BILL ANALYSIS �
SENATE GOVERNANCE & FINANCE COMMITTEE
Senator Lois Wolk, Chair
BILL NO: AB 276 HEARING: 7/3/12
AUTHOR: Alejo FISCAL: No
VERSION: 6/19/12 TAX LEVY: No
CONSULTANT: Weinberger
CENTRAL COAST HOSPITAL AUTHORITY
Authorizes the Monterey County Board of Supervisors to
create the Central Coast Hospital Authority and specifies
the new authority's governance, powers, and procedures.
Background and Existing Law
State law requires counties to provide or secure public
health care services and authorizes the formation of
hospital districts to provide such services. Facing
escalating costs, however, some county hospitals have
sought to merge or affiliate with public, private
non-profit, or for-profit hospitals in their areas.
Natividad Medical Center is a 172-bed, acute care hospital
owned and operated by Monterey County. The hospital has
over 235 physicians and has several specialty clinics and
outpatient primary care clinics operated by the Monterey
County Health Department. As one of California's 19 public
safety-net hospitals, Natividad serves a high proportion of
underinsured and uninsured patients, providing healthcare
access to all patients regardless of their ability to pay.
As a public safety-net hospital, Natividad Medical Center
faces significant challenges. The recent economic slowdown
has increased the population of patients who rely on the
hospital's safety net services while, at the same time,
decreasing the reimbursements that the hospital receives
from the federal and state governments. Public hospitals
also face the challenge of competing with private health
care providers while complying with statutes governing
procurement, hiring, public records, and other restrictions
imposed by state law. In response to similar concerns, the
Legislature granted the Alameda County Board of Supervisors
the power to establish a separate hospital authority to
govern the county's medical center (AB 2374, Bates, 1996).
AB 276 -- 6/19/12 -- Page 2
The Monterey County Board of Supervisors wants to create a
hospital authority to govern the Natividad Medical Center
and one or more other health care facilities that are
affiliated or consolidated with the medical center.
Proposed Law
Assembly Bill 276 authorizes the Monterey County Board of
Supervisors to establish, subject to specified limitations,
the Central Coast Hospital Authority (CCHA) as a separate
public entity.
AB 276's provisions specify:
I. The process for establishing the CCHA.
II. CCHA's governance.
III. CCHA's powers and duties.
I. Establishment. Assembly Bill 276 prohibits the CCHA
from being established, transacting business, exercising
powers, or undertaking duties and responsibilities until
the Monterey Board of Supervisors and at least one other
governing board reach an agreement to affiliate or
consolidate the Natividad Medical Center (NMC) with at
least one other health care facility. This agreement may
include a transfer of:
Real and personal property, and assets and
liabilities from the county and the other health care
facility to the CCHA.
Employees from the county and the other health care
facility to the CCHA.
Maintenance, operation, and management or ownership
of the medical center, in accordance with state law.
Maintenance, operation, and management or ownership
of the other health care facility.
Other matters that the board of supervisors and the
governing board deem necessary or appropriate.
AB 276 requires the terms and conditions of the agreement
between the Board of Supervisors and the governing board to
be binding upon the CCHA. The agreement can be amended
upon the mutual consent of the CCHA and one or more of the
parties to the agreement.
AB 276 -- 6/19/12 -- Page 3
The bill requires the agreement to include a transition
plan that requires:
Communication to employees and recognized employee
organizations regarding the impact of the transition
on existing medical center and other health care
facility employees and employee classifications,
Meeting and conferring by the county and the other
health care facility with affected employee bargaining
units on specified issues, and
Acknowledgment that the CCHA is bound by the terms
of the memoranda of understanding executed between the
county and its exclusive employee representatives and
between the other health care facility and its
respective employee organizations that are or will be
in effect as of the date the county adopts an
ordinance creating the CCHA.
AB 276 provides that any agreement for the maintenance,
operation, and management or ownership of NMC:
Cannot relieve Monterey County of the
responsibility for indigent care pursuant to state
law.
Must require the County to meet statutory
requirements that apply to a decision to close a
county health care facility, reduce the services
provided by a county health care facility, or lease,
sell or transfer the management of a county health
care facility.
AB 276 exempts the CCHA from the jurisdiction of a local
agency formation commission pursuant to the
Cortese-Knox-Hertzberg Local Government Reorganization Act
of 2000 or any successor statute.
AB 276 contains extensive provisions relating to the CCHA's
effects on current NMC employees, including requirements
related to:
The qualifications and retention of current NMC
employees.
The maintenance of current NMC employees' seniority
and benefits.
Changes in current employee classifications and job
descriptions.
Employee's continued membership in the Public
Employees' Retirement System.
AB 276 -- 6/19/12 -- Page 4
Recognition of exclusive representatives of
employee's bargaining units.
The continuation of an existing memorandum of
understanding or agreement covering the terms and
conditions, including the level of wages and benefits,
of current employees.
After an agreement is reached between the Monterey County
Board of Supervisors and the governing board of another
health care facility, the Board of Supervisors must adopt
an ordinance to establish the CCHA and authorize it to
exercise its specified powers and duties.
