BILL ANALYSIS Ó AB 2546 Page 1 CONCURRENCE IN SENATE AMENDMENTS AB 2546 (Salas) As Amended August 11, 2014 Majority vote ----------------------------------------------------------------- |ASSEMBLY: |76-0 |(May 19, 2014) |SENATE: |34-0 |(August 14, | | | | | | |2014) | ----------------------------------------------------------------- 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; AB 2546 Page 2 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 AB 2546 Page 3 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 AB 2546 Page 4 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 AB 2546 Page 5 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"; AB 2546 Page 6 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 AB 2546 Page 7 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, AB 2546 Page 8 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. AB 2546 Page 9 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 AB 2546 Page 10 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 AB 2546 Page 11