BILL ANALYSIS
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|SENATE RULES COMMITTEE | SB 1240|
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VETO
Bill No: SB 1240
Author: Corbett (D)
Amended: 8/24/10
Vote: 21
SENATE LOCAL GOVERNMENT COMMITTEE : 3-2, 4/7/10
AYES: Kehoe, DeSaulnier, Price
NOES: Cox, Aanestad
SENATE HEALTH COMMITTEE : 5-0, 04/21/10
AYES: Alquist, Leno, Negrete McLeod, Pavley, Romero
NO VOTE RECORDED: Strickland, Aanestad, Cedillo, Cox
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SENATE FLOOR : 22-12, 06/01/10
AYES: Alquist, Calderon, Cedillo, Corbett, Correa,
DeSaulnier, Ducheny, Florez, Hancock, Kehoe, Leno,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price,
Romero, Simitian, Steinberg, Wolk, Wright, Yee
NOES: Aanestad, Ashburn, Cogdill, Cox, Denham, Dutton,
Harman, Hollingsworth, Huff, Runner, Strickland, Wyland
NO VOTE RECORDED: Liu, Oropeza, Walters, Wiggins, Vacancy,
Vacancy
ASSEMBLY FLOOR : 48-28, 8/31/10 - See last page for vote
SENATE FLOOR : 22-13, 8/31/10
AYES: Alquist, Calderon, Cedillo, Corbett, Correa,
DeSaulnier, Ducheny, Florez, Hancock, Kehoe, Leno, Liu,
Lowenthal, Negrete McLeod, Padilla, Pavley, Price,
Romero, Steinberg, Wolk, Wright, Yee
CONTINUED
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NOES: Aanestad, Ashburn, Blakeslee, Cogdill, Denham,
Dutton, Emmerson, Harman, Hollingsworth, Huff, Runner,
Walters, Wyland
NO VOTE RECORDED: Oropeza, Simitian, Strickland, Wiggins,
Vacancy
SUBJECT : Local health care districts
SOURCE : California Nurses Association
DIGEST : This bill requires, when a health care 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.
ANALYSIS : Under the Local Health Care District Law,
provides for the formation of local health care 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
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.
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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:
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 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
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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
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.
4.Contains language to avoid chaptering-out issues with SB
894 (Local Government Committee.
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
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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
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
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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
Local: Yes
SUPPORT : (Verified 5/25/10 - unable to reverify)
California Nurses Association (source)
AFSCME
California Labor Federation
Eden Township Healthcare District
Marin Healthcare District
St. Rose Hospital
OPPOSITION : (Verified 5/25/10 - unable to reverify)
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
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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.
GOVERNOR'S VETO MESSAGE:
"I am returning Senate Bill 1240 without my signature.
This bill would limit the discretion of a hospital
district when entering into a contract with another
operating entity and have the unintended consequence
of reducing the incentive for such arrangements when
hospitals are struggling to remain open. The
Legislature has balanced local discretion with the
state's interest in protecting access to health care
with several safeguards, including requiring the State
Attorney General to review asset transfers and in some
cases, requiring voter approval. This bill would
disrupt the balance between local discretion by local
elected officials and state policy for assuring access
to health care.
For these reasons, I cannot sign this bill."
ASSEMBLY FLOOR :
AYES: Ammiano, Arambula, Bass, Beall, Block, Blumenfield,
Bradford, Brownley, Buchanan, Caballero, Charles
Calderon, Carter, Coto, Davis, De La Torre, De Leon, Eng,
Evans, Feuer, Fong, Fuentes, Furutani, Gatto, Hall,
Hayashi, Hernandez, Hill, Huffman, Jones, Lieu, Bonnie
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Lowenthal, Ma, Mendoza, Monning, Nava, V. Manuel Perez,
Portantino, Ruskin, Salas, Saldana, Skinner, Solorio,
Swanson, Torlakson, Torres, Torrico, Yamada, John A.
Perez
NOES: Adams, Anderson, Bill Berryhill, Tom Berryhill,
Conway, Cook, DeVore, Fletcher, Fuller, Gaines, Garrick,
Gilmore, Hagman, Harkey, Huber, Jeffries, Knight, Logue,
Miller, Nestande, Niello, Nielsen, Norby, Silva, Smyth,
Audra Strickland, Tran, Villines
NO VOTE RECORDED: Chesbro, Galgiani, Vacancy, Vacancy
AGB:nl 10/5/10 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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