BILL ANALYSIS Ó
SENATE COMMITTEE ON GOVERNANCE AND FINANCE
Senator Robert M. Hertzberg, Chair
2015 - 2016 Regular
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|Bill No: |AB 1350 |Hearing |7/15/15 |
| | |Date: | |
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|Author: |Salas |Tax Levy: |No |
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|Version: |6/16/15 |Fiscal: |No |
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|Consultant|Weinberger |
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KERN COUNTY HOSPITAL AUTHORITY
Makes numerous changes to state laws allowing the Kern County
Board of Supervisors to create the Kern County Hospital
Authority.
Background and Existing Law
State law requires counties to provide or secure public health
care services and authorizes the formation of hospital districts
to provide such services. Facing escalating costs, however,
some county hospitals have sought to restructure their
governance, merge, or affiliate with other hospitals in their
areas.
Kern Medical Center is a 222-bed acute care teaching hospital
owned and operated by Kern County. The Medical Center serves a
community of approximately 650,000 and employs approximately
1,800 staff members. Kern Medical Center 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, Kern Medical Center serves a high
proportion of underinsured and uninsured patients, providing
healthcare access to all patients regardless of their ability to
pay.
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As a public safety-net hospital, Kern Medical Center 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 governments. The Medical Center is confronting
significant fiscal challenges. The medical center'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, 1996).
Recently, the Legislature granted similar authority to the
Monterey County Board of Supervisors (AB 276, Alejo, 2012).
Last year, the Legislature passed AB 2546 (Salas, 2014), which
allowed the Kern County Board of Supervisors to create a
hospital authority to govern the Kern Medical Center (KMC). Now
that the county has started the process of forming a hospital
authority, stakeholders have identified more changes to state
law that will help facilitate KMC's transfer to the new
authority.
Proposed Law
State law authorizes the Kern County Board of Supervisors to
establish, by ordinance, the Kern County Hospital Authority
(KCHA) as a separate public entity, specifies KCHA's purpose,
and charges it with the management, administration, and control
of Kern Medical Center (KMC) and other health related resources.
Assembly Bill 1350 requires the enabling ordinance establishing
the KCHA to specify whether KCHA's funds are to be deposited in
the custody of, and paid out solely through, the county
treasurer's office. The bill clarifies that if the enabling
ordinance does not require funds to be deposited in the county
treasury, KCHA can establish its own treasury.
State law requires the Department of Health Care Services take
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all necessary steps to ensure that KCHA is permitted to operate
KMC. Assembly Bill 1350 clarifies that this requirement
includes ensuring that KCHA has all of the licenses, permits,
and approvals needed.
Assembly Bill 1350 defines "transfer of control" of KMC as the
transfer by the county to KCHA of the maintenance, operation,
management, and personnel of KMC, whether by lease, transfer of
ownership, or other means, as provided by, and subject to, any
conditions and limitations specified by the board of supervisors
in the enabling ordinance.
State law requires the enabling ordinance adopted by the board
of supervisors, to establish the terms and conditions of the
transfer to KCHA from the county, including the maintenance,
operation, and management or ownership of the KMC. Assembly
Bill 1350 clarifies that the county, has the option to require
KCHA to lease KMC, in addition to the option of transferring
ownership of KMC.
State law contains extensive provisions relating to KCHA's
effects on current medical center and county employees,
including requirements related to 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. Assembly Bill 1350 requires KCHA, if a
memoranda of understanding (MOU) is expired on the date of the
transfer of control of KMC, to continue to be bound by the terms
and conditions of the most recent MOU for 24 months, unless
modified by a mutual agreement with each of the exclusive
employee representatives, and requires the benefits and wages of
transferred employees to be retained, as specified.
State law specifies the manner in which current KMC employees
would retain membership in specified retirement systems after a
transfer to KCHA. Assembly Bill 1350 requires KCHA to be
considered a public employer that offered a plan of replacement
benefits prior to January 1, 2013, for purposes of a statute
prohibiting a public employer from offering a replacement
benefits plan for employees after January 1, 2013, if it had not
already been offering such a plan prior to January 1, 2013.
Assembly Bill 1350 deems the County's plan of replacement
benefits in effect prior to January 1, 2013 to also be the
KCHA's replacement plan for the sole purpose of allowing KCHA to
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continue to offer the replacement benefit plan, to an employee
who was employed as of January 1, 2013, or to employees who are
part of a member group to which the County offered a replacement
benefit plan prior to January 1, 2013.
