BILL ANALYSIS Ó
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|SENATE RULES COMMITTEE | AB 1350|
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CONSENT
Bill No: AB 1350
Author: Salas (D)
Amended: 6/16/15 in Senate
Vote: 21
SENATE HEALTH COMMITTEE: 8-0, 6/24/15
AYES: Hernandez, Nguyen, Mitchell, Monning, Nielsen, Pan,
Roth, Wolk
NO VOTE RECORDED: Hall
SENATE GOVERNANCE & FIN. COMMITTEE: 6-0, 7/15/15
AYES: Hertzberg, Nguyen, Beall, Hernandez, Moorlach, Pavley
NO VOTE RECORDED: Lara
ASSEMBLY FLOOR: 80-0, 5/14/15 - See last page for vote
SUBJECT: Kern County Hospital Authority
SOURCE: Author
DIGEST: This bill makes a number of changes to provisions of
law governing the ability of Kern County (County) to establish a
separate authority, and to transfer control of the county
hospital, Kern Medical Center, to this authority. These changes
include requiring the County to be obligated to ensure that
required employer contributions to fund retirement benefits for
employees are paid, requiring an expired memorandum of
understanding to be adhered to in the same manner as a
memorandum of understanding that has not expired, as well as
other technical, clarifying, and conforming changes.
ANALYSIS:
Existing law:
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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)Authorizes the County to establish, by ordinance, the Kern
County Hospital Authority (Authority) as a separate public
entity, in order to transfer the management, administration,
and control of Kern Medical Center (KMC) and other
health-related resources.
3)Requires the enabling ordinance adopted by the County to
establish the terms and conditions of the transfer to the
Authority from the County, including any transfer of real and
personal property, assets and liabilities, and transfer of
employees.
4)Contains extensive provisions relating to the Authority's
effects on current KMC and County employees, including
requirements related to the maintenance of current employees'
seniority and benefits, employees' eligibility for membership
in the Kern County Employee's Retirement Association,
recognition of exclusive representatives of employee's
bargaining units, and the continuation of an existing
memorandum of understanding (MOU) covering the terms and
conditions, including the level of wages and benefits, of
current employees for 24 months or through the term of the
MOU, whichever is longer.
5)Requires the Authority to be a government entity separate and
apart from the County, and exempts the Authority from the
County's civil service requirements, and from the policies or
operational rules of the County or any other public entity,
including policies or rules relating to personnel and
procurement.
6)Requires the Authority to be subject to the jurisdiction of
the Public Employment Relations Board, to comply with
specified statutes relating to the termination of employee
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contracts, to maintain financial and accounting records, and
to meet all local, state, and federal data reporting
requirements.
7)Specifies how the Board may dissolve the Authority and provide
for the disposition of its assets, obligations, and
liabilities.
This bill:
1) Requires the enabling ordinance establishing the Authority
to specify whether funds of the Authority are to be deposited
in the custody of, and paid out solely through, the County
treasurer's office. Clarifies that if the enabling ordinance
does not require funds to be deposited in the County
treasury, the Authority is permitted to establish its own
treasury.
2) Requires the Authority, 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.
3) Requires the Authority to be considered a public employer
that offered a plan of replacement benefits prior to January
1, 2013, for purposes of a provision of law prohibiting a
public employer from offering a replacement benefits plan for
employees after January 1, 2013 if they had not already been
offering such a plan prior to January 1, 2013. Deems the
County's plan of replacement benefits in effect prior to
January 1, 2013 to also be the Authority's replacement plan
for the sole purpose of allowing the Authority to 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.
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4) 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.
5) 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 the Authority is
required to commence making periodic employer contributions
for legacy employees folowing the transfer of control of KMC.
Requires the County to be obligated to make employer
contributions in the event the Authority fails to make the
required contributions.
6) Defines "legacy employees," for purposes of the Authority,
as the employees of the County who retired from KMC prior to
the date of transfer of control of KMC, employees of the
County who are initially transferred to the Authority on the
date of transfer of control of KMC, and employees first hired
by or retired from the Authority during the 24-month period
following the date of transfer of control of KMC.
7) Requires the Authority 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 the Authority fails
to make the required contributions for new employees.
