BILL ANALYSIS
SB 1240
Page 1
SENATE THIRD READING
SB 1240 (Corbett)
As Amended August 20, 2010
Majority vote
SENATE VOTE :22-12
HEALTH 13-6 APPROPRIATIONS 12-5
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|Ayes:|Monning, Ammiano, Carter, |Ayes:|Fuentes, Bradford, |
| |De La Torre, De Leon, | |Charles Calderon, Coto, |
| |Eng, Hayashi, Hernandez, | |Davis, De Leon, Gatto, |
| |Jones, Bonnie Lowenthal, | |Hall, Skinner, Solorio, |
| |Nava, V. Manuel Perez, | |Torlakson, Torrico |
| |Salas | | |
| | | | |
|-----+--------------------------+-----+--------------------------|
|Nays:|Fletcher, Conway, Gaines, |Nays:|Conway, Harkey, Miller, |
| |Smyth, Audra Strickland, | |Nielsen, Norby |
| |Gilmore | | |
| | | | |
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SUMMARY : Requires, when a health care district (district) is
under contract with another public or private entity to operate
one or more of its health facilities, the district and the
public or private entity operating the district facility to
comply with specified conditions. Specifically, this bill :
1)Requires, when a district is under contract with another
public or private entity to operate one or more of its health
facilities, the district and the public or private entity
operating the district facility to comply with the following
requirements:
a) Except as authorized in existing law, assets of any
health facility owned by the district, including, but not
limited to, all revenues from the sale or investment of any
asset of the facility and all net operating income, to be
used exclusively for the benefit of a facility within the
geographic boundaries of the district and owned by the
district;
b) The hospital and the operating entity are to annually
undergo an independent financial audit and the resulting
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report is to be made public by the district; and,
c) In the case of a subsequent sale of the hospital
facility or any other assets of the district to the
operating entity, any losses incurred by the entity in the
operation of the facility are not to be used as a credit
against the purchase price of the facility or other
district assets. This provision is exempt from a sale of a
hospital facility that is otherwise in compliance with
existing law, as specified.
2)Exempts 1) above from applying to a district and a nonprofit
corporation that meets all of the following criteria:
a) The district is under contract with a tax-exempt
nonprofit corporation, qualified under Section 501 (c) (3)
of the Internal Revenue Code, to operate a district
facility;
b) The nonprofit corporation operates one or more general
acute care hospitals, as defined in existing law, that are
the subject of the contract;
c) The general acute care hospital or hospitals that are
operated by the nonprofit corporation are owned by the
district; and,
d) The district is the nonprofit corporation's sole
corporate member.
3)Permits the district board of directors to provide for the
operation and maintenance through tenants of the whole or any
part of any hospital acquired or constructed by it and enter
into any lease agreement that it believes will best serve the
interest of the district, only to the extent that the
agreement does not provide benefits to the tenants beyond
those reasonably necessary to ensure the operation of the
hospital for the benefit of the district and allows the tenant
to recoup its capital investments made during the lease
agreement.
EXISTING LAW :
1)Establishes the Local Health Care District Law which
authorizes communities to form special districts to construct
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and operate hospitals and other health care facilities to meet
local needs.
2)Authorizes, until January 1, 2011, 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 assets.
Prior to the district transfer of 50% or more of the
district's assets to one or more corporations, requires the
elected district board to submit to the voters of the district
a measure proposing the transfer.
3)Requires, after January 1, 2011, the provisions in 2) above to
restrict these transfers to only nonprofit corporations.
4)Authorizes a district to transfer, at less than 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.
Requires the transfer agreement to provide 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. Prior to
the transfer of 50% or more of the district's assets to one or
more nonprofit corporations, requires the elected district
board to submit to the voters of the district a measure
proposing the transfer.
5)Requires the district to report to the California 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.
FISCAL EFFECT : According to the Assembly Appropriations
Committee, this bill has no direct General Fund impact.
COMMENTS : According to the author, due to rapid changes in
health care delivery, technology, and reimbursement, hospitals
owned and operated by districts must compete with other health
care providers in addition to complying with the state's
hospital seismic requirements. The author maintains that all of
these factors have forced districts to ponder arrangements with
non-profit or for-profit entities in order to keep their
districts solvent and maintain a strong presence in their
communities. The author asserts that, in some cases, district
boards enter into a contract with larger, private health care
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systems to manage the district hospitals which, unfortunately,
in too many cases, end with assets being transferred out of the
district to the benefit of the contracting private health system
and to the detriment of the local community. The author argues
that there is a growing concern that some districts are entering
into contracts that reduce the district's assets and access to
acute care. The author cites as examples of this a 2007
agreement between the Eden Township Healthcare District and
Sutter Health, under which Sutter obtained a right of first
refusal to purchase San Leandro Hospital, and the right to first
deduct their operating losses from the purchase price, and an
agreement between Marin Healthcare District and Sutter Health,
under which the author states that $90 to $200 million was
transferred from Marin General Hospital to Sutter over a
two-year period. According the author, this bill is intended to
protect the assets of a district to ensure the community's
health care needs are met.
Analysis Prepared by : Tanya Robinson-Taylor / Health / (916)
319-2097
FN: 0006479