a designated public hospital  
               to at least the same extent as it would be designated in  
               the absence of its transfer to the Authority pursuant to  
               this bill;  

             c)   The Authority may participate as a contributing public  
               agency to the extent permitted by federal law, as  
               specified.  

          24)Revise language relating to indigent care services and the  
            continued responsibility of the County.  

          25)Clarify that the Authority's obligations are solely their  
            obligations and are not obligations of the state, County, or  
            any other entity.  

          26)Authorize the Board of Supervisors to dissolve the Authority  
            and provide for the disposition of assets, obligations, and  
            liabilities.

          27)Define the following terms:

             a)   "Authority" to mean "the Kern Hospital System  
               Authority";








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             b)   "Board of governors" to mean "the governing body of the  
               Authority";

             c)   "Enabling ordinance" to mean "the county ordinance  
               enacted by the board of supervisors to establish the  
               Authority, as it may be amended from time to time."

             d)   "Medical center" to mean the "assets and liabilities  
               comprising the KMC, without limitation a licensed acute  
               care hospital and related public health care programs,  
               facilities, care organizations, physician practice plans  
               and delivery systems as specified by the Board of  
               Supervisors or the Authority now or in the future depending  
               on which entity controls the medical center."

          28)Add double-jointing language to avoid chaptering conflicts  
            with SB 673 (DeSaulnier) of the current legislative session.  

          29)Make findings and declarations, and other technical and  
            conforming changes.  

           AS PASSED BY THE ASSEMBLY  , this bill:

          1)Required an agreement for the maintenance, operation, and  
            management or ownership of the medical center to conform with  
            the following requirements:

             a)   To comply with existing law which authorizes county  
               hospitals to integrate services with other hospitals into a  
               system of community service which offers free choice of  
               hospitals;

             b)   Allows the board of supervisors and governing board to  
               mutually agree on terms and conditions; and,

             c)   To comply with public notice requirements in existing  
               law which establish requirements for medical facilities  
               prior to closing or eliminating for reducing medical  
               services.  

          2)Stated that upon an agreement between the Authority and each  
            affected employee bargaining unit: 

             a)   Requires permanent employees of the medical center on  








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               the effective date of affiliation to be deemed qualified  
               for employment or retention and prohibits any other  
               qualifications from being required.  Requires that  
               probationary employees on the effective date of affiliation  
               to retain their probationary status and rights and  
               prohibits probationary employees from having to serve a new  
               probationary period;  

             b)   Requires employment seniority of an employee of the  
               medical center upon affiliation to be counted toward  
               seniority in the Authority, as specified.  Requires the  
               Authority to provide for the maintenance of benefits that  
               accompany seniority, including, but not limited to,  
               preference in vacations and scheduling, when applicable;

             c)   Prohibits the implementation of this Act from being a  
               cause for the modification of the level of employment  
               benefits.  Requires employees, as specified, upon  
               consolidation or affiliation, to retain the existing or  
               equivalent classification, job descriptions, comparable  
               pension benefits, at least their existing salaries, and  
               other benefits, including, but not limited to, accrued and  
               unused vacation, sick leave, personal leave, health and  
               pension benefits, retiree health benefits, and deferred  
               compensation plans;  

             d)   Allows the Authority to contract with the California  
               Public Employees' Retirement System, to the extent  
               permitted by federal law, to provide membership for  
               Authority employees, as specified;  

             e)   Requires the transfer of function from county employee  
               classifications to Authority employees established to  
               result in the recognition by the Authority of the exclusive  
               representative of the classifications performing those  
               functions at the time of transfer; and,

             f)   Requires the Authority, notwithstanding any other law,  
               to do both of the following for 24 months after the term  
               end date of a KMC MoU in existence when the County  
               establishes the Authority:

               i)     Continue to recognize each exclusive representative  
                 of each bargaining unit; and,









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               ii)    Roll over and continue to be bound by any existing  
                 KMC MoU or agreement covering the terms and conditions of  
                 employment.  

          3)Authorized the Authority to determine the number of employees,  
            the number of full-time equivalent positions, job  
            descriptions, the nature and extent of classified employment  
            positions and salaries of employees, except as provided in the  
            transfer agreement described above.  