II. Governance. AB 276 requires that the Monterey County
Board of Supervisors, and the governing board with which it
has entered into an agreement must appoint a nine-member
board of trustees to govern the CCHA. The bill specifies
that the Board of Supervisors must appoint one trustee to
serve a two-year term, two trustees to serve three-year
terms, and two trustees to serve four-year terms. The
governing board must appoint two trustees to serve two-year
terms, one trustee to serve a three-year term, and one
trustee to serve a four year term.
AB 276 requires that the trustees must reflect:
The expertise necessary to maximize the quality and
scope of care at the NMC and the other health care
facility in a fiscally responsible manner.
The communities of interest that the NMC and the
other health care facility serve.
The bill requires the board of trustees to operate the NMC
and the other health care facility in a manner that
provides appropriate, quality, and cost-effective medical
care through the development of innovative delivery
systems, care arrangements, and contractual agreements that
provide access to affordable, high-quality health care
services.
AB 276 allows the Board of Supervisors and the governing
board to each remove their respective appointees, upon a
majority vote, only for cause. If the governing board
ceases to exist at any time, the appointing authority must
be exercised solely by the board of supervisors. If a
vacancy exists for any reason on the board of trustees, the
appointing authority for that trustee shall make an
AB 276 -- 6/19/12 -- Page 5
appointment to fill out the remainder of the term of the
vacant trustee position. AB 276 allows the Board of
Supervisors and governing board to modify the number of
trustees, length of terms, and appointing authority of the
board of trustees, subject to specified conditions.
AB 276 requires the board of trustees to adopt bylaws for
the CCHA. The bylaws, and any subsequent amendments, must
be adopted by a majority vote.
The bill declares the board of trustees to be a duly
constituted governing body for the purposes of a specified
statute and regulation.
III. Powers and duties. AB 276 declares that the CCHA
must:
Provide management, administration, and other
controls for the NMC to continue to serve as a
designated public hospital and ensure the viability of
the health care safety net in Monterey County in a
manner consistent with the county's requirements under
state law.
Provide management, administration, and other
controls for the continued operation of one or more
other health care facilities that may be affiliated or
consolidated with the NMC.
Be charged with the management, administration, and
control of the medical center, other health care
facilities, and related services and facilities.
AB 276 assigns corporate powers to the CCHA, including
provisions relating to:
Real and personal property.
Lawsuits, claims, and liability.
Procurement and contracts.
Personnel, employee compensation, and benefits.
Financial management.
Joint powers agreements.
The creation of nonprofit, for profit, or other
entities to carry out CCHA's duties.
The use of a computerized management information
system and electronic health records.
AB 276 authorizes the CCHA to levy taxes and assessments,
subject to compliance with applicable constitutional
provisions, within the incorporated and unincorporated
AB 276 -- 6/19/12 -- Page 6
areas of the county.
AB 276 authorizes the CCHA to incur indebtedness and to
borrow money and issue bonds, including notes and revenue
bonds, to provide sufficient funds for any of the CCHA's
purposes. The bill exempts any notes, bonds, or other
securities issued, and the income from them, from taxation
by the state or any agency, political subdivision, or
instrumentality of the state. AB 276 allows the CCHA to
arrange for guarantees or insurance of its bonds, notes, or
other obligations by the federal or state government or by
a private insurer, and to pay the associated premiums.
AB 276 requires that the CCHA must:
Be a government entity separate and apart from the
county and any other public entity. The bill declares
that CCHA cannot be considered to be an agency,
division, or department of the county or any other
public entity, nor is it governed by, or subject to,
the policies or operational rules of the county or any
other public entity.
Be subject to state and federal taxation laws that
are applicable to public entities generally, except
for an exemption from social security taxation,
subject to specified conditions.
Comply with the Myers-Milias-Brown Act, the Public
Records Act, and the Ralph M. Brown Act.
Assume the liabilities for California Public
Employees' Retirement System benefits, workers'
compensation, and other employee benefits and
liabilities with respect to employees of the
authority, unless otherwise agreed to by the
authority, the county, and the governing board.
Carry professional and general liability insurance
or programs to the extent sufficient to cover its
activities.
Comply with specified statutes relating to the
termination of employee contracts.
Meet all local, state, and federal data reporting
requirements.
Be subject to the jurisdiction of the Public
Employment Relations Board.
AB 276 grants the board of trustees authority over
procurement and contracts for the CCHA, pursuant to written
rules, regulations, and procedures that the board of
AB 276 -- 6/19/12 -- Page 7
trustees must adopt. The bill allows contracts by and
between the authority and any public agency, and contracts
by and between the authority and providers of health care,
goods, or services, to be let on a nonbid basis and exempts
those contracts from specified provisions of the Public
Contract Code.
AB 276 declares that a member of the CCHA's administrative
staff cannot be considered to be engaged in activities
inconsistent and incompatible with his or her duties as a
result of prior employment or affiliation with the county
or the governing board.
