BILL ANALYSIS �
SENATE COMMITTEE ON HEALTH
Senator Ed Hernandez, O.D., Chair
BILL NO: AB 272
AUTHOR: Monning
AMENDED: January 4, 2012
HEARING DATE: January 11, 2012
CONSULTANT: Moreno
SUBJECT : Health care facilities: financing.
SUMMARY : Permits the California Health Facilities
Financing Authority (CHFFA) to award one or more grants, as
specified, to one or more projects designed to demonstrate
specified new or cost-effective methods of delivering
health care services to improve access to quality health
care for vulnerable populations or communities that are
effective at enhancing health outcomes, and improving
access to quality health care.
Existing law:
1.Establishes CHFFA, consisting of nine members, including
the State Treasurer who serves as chairman, through the
CHFFA Act.
2.Permits CHFFA to make loans from the continuously
appropriated CHFFA Fund to public or nonprofit health
institutions for financing or refinancing the
acquisition, construction, or remodeling of health
facilities.
3.Requires, for the purposes of CHFFA's loans, a nonprofit
health institution to include, but not be limited to: a
general acute care hospital; an acute psychiatric
hospital; a skilled nursing facility (SNF); an
intermediate care facility; a special health care
facility that provides medical, nursing, rehabilitation,
dental, or maternity services; a clinic; an adult day
health center; a county-operated health facility; a
residential facility for the elderly that is operated as
a part of, or in conjunction with, an intermediate care
facility, a SNF, or a general acute care hospital; a
child day care facility operated in conjunction with a
health facility; an intermediate care facility/
developmentally disabled habilitative, that is a health
facility; a community care facility; an accredited
Continued---
AB 272 | Page
2
community work-activity program; a community mental
health center; a speech and hearing center; or a blood
bank.
This bill:
1.Permits CHFFA, after a competitive selection process, to
award one or more grants that, in the aggregate, do not
exceed $1.5 million to one or more projects designed to
demonstrate new or cost-effective methods of delivering
health care services to improve access to quality health
care for vulnerable populations or communities that are
effective at enhancing health outcomes, and improving
access to quality health care. Exempts the competitive
selection process from competitive bidding requirements
under existing law, as specified.
2.Permits the services to include, but not be limited to,
medical, mental health, or dental services for the
diagnosis, care, prevention, and treatment of human
illness, or individuals with physical, mental, or
developmental disabilities.
3.Permits more than one demonstration project to receive a
grant. States legislative intent that grantees allow
patients to receive screenings, diagnoses, or treatments
in community settings, including, but not limited to,
school-based health centers, adult day health centers,
and residential care facilities for the elderly, or for
individuals with mental illness or developmental
disabilities. Further states legislative intent that
grantees take advantage of advances in telecommunications
technologies that will produce a more accessible and
cost-effective delivery system for needed services and
improved health outcomes.
4.Permits grants to a demonstration project to be allocated
in increments over multiple years to ensure the
demonstration project's ability to complete its work, as
determined by CHFFA.
5.Requires the demonstration project administrators, prior
to the initial allocation of funds, to provide evidence
that the project has or will have additional funds
sufficient to ensure completion of the project.
AB 272 | Page
3
6.Requires, if CHFFA allocates a grant in increments, that
each subsequent year's allocation be provided to the
project only upon submission of research that shows that
the project is progressing towards the identification of
a cost-effective delivery model that improves health
outcomes and access to quality care for vulnerable
populations or communities, and can be replicated
throughout the state in community settings.
7.Prohibits a health facility that has received tax-exempt
bond financing from CHFFA from being eligible to receive
funds for a demonstration project, but permits it to
participate as an uncompensated partner or member of a
collaborative effort that is awarded a demonstration
project grant.
8.Permits CHFFA, if a demonstration project is successful
at developing a new method of delivering cost-effective
health care services in community settings, as specified,
beginning as early as the second year after the initial
allocation of moneys, to implement a second grant program
that awards not more than $5 million, in the aggregate,
to eligible recipients as defined by CHFFA, to replicate
in additional California communities.
9.Requires the award of replication grants to be exempt
from the competitive bidding requirements in existing
law. Requires CHFFA, prior to the implementation of this
second grant program, to provide a report to the
Legislature and the Governor on the outcomes of the
demonstration project, as specified. Requires CHFFA, if
it implements the second grant program, to report
annually, beginning with the first year of implementation
of the second grant program, to the Legislature and the
Governor regarding the program, as specified.
10.Permits grants to be utilized for eligible construction
and land costs, as defined in existing law, and to
include equipment, information technology, and working
capital, as defined in existing law.
11. Permits CHFFA to promulgate regulations
relating to this grant program, including those that
define eligible recipients, eligible costs, and minimum
and maximum grant amounts, as emergency regulations, as
AB 272 | Page
4
specified.
12. Creates the California Health Access Model
Program Account (Account) in the CHFFA Fund and
continuously appropriates the moneys in the Account to
CHFFA for carrying out the purposes of this bill.
Transfers an amount of up $6.5 million from funds in the
CHFFA Fund that are not impressed with a trust for other
purposes into the Account for the purpose of issuing
grants pursuant to this bill. Reverts any moneys
remaining in the Account on January 1, 2020, to the CHFFA
Fund.
13. Contains an urgency clause that will make this
bill effective upon enactment.
FISCAL EFFECT : This bill has not been analyzed by a fiscal
committee.
PRIOR VOTES :
Assembly Floor: not relevant.