          4)Required the Authority to conform to the following:

             a)   Be a government entity separate from the County and any  
               other public agency that is not governed by or subject to  
               the policies or operational rules of the County or any  
               other public entity;  

             b)   Be subject to state and federal taxation laws that are  
               applicable to public entities, except to apply from  
               exemption from social security taxation with an agreement  
               with the exclusive representatives of the affected  
               employees, pursuant to federal law;  

             c)   Comply with the Meyers-Milias-Brown Act, the Public  
               Records Act, the Ralph M. Brown Act, and other existing  
               laws that apply to public agencies and laws relating to  
               peer review;

             d)   Carry professional and general liability insurance or  
               programs to the extent sufficient to cover its activities; 

             e)   Comply with current law regarding the settlement of  
               terminated employment contracts; and,

             f)   Meet all local, state, and federal data reporting  
               requirements.  

          5)Required the Authority to be responsible for human resources  
            functions pursuant to written rules, regulations, and  
            procedures adopted.  Prohibited a member of the Authority's  
            administrative staff from engaging in activities inconsistent  
            and incompatible with his or her duties as a result of prior  
            employment or affiliation with the County or the governing  
            board.









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           FISCAL EFFECT  :  According to the Senate Appropriations  
          Committee, pursuant to Senate Rule 28.8, negligible state costs.

           COMMENTS  :   

          1)Purpose of this bill.  This bill is permissive and allows the  
            Board of Supervisors to establish a separate Authority to  
            govern the County's medical center.  This bill contains  
            several provisions to ensure that healthcare services remain  
            accessible to patients regardless of their ability to pay and  
            that the Authority, as a separate entity from the County, will  
            still continue to serve as a hospital.  This bill also  
            establishes requirements for the Authority upon the transfer  
            of KMC employees.  This bill is author-sponsored.  


          2)Previous legislation.  The Legislature has granted several  
            counties the ability to create health authorities, including  
            Alameda [AB 2374 (Bates), Chapter 816, Statues of 1996], San  
            Luis Obispo [SB 538 (O'Connell), Chapter 899, Statues of  
            1999], Santa Barbara, and Sonoma (for dental). 

          This bill is similar to AB 276 (Alejo), Chapter 686, Statutes of  
            2012, which authorized the Monterey County Board of  
            Supervisors to establish the Central Coast Hospital Authority  
            (CCHA) and prohibited the Monterey County Board of Supervisors  
            from establishing the CCHA until an agreement to affiliate or  
            consolidate the Natividad Medical Center with at least one  
            other health care facility was reached.  Prior to AB 276,  
            previous health authorities were established with existing  
            county-run and operated hospitals and programs.

          Similar to AB 276, this bill authorizes the Authority to issue  
            bonds and levy taxes.  However, unlike AB 276 this bill does  
            not require that an agreement to be reached with the Board of  
            Supervisors and another health care facility to consolidate or  
            merge the facilities.  This bill also contains a different  
            governing board structure.  


          3)Author's statement.  According to the author, "Existing state  
            law requires counties to be the 'provider of last resort' for  
            indigent individuals with no other means.  KMC has fulfilled  
            this role for the County of Kern as a vital community  
            resource:  it provides the only trauma care between Los  








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            Angeles and Fresno, and is vital to training physicians  
            through academic residency and education programs.  However,  
            recent investigations have revealed that the hospital is in  
            poor fiscal condition.  There have been interests in modifying  
            the way KMC is governed.  Creating a Hospital Authority to  
            govern the KMC is only one option of several currently being  
            explored."  

            KMC continues to face significant financial challenges.   
            Although the monthly operating deficits have decreased, KMC  
            still faces a sizable total deficit and is continuing to take  
            steps to reduce costs.  

          4)Kern Medical Center (KMC).  According to KMC's Web site,  
            "Since our beginning in 1867, KMC has been striving for  
            excellence in serving the community in which we operate.   
            Employing an average of 1,800 staff members, KMC is an  
            integral part of the community.  KMC is a 222-bed acute care  
            teaching hospital.  The Medical Center serves a community of  
            approximately 650,000, and the hospital is owned and operated  
            by the County.  The health of the citizens of the County is a  
            priority to KMC, and it is the only hospital dedicated to  
            physician resident training."  
                
           5)Policy considerations.  The Legislature may wish to consider  
            if some of the specifics contained in this bill are more  
            appropriately dealt with outside of the state legislative  
            process and handled at the local level.

          6)Arguments in support.  Supporters argue that the formation of  
            the Authority will give KMC the ability to be more flexible,  
            responsive, and innovative as they continue to provide care to  
            the large number of uninsured and low-income residents in the  
            County.  

          7)Arguments in opposition.  None on file.  


           Analysis Prepared by  :    Misa Yokoi-Shelton / L. GOV. / (916)  
          319-3958                                               


                                                               FN: 0004677 










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