BILL ANALYSIS
SB 1240
Page 1
Date of Hearing: August 4, 2010
ASSEMBLY COMMITTEE ON APPROPRIATIONS
Felipe Fuentes, Chair
SB 1240 (Corbett) - As Amended: April 28, 2010
Policy Committee: Health Vote:13-6
Urgency: No State Mandated Local Program:
Yes Reimbursable: Yes
SUMMARY
This bill establishes requirements for local health care
district (district) contracts with public or private entities to
operate one more of the district's health facilities.
Specifically, this bill:
1)Requires contracts to prohibit the use of district revenues
for support of activities outside of the district and prohibit
the use of financial losses being used as a credit against the
purchase price of a facility or the acquisition of other
assets. Requires contracts to impose an annual audit
requirement on the hospital and the operating entity.
2)Specifies contract requirements will apply to current and
future contracts unless all terms and conditions of current
contracts have been executed by January 1, 2011.
3)Establishes exemptions to the contract requirements in this
bill.
FISCAL EFFECT
1)No direct GF fiscal impact is created by this bill. The annual
audit requirement for the district hospital and the operating
entity creates workload, but related funding to support the
workload would be funded from administrative overhead sources
and not specifically from GF.
2)The provision of the bill imposing requirements on current
contracts may face legal challenges and therefore create
unknown cost pressures.
SB 1240
Page 2
COMMENTS
1)Rationale . This bill is sponsored by the California Nurses
Association to reduce the likelihood of health care district
assets being transferred out of the district to the benefit of
a contracting private health system and to the detriment of
the local community.
2)Background . The author has a specific interest in this policy
area due to issues in her legislative district. The district
issues involve the Eden Township Health Care District, Eden
Medical Center (EMC, the nonprofit formed in 1997 in
conjunction with Sutter Health), and San Leandro Hospital. The
author indicates the interests of the health care district
have suffered due to overarching governance and financial
arrangements that have benefited Sutter. This bill aims to
increase health care district financial protections and
increase reporting about operational arrangements.
3)California Health Care Districts . Health care districts in
California originated after World War II to address a severe
shortage of hospitals in historically less populated, lower
income parts of the state. The Legislature enacted the Local
Hospital District Law in 1945 to allow certain communities
access to a source of tax dollars to build and fund health
care services. The law allowed the creation of a new legal
entity with specified jurisdiction and governance. Since that
time more than 80 health care districts in California have
been formed. Districts may operate a variety of medical
facilities including hospitals, public health clinics,
chemical dependence recovery facilities, outpatient surgery
centers, and skilled nursing facilities. Some also provide
paramedic services and community-based education programs to
the residents of their districts. There are now more than 30
districts that do not operate a hospital, with many health
care district hospital losses associated with selling
facilities to for-profit or nonprofit hospital systems.
4)Concerns . The California Hospital Association (CHA) is opposed
to this bill. CHA indicates current law contains adequate
protections and public review prior to the finalization of
major health care district contracts. CHA indicates this bill
will create barriers to financially distressed district
hospitals establishing operational relationships with
nonprofit entities.
SB 1240
Page 3
5)Related Legislation . SB 1351 (Corbett) in 2008 required a
health care district to submit a ballot measure to district
voters and obtain majority approval prior to specified
ownership transfers or property relinquishments. SB 1351 was
vetoed due to concerns about placing additional restrictions
on health care district governance.
Analysis Prepared by : Mary Ader / APPR. / (916) 319-2081