BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1240|
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THIRD READING
Bill No: SB 1240
Author: Corbett (D)
Amended: 4/28/10
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 3-2, 4/7/10
AYES: Kehoe, DeSaulnier, Price
NOES: Cox, Aanestad
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Local health care districts
SOURCE : California Nurses Association
DIGEST : This bill imposes conditions on contracts
between health care districts and other entities to operate
one or more health facilities owned by the district. This
bill also states that, with certain exceptions, its
provisions apply to all existing and future contracts,
unless there has been full performance by both parties to
the contract prior to January 1, 2011.
ANALYSIS : Under the Local Health Care District Law,
provides for the formation of local health care districts
(districts).
Until January 1, 2011, authorizes a district to transfer
ownership, at fair market value, of any part of its assets
to one or more corporations to operate and maintain the
CONTINUED
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assets. Before the district transfers, pursuant to this
paragraph, 50 percent or more of the district's assets to
one or more corporations, in sum or by increment, the
elected board must, by resolution, submit to the voters of
the district a measure proposing the transfer.
After January 1, 2011, existing law changes these
provisions to restrict these transfers only to nonprofit
corporations.
Also authorizes a district to transfer, at less then fair
market value, any part of the assets of the district to one
or more nonprofit corporations to operate and maintain the
assets, if the transfer benefits the communities served by
the district, the transfer agreement provides that all
assets transferred to and accumulated by the nonprofit
corporation are transferred back to the district upon
termination of the transfer agreement, and other conditions
are met.
Before the district transfers 50 percent or more of the
district's assets to one or more nonprofit corporations,
the elected board must, by resolution, submit to the voters
of the district a measure proposing the transfer.
Requires the district to report to the Attorney General,
within 30 days of any lease of district assets to one or
more corporations, the type of transaction and the entity
to whom the assets were leased.
This bill imposes additional specific conditions on
contracts between districts and other entities to operate
one or more health facilities owned by the district:
1.Specifically provides that no assets of the district
shall be used for the benefit of any person or entity
other than a hospital within the jurisdiction of the
district;
2.Provides that the hospital and the operating entity must
undergo an independent financial audit, which must be
made public; and
3.Provides that, in the case of a subsequent sale of the
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hospital facility or other assets of the district to the
operating entity, any losses incurred by the entity may
not be used as a credit against the purchase price of the
facility or other district assets.
This does not apply to a sale of a hospital facility that
otherwise meets the fair market value standard in
existing law.
This bill also states that, with certain exceptions, its
provisions apply to all existing and future contracts,
unless there has been full performance by both parties to
the contract prior to January 1, 2011.
Comments
Health care districts are special districts formed under
state law to meet local health needs not satisfied by other
health care resources or government programs in a given
geographical area. Health care districts formed pursuant
to state law are financed by assessments on real and
personal property within the district. A 2006 report
published by the California Healthcare Foundation found
that 85 health care and hospital districts have been formed
in California since the first hospital district enabling
legislation was passed in 1946.
Health care districts operate medical facilities, including
hospitals, public health clinics, and skilled nursing
facilities. Some also provide community-based education
programs to the residents of their districts. Given the
volatile health care market in recent decades, hospital
districts have contemplated service changes, leasing
arrangements, and affiliations with both nonprofit and
for-profit health care corporations as means or providing
health care services to residents.
Prior Legislation
SB 1351 (Corbett) of 2008 would have required voter
approval before a health care district can transfer, for
the benefit of the communities served by the district and
in the absence of adequate consideration, any part of the
assets of the district to one or more nonprofit
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corporations to operate and maintain the assets, as opposed
to 50 percent or more of the district's assets. It would
have expanded the Attorney General's ability to review and
comment on proposed transfers. It also would have
prohibited a health care district from relinquishing its
membership on the board of a nonprofit corporation to which
the district has transferred or leased its assets without a
vote of the district electorate. This bill was vetoed by
the Governor with the following message:
District hospitals are governed by a locally-elected
health care district board and are governed by the
Brown Act, the Public Records Act, the Political
Reform Act, public contracting laws and other
statutory restrictions. I cannot support placing
additional restrictions on a local hospital district,
especially when they are elected by, and accountable
to, their local community.
AB 1131 (Torrico), Chapter 194, Statutes of 2005, extends
for five years, until 2011, the January 1, 2006 sunset date
permitting health care districts to transfer or lease
assets to for-profit corporations, as specified.
SB 1508 (Figueroa), Chapter 169, Statutes of 2000, extended
the authority for districts to transfer or lease assets to
a for-profit until January 1, 2006.
SB 460 (Kelley), Chapter 18, Statutes of 1998, permits,
until 2001, a health care district to transfer at fair
market value its assets to for-profit corporations, as
specified.
SB 1771 (Russell & Kopp), Chapter 1359, Statutes of 1992,
defines the terms and conditions under which a health care
district may transfer, without adequate consideration, any
part of its assets to one or more nonprofit corporations,
including that the transfer must be for the benefit of the
community served by the district, provide for the transfer
back to the district of the assets at the end of the lease,
and be approved by a majority of the voters in the district
if the transfer is of 50 percent or more of the district's
assets.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: Yes
SUPPORT : (Verified 5/25/10)
California Nurses Association (source)
AFSCME
California Labor Federation
Eden Township Healthcare District
Marin Healthcare District
St. Rose Hospital
OPPOSITION : (Verified 5/25/10)
California Hospital Association
ARGUMENTS IN SUPPORT : The California Nurses Association
(CNA), states that the experience of nurses at district
hospitals leased by Sutter Health has revealed the urgent
need for state action to protect public assets contracted
to private operators. CNA argues that Marin General
Hospital is being returned to the health care district much
poorer as it faces renewed competition from Sutter's
hospital in Novato. CNA also argues that Eden Township
Health Care District's MOU with Sutter gave Sutter a
perverse incentive to run the San Leandro Hospital into the
ground and close the hospital.
ARGUMENTS IN OPPOSITION : The California Hospital
Association (CHA) argues that existing law already provides
adequate protections and public review prior to a district
entering into a major contract. CHA argues that district
hospitals, like all hospitals, face intense market
pressures; often, contracting with a health care system is
what a district must do in order to sustain the operations
of a hospital, and often these agreements require the
movement of assets between operating organizations. CHA
also asserts that outside entities may be reluctant to
enter into agreements to operate hospitals given the
restrictions proposed in this bill.
AGB:nl 5/25/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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