Requires the County to maintain this obligation until the
Authority demonstrates, and the Kern County Employees'
Retirement Association's Board of Retirement determines, that
the Authority is sufficiently capable financially to fully
assume the obligation to make all employer contributions, as
specified. However, in the event the Authority fails to make
contributions due to the Authority's dissolution or
bankruptcy, the County is again obligated to make the
required contributions.
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8) Defines "new employees," for purposes of the Authority, as
employees first hired by the Authority after the 24-month
period following the date of transfer of control of KMC.
9) Clarifies that the County, in the enabling ordinance
transferring control of KMC to the Authority, has the option
to require the Authority to lease KMC, in addition to the
option of transferring ownership of KMC to the Authority.
10)Clarifies that the current requirement that the Department
of Health Care Services take all necessary steps to ensure
that the Authority is permitted to operate KMC includes
ensuring that the Authority has all of the licenses, permits,
and approvals needed.
11)Clarifies the ability of the County to lend the Authority
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.
12)Permits the County to contract for services or purchase
items on behalf of the Authority, and unless otherwise
provided for, requires the Authority's board of governors to
have authority over procurement and contracts for the
Authority.
13)Specifies that the Authority'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.
14)Defines "transfer of control" of KMC as the transfer by the
County to the Authority 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.
15)Makes other technical, clarifying and conforming changes.
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Comments
1)Author's statement. According to the author, KMC is owned and
operated by the County. KMC 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 (Salas, Chapter 613, Statutes of 2014), was
enacted to give the Kern County Board of Supervisors the
option to establish a hospital authority to manage and
administer KMC. A hospital authority allows 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. The law established extensive provisions intended
to ensure 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. This
bill makes technical and clarifying changes to ensure that
employees transferred from KMC to the Authority are covered
under most current MOU and receive the same retirement
benefits. This bill also allows the Authority to deposit and
borrow funds from the County Treasury, and gives the Authority
the option of establishing its own treasury. In addition, this
bill clarifies the scope of the transfer of control of KMC
operations to the Authority, the Authority's responsibilities
as hospital operator, and the conditions under which the
transfer shall occur.
2)Background on KMC. KMC is a 222-bed acute care teaching
hospital owned and operated by the County, and the County
reports that it has historically faced significant operational
issues and financial losses. Prior to the County appointing a
new Chief Executive Officer (CEO) in December 2013, the
hospital had been losing $3 million per month. Since that time
under new leadership, considerable improvements have been
achieved. Within five months of the new leadership team being
in place, the losses were reduced to $400,000 per month, and
within eight months the medical center began generating a
profit. Through the 10 months ended April 30, 2015, the net
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income for KMC is $7,272,956. During the same period last year
the hospital reported a net loss of $12,083,046. The
$19,356,003 improvement has been achieved through a number of
initiatives including replacing management staff, improvements
in how the hospital bills and collects, labor productivity
management, and renegotiated managed care contracts. The
County reports that it has begun pursuing growth
opportunities, including physician recruitment in needed
specialties, adding new clinics and services, including a
medical home model, and enhancing access to care in outpatient
clinics, with monthly visits increasing by 40 % over the past
year.
3)Background on plan to transfer KMC to the Authority. Last
year, AB 2546 was introduced with the initial plan to form an
authority that would combine under a single governance
structure both KMC and Kern Health Systems, which is the Local
Initiative Medi-Cal managed care plan. In response to concerns
regarding the financial implications of a merger of Kern
Health Systems with the hospital, AB 2546 was scaled back to
follow the precedent that the Legislature had established in
previous legislation for Alameda and Monterey counties by
allowing the County to establish an authority to govern the
county's medical center. The author and sponsor state that by
separating KMC from the County's governance structure, there
will be opportunities for increased flexibility,
responsiveness, and innovation that will enable KMC to
stabilize financially and continue to meet the needs of the
community.