Assembly Bill 1350 defines "legacy employees," for purposes of
KCHA, as county employees who retired from KMC before the date
of transfer of control of KMC, county employees who are
initially transferred to KCHA on the date of transfer of control
of KMC, and employees first hired by or retired from KCHA during
the 24-month period following the date of transfer of control of
KMC. Assembly Bill 1350 requires legacy employees, as defined,
to be deemed county employees for purposes of participation in a
benefit plan administered by the Kern County Employees'
Retirement Association, but only for that purpose, and not be
employees of the County for any other purpose. The bill
requires Kern County, upon the transfer of control of KMC, to
include legacy employees in a special county employee group for
which the county has primary financial responsibility to fund
all employer contributions that, together with contributions by
employees and earnings, are necessary to fund all benefits for
legacy employees administered by the Kern County Employees'
Retirement Association, notwithstanding the fact that KCHA must
make periodic employer contributions for legacy employees
following the transfer of control of KMC. The bill requires the
county to be obligated to make employer contributions in the
event the KCHA fails to make the required contributions.
Assembly Bill 1350 defines "new employees," for purposes of
KCHA, as employees first hired by KCHA after the 24-month period
following the date of transfer of control of KMC. Assembly Bill
1350 requires KCHA to be primarily responsible for any employer
contributions necessary to fund benefits for new employees, but
requires the county to be obligated to make the required
contributions in the event KCHA fails to make the required
contributions for new employees. The bill requires the county
to maintain this obligation until KCHA demonstrates, and the
Kern County Employees' Retirement Association's Board of
Retirement determines, that KCHA is sufficiently capable
financially to fully assume the obligation to make all employer
contributions, as specified. However, in the event that KCHA
fails to make contributions due to dissolution or bankruptcy,
the County is again obligated to make the required
contributions.
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State law allows the county to lend KCHA funds or issue revenue
anticipation notes to obtain funds necessary to meet KCHA's
operational or capital needs. Assembly Bill 1350 clarifies the
county's ability to lend KCHA funds to meet its operating and
capital needs by permitting the County to use any borrowing
power the County otherwise has under law, and not just issue
revenue anticipation notes.
State law requires KCHA's board of governors to have authority
over procurement and contracts for KCHA, subject to written
rules, regulations, and procedures adopted by the board.
Assembly Bill 1350 allows the county to contract for services or
purchase items on behalf of KCHA. The bill specifies that
KCHA's ability to contract for personnel or other services and
items it deems necessary is only limited by the obligations
under specified provisions of law which govern the relationship
between employee groups and local governments.
Assembly Bill 1350 makes other technical, clarifying and
conforming changes to the statutes governing KCHA.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . The Kern Medical Center (KMC), which is
owned and operated by the Kern County Board of Supervisors,
serves a community of over 650,000 residents, including indigent
individuals with no other means of obtaining medical care. KMC
provides the only trauma care between Los Angeles and Fresno,
and is vital to training physicians through academic residency
and education programs. Last year, AB 2546 gave Kern County the
option to establish the KCHA to manage and administer KMC. AB
1350's provisions will ensure that employees transferred from
KMC to KCHA are covered under the most current MOU and receive
the same health and retirement benefits. The bill also protects
retiree benefits should KCHA dissolve, allows KCHA to deposit
and borrow funds from the county treasury, and gives KCHA the
option of establishing its own treasury. In addition, AB 1350
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clarifies the scope of the transfer of control of KMC
operations, KCHA's responsibilities as hospital operator, and
the conditions under which the transfer must occur. By
facilitating the establishment of KCHA, AB 1350 will allow Kern
County to benefit from the cost savings, that can be generated
by operating KMC under a separate governance structure and
provide opportunities for increased flexibility, responsiveness,
and innovation.
2. Double-referred . Because AB 1350 relates to the creation of
a new local hospital authority, Senate Rules Committee
double-referred the bill, first to the Senate Health Committee,
which hears bills related to health care policy, and then to the
Senate Governance & Finance Committee, which hears bills related
to local governments' powers. At its June 24 hearing, the
Senate Health Committee passed AB 1350 on an 8-0 vote.
Assembly Actions
Assembly Local Government Committee: 9-0
Assembly Floor: 80-0
Support and
Opposition (7/9/15)
Support : Kern County Board of Supervisors; Kern Health Systems;
Service Employees International Union, California State Council
Opposition : Unknown.
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