BILL ANALYSIS �
AB 2115
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Date of Hearing: April 18, 2012
ASSEMBLY COMMITTEE ON LOCAL GOVERNMENT
Cameron Smyth, Chair
AB 2115 (Alejo) - As Amended: April 10, 2012
SUBJECT : Local hospital districts: employment contracts.
SUMMARY : Requires a local hospital district, if employing a
hospital administrator, to enter into a written contract of
employment with the administrator. Specifically, this bill :
1)Requires a local hospital district, if employing a hospital
administrator, to enter into a written contract of employment
with the hospital administrator.
2)Provides that reimbursement to local agencies shall be made if
the Commission on State Mandates determines that this act
contains cost mandated by the state.
EXISTING LAW allows a local hospital district to enter into a
contract of employment with a hospital administrator, the
duration of which shall not exceed four years, but which may
periodically be renewed upon expiration for not more than four
years.
FISCAL EFFECT : Unknown. This bill is keyed fiscal and contains
a state-mandated local program.
COMMENTS :
1)The Legislature enacted the Local Hospital District Law in
1945 to authorize special districts to build and operate
community hospitals and other health care facilities in
underserved areas. The Salinas Valley Memorial Healthcare
System, in the County of Monterey, was founded in 1947 under
the provisions of the Local Hospital District Law.
Provisions in existing law allow hospital districts, also
known as health care districts, to enter into a renewable
employment contract of up to four years with a hospital
administrator, but the law does not specify that hospitals
require written contracts.
2)This bill, an author-sponsored measure, stems from the recent
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Bureau of State Audits (BSA) examination of the Salinas Valley
Memorial Health Care System. That audit, released in, March
2012, concluded the following in the opening letter to the
Governor and Legislative Leaders:
"This report concludes that the �Salinas Valley Memorial]
Health Care System's board of directors, when making decisions
regarding executive compensation, violated the Ralph M. Brown
Act, which requires legislative bodies of local public
agencies to conduct their meetings in an open manner. In an
environment characterized by a lack of an executive
compensation policy and limited transparency, the Health Care
System granted compensation for its executives at the upper
end of the range for the health care industry. In addition,
the former chief executive officer (CEO) received generous
retirement and severance benefits totaling $4.9 million
between 2008 and 2011, most of which were paid to him before
he retired.
Our review also noted weaknesses in controls in several areas.
We audited instances in which the Health Care System had
business relationships between 2006 and 2010 with entities in
which its executives or board members had economic interests.
In the two relationships we reviewed, the former CEO may have
violated contract-of-interest laws in one instance, and the
board may have violated conflict-of-interest laws in the other
instance. Also, the Health Care System did not ensure that
many of the individuals its conflict-of-interest code
identified as needing to submit statements of economic
interests did so. Further, it does not have written policy
and procedures to demonstrate that its community funding
furthers its public purposes, thereby risking questions about
whether this funding violates the constitutional prohibition
against public agencies making gifts of public funds.
Additionally, for contracts we reviewed for which it was not
required by state law to use a competitive process, the Health
Care System generally did not document how it selected
contractors in a way that demonstrated that it obtained the
best value when procuring goods and services."
3)According to the author, this bill will result in clarity,
transparency and accountability in terms of employment and
compensation. The author notes that due to the lack of a
written contract for the CEO, board members were unclear about
the former CEO's total compensation and what he was entitled
to.
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4)Seeing that the BSA audit of the Salinas Valley Memorial
Health Care System revealed other problems, the Committee may
wish to ask the author whether there are plans to include
other legislative fixes in this bill.
5)Support arguments : This bill requires a written contract to
be entered into between health care districts and hospital
administrators thereby increasing transparency for the public
about the total compensation for that administrator.
Opposition arguments : The Committee may wish to consider
whether there are additional legislative fixes that this bill
could include to increase transparency for the public in
knowing the compensation for hospital district administrators.
REGISTERED SUPPORT / OPPOSITION :
Support
None on file
Opposition
None on file
Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958