The bill specifies a process by which the Authority,
subject to specified conditions, may be dissolved.
The bill contains legislative findings and declarations
regarding the need to establish a public hospital authority
in Monterey County.
State Revenue Impact
No estimate.
Comments
1. Purpose of the bill . To maintain the county hospital's
ability to provide affordable, high quality health care
services, Monterey County supervisors want Natividad
Medical Center to function with increased flexibility,
responsiveness and innovation. To accomplish this goal,
the County wants Natividad Medical Center to be affiliated
or consolidated with one or more healthcare facilities in
Monterey County and operated by a separate and distinct
Central Coast Public Hospital Authority separate and apart
from the County. SB 276 will allow the Monterey region to
compete more effectively for federal health care funding
and ensure the viability of the health care safety net in
Monterey County. The bill is permissive, allowing
Natividad Medical Center to merge with another hospital if
both entities agree to a merger. The Salinas Valley Medical
Hospital has been considering this option. If a merger
agreement is reached, SB 276 ensures that the employees
have a seamless transition of wages, benefits, and
AB 276 -- 6/19/12 -- Page 8
contracts without loss of rights or status.
2. Similar, but not identical . AB 276 authorizes Monterey
County to create a hospital authority that is similar to
the authority created in Alameda County under provisions of
the 1996 Bates legislation. However, AB 276 differs from
the legislation for Alameda County by allowing the CCHA to
levy taxes and issue bonds:
Taxes . Although taxes levied by the CCHA would be
subject to constitutional voter-approval requirements,
the bill takes the decision to propose taxes for NMC
away from the county's elected board of supervisors
and places the authority to propose taxes in the hands
of the CCHA's less-visible, unelected board of
directors. By contrast, in Alameda County, a local
sales tax to support the county medical center was
proposed to voters and levied by the Board of
Supervisors, not the county's hospital authority. AB
276 also does not specify what taxes the CCHA can
levy. The Committee may wish to consider amending AB
276 to authorize the Monterey County Board of
Supervisors to levy a taxes on behalf of CCHA, at the
request of the Authority's board of trustees.
Bonds . Before counties, cities, or school
districts can create multi-year general obligation
debt, the California Constitution requires that
counties and cities receive 2/3-voter approval and 55%
voter-approval for school district bonds. Because the
Constitution doesn't mention special districts, the
Legislature has allowed some districts to borrow money
without voter approval by issuing "promissory notes,"
loans that are backed only by the promise to repay.
AB 276 broadly authorizes the CCHA to issue bonds,
including notes and revenue bonds. By contrast, the
Legislature removed the authority to issue revenue
bonds from the legislation creating the Alameda County
hospital authority. By granting the CCHA authority to
issue long-term debt, AB 276 may allow the county to
avoid seeking voter approval for financing projects at
NMC. The Committee may wish to consider amending AB
276 to authorize CCHA to issue bonds that require
voter approval only with the consent of the Monterey
County Board of Supervisors.
AB 276 -- 6/19/12 -- Page 9
3. Let's get technical . To clarify AB 276's provisions,
the Committee may wish to consider making the following
technical amendments to the bill:
On page 6, line 27, after "ownership" insert "of
the medical center"
On page 7, strike out paragraph (f), lines 5-19
On page 8, line 39, strike out "a period not to
exceed".
On page 8, line 40, strike out "expiration of the"
and insert "term end date of any".
On page 9, line 10, strike out "Continue to be
bound by any existing" and insert "Roll over and
continue to be bound by any existing medical center".
On page 9, line 13, strike out "not to exceed" and
insert "of".
On page 9, line 13, strike out "expiration" and
insert "term end date"
On page 9, line 20, after "Section 101768" insert
", 101660(m)"
On page 10, line 13, strike out "directors" and
insert "supervisors".
4. Double-referral . Because AB 276 authorizes the
creation of a new local hospital authority, Senate Rules
Committee double-referred the bill, first to the Senate
Health Committee, which hears bills related to health care
policy, and then to the Senate Governance & Finance
Committee, which hears bills related to local governments'
powers. At its June 27 hearing, the Senate Health
Committee passed AB 276 by a 9-0 vote.
5. Special legislation . The California Constitution
prohibits special legislation when a general law can apply.
AB 276 contains findings and declarations explaining the
need for legislation that applies only to the County of
Monterey.
6. Gut-and-amend . As introduced, AB 276 made changes to
state laws governing local governments' annual financial
transactions reports. Later amendments deleted those
provisions from the bill and added language relating to the
collective bargaining process. The Committee never heard
those versions of the bill. The June 4 amendments deleted
the bill's contents and inserted the language relating to
the Central Coast Hospital Authority.
AB 276 -- 6/19/12 -- Page 10
Assembly Actions
Not relevant to the June 19, 2012 version of the bill.
Support and Opposition (6/28/12)
Support : California Nurses Association; Central California
Alliance for Health; SEIU; SEIU Local 521; Natividad
Medical Center; Monterey County Board of Supervisors.
Opposition : Unknown.