Following the enactment of AB 2546 last year, the County
reports that an implementation plan was approved in January
2015. The implementation plan detailed the guiding principles
of the transition, a transition plan, a transition budget, and
a list of agreements and steps necessary to transition the
medical center. The County and KMC formed a Hospital
Authority Steering Committee, which is responsible for the
overall coordination and implementation of the transfer. The
County states that in order to successfully transition KMC
from a County department to a hospital authority, KMC has
begun to engage with legal and financial consultants to gain
an understanding of the mechanics of the transfer of control,
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assets, liabilities, and personnel of the medical center to
the hospital authority. The draft ordinance to enact the
hospital authority has been drafted and is in circulation for
public review and feedback. The County states it plans on
taking the ordinance to the Board of Supervisors for a vote in
the fall of 2015 and transferring the medical center,
personnel, assets and liabilities from the county to the
hospital authority in July 2016.
Prior Legislation
AB 2546 authorized the County to establish the Authority to
manage, administer, and control KMC, and provided for the
Authority's governance, powers, and procedures.
AB 276 (Alejo, Chapter 686, Statutes of 2012), authorized the
Monterey County Board of Supervisors to establish the Central
Coast Hospital Authority (CCHA), as specified, and prohibited
the board of supervisors from establishing the CCHA until an
agreement to affiliate with at least one other health care
facility is reached.
AB 2374 (Bates, Chapter 816, Statutes of 1996), authorized the
County of Alameda to establish a hospital authority to manage
the respective county hospitals and county programs of the
Alameda County Medical Center.
FISCAL EFFECT: Appropriation: No Fiscal
Com.:NoLocal: No
SUPPORT: (Verified8/7/15)
Kern County Board of Supervisors
Kern Health Systems
Service Employees International Union, California State Council
OPPOSITION: (Verified8/7/15)
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None received
ARGUMENTS IN SUPPORT: This bill is supported by the Kern
County Board of Supervisors, which states that among other
provisions, this bill will ensure that the most current MOU
existing at the time that KMC is transferred to the Authority
will apply to any County employees who are transferred to the
Authority. The County states that other provisions clarify the
ability of the Authority to deposit funds in, and borrow funds
from, the County treasury, which will allow the Authority to
receive temporary cash transfer from the County treasury pool.
The County states that this bill also makes needed amendments to
treat the Authority as a public employer for purposes of making
County employees whose retirement benefits are limited by
federal law eligible for the same replacement benefits after
transferring to the Authority that would be due to them as
County employees. This bill is also supported by the California
State Council of the Service Employees International Union (SEIU
California), which states that the purpose of last year's AB
2546 was to ensure a smooth transition of KMC to an authority
while preserving key protections for the hospital employees who
would be transitioning to a different model of administration
within the County. After AB 2546's enactment, SEIU California
states that the need for clarification and clean-up has emerged
on several issues related to the transition of KMC into the
Authority. Kern Health Systems states in support that it is a
partner with KMC in preserving and improving the delivery system
that serves California's uninsured and indigent population, and
therefore supports this bill so that these technical changes can
be enacted as swiftly as possible, clearing the way for KMC's
transition to a hospital authority.
ASSEMBLY FLOOR: 80-0, 5/14/15
AYES: Achadjian, Alejo, Travis Allen, Baker, Bigelow, Bloom,
Bonilla, Bonta, Brough, Brown, Burke, Calderon, Campos, Chang,
Chau, Chávez, Chiu, Chu, Cooley, Cooper, Dababneh, Dahle,
Daly, Dodd, Eggman, Frazier, Beth Gaines, Gallagher, Cristina
Garcia, Eduardo Garcia, Gatto, Gipson, Gomez, Gonzalez,
Gordon, Gray, Grove, Hadley, Harper, Roger Hernández, Holden,
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Irwin, Jones, Jones-Sawyer, Kim, Lackey, Levine, Linder,
Lopez, Low, Maienschein, Mathis, Mayes, McCarty, Medina,
Melendez, Mullin, Nazarian, Obernolte, O'Donnell, Olsen,
Patterson, Perea, Quirk, Rendon, Ridley-Thomas, Rodriguez,
Salas, Santiago, Steinorth, Mark Stone, Thurmond, Ting,
Wagner, Waldron, Weber, Wilk, Williams, Wood, Atkins
Prepared by:Vince Marchand / HEALTH /
8/13/15 13:24:41
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