Assembly Appropriations: not relevant.
Assembly Health: not relevant.
COMMENTS :
1.Author's statement. According to the author, this bill
has been introduced in response to devastating funding
reductions to services for California's underserved and
vulnerable populations, and is in alignment with the
challenge posed to states by the national health care
reform to fund innovative and cost-effective ways of
delivering quality health care to more people. During
this time of tragic budget reductions to our most
vulnerable populations, this is a rare chance to use some
available funds to help minimize the reductions that are
occurring in other areas. The CHFFA Fund has $6.5
million immediately available that can be put to work to
get urgently needed health care services to underserved
and vulnerable populations throughout the state. This
urgency legislation will give CHFFA an opportunity to get
that money out to deserving grant recipients as quickly
as possible.
2.Background. CHFFA was created to be the state's vehicle
for providing financial assistance to public and
AB 272 | Page
5
nonprofit health care providers through loans funded by
the issuance of tax-exempt bonds. To this end, CHFFA
administers the Bond Financing Program and the Tax-Exempt
Equipment Financing Program. CHFFA also provides direct
loans to small and rural health facilities through the
Healthcare Expansion Loan Program (HELP) II Financing
Program and the Medi-Cal Bridge Loan Program.
Additionally, CHFFA administers two grant programs, the
Community Clinic Grant Program and the Children's
Hospital Program, to provide funding to community clinics
and 13 of the state's children's hospitals.
By borrowing through CHFFA, health facilities can likely
obtain lower interest rates than they would through
conventional bonds. Generally, nonprofit, licensed
health facilities in California, including adult day
health centers, community clinics, skilled nursing
facilities, developmentally disabled centers, hospitals,
and drug and alcohol rehabilitation centers are eligible
for CHFFA financing. Proceeds from CHFFA financings may
be used for project-related costs, including:
construction; remodeling and renovation; land acquisition
(as part of the proposed project); acquisition of
existing health facilities; purchase or lease of
equipment; refinancing or refunding of prior debt;
working capital for start-up facilities; costs of bond
issuance; feasibility studies; and reimbursement of prior
expenses. Under statute, savings resulting from issuance
of tax-exempt bonds for borrowers must be transferred to
the consuming public through lower or contained costs for
delivery of health services. In 2010, $712,845,000 in
bonds were issued by CHFFA.
3.Fees. According to the author, CHFFA currently has a
fund balance largely derived from the annual and initial
administrative fees paid by CHFFA borrowers and this bill
seeks to permit CHFFA to utilize a portion of that
balance to fund this new grant program. Fees are set
competitively with those charged by competing lenders and
generally cover CHFFA's overhead expenses, such as
personnel costs, travel, legal services, and other
operational expenses. Borrowers are charged an
application fee of $500 and other fees at various times,
which differ depending on the type of borrower and type
of fee.
AB 272 | Page
6
According to CHFFA, the current fund balance is
approximately $14 million, which has been accumulated
over the past 30 years. These sums have been used to
fund Medi-Cal Bridge Loan Program loans to hospitals,
clinics and other health institutions when the state's
budget impasses temporarily suspend Medi-Cal
reimbursements to these health facilities. These sums
have also been used to fund the Authority's existing HELP
II Financing Program which provides low-cost financing
for small or rural health care facilities that have
difficulty accessing affordable capital markets because
of the quality of their credit and relative risk profile.
4.Support. California State Treasurer Bill Lockyer, the
sponsor of this bill, writes that this bill will
authorize CHFFA to use money from its fund balance to
fast-track and spur innovative new grant programs which
target the state's burgeoning health care needs. The
Treasurer writes that California's health care and
medical services systems have undergone devastating
reductions, leaving its most vulnerable and underserved
populations without the proper access to health care
needed to survive and thrive. In light of this, the
Treasurer contends that it is important, and within
CHFFA's mission, to utilize available funds to
immediately spur innovative and cost-effective health
care services approaches, even when the available funds
are relatively modest. The Treasurer states that this
bill would do just that by allowing existing monies in
the CHFFA fund balance to support the creation of new
models for health care delivery to California's most
vulnerable populations and communities. The California
Hospital Association writes that using these monies to
spark innovative and cost-effective models for delivering
health care for underserved and vulnerable populations
presents the opportunity to greatly impact millions of
people who have been hit the hardest by decreases in
health care services.
5.Author's amendments.
a. On Page 7, line 22, delete "that shall be exempt
AB 272 | Page
7
from the competitive bidding requirements of Chapter 2
(commencing with Section 10290) of Part 2 of Division
2 of the Public Contract Code"
b. On Page 8, between lines 28 and 29, insert the
following: "Funds provided to a demonstration project
pursuant to this section may only be used to
supplement, but not supplant, existing financial and
resource commitments of the grantee(s) or any other
members of a collaborative effort that has been
awarded a demonstration project grant."
c. On Page 8, line 24, insert after (3): "Except for a
health facility that qualifies as a "small and rural
hospital" pursuant to Health and Safety Code Section
124840, a"
d. On Page 9, line 1, delete "The award of these
replication grants shall be exempt from the
competitive bidding requirements of Chapter 2
(commencing with Section 10290) of Part 2 of Division
2 of the Public Contract Code."
SUPPORT AND OPPOSITION :
Support: California State Treasurer Bill Lockyer (sponsor)
Association of California Healthcare Districts
California Hospital Association
Oppose: None received.
-- END --