BILL ANALYSIS �
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|SENATE RULES COMMITTEE | AB 2115|
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THIRD READING
Bill No: AB 2115
Author: Alejo (D)
Amended: 5/31/12 in Senate
Vote: 21
SENATE HEALTH COMMITTEE : 7-0, 6/13/12
AYES: Hernandez, Harman, Alquist, Anderson, DeSaulnier,
Rubio, Wolk
NO VOTE RECORDED: Blakeslee, De Le�n
SENATE GOVERNANCE & FINANCE COMMITTEE : 9-0, 6/20/12
AYES: Wolk, Dutton, DeSaulnier, Fuller, Hernandez, Kehoe,
La Malfa, Liu, Yee
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
ASSEMBLY FLOOR : 76-0, 5/14/12 - See last page for vote
SUBJECT : Local health care districts: employment
contracts
SOURCE : Author
DIGEST : This bill requires a written employment
agreement if a local health care district employs or
contracts with a hospital administrator or chief executive
officer (CEO).
ANALYSIS :
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Existing law:
1. Establishes "The Local Health Care District Law," under
which a local hospital district may be organized,
incorporated and managed. Permits a district to include
incorporated or unincorporated territory, or both, in
any one or more counties.
2. Permits a local hospital district to enter into a
contract of employment with a hospital administrator,
and limits the duration of this contract to four years,
but permits the contract to be renewed periodically upon
expiration.
3. Specifies that any reference to a "hospital
administrator" means "chief executive officer."
This bill:
1. Revises provisions of law that permit a local hospital
district to enter into a contract of employment with a
hospital administrator or chief executive by requiring a
written employment agreement if a local district employs
or contracts with the hospital administrator or chief
executive officer.
2. Requires, if the Commission on State Mandates
determines that this bill contains costs mandated by the
state, health care districts to be reimbursed for those
costs by the state.
Background
In March of 2012, the Bureau of State Audits released its
report on the fiscal mismanagement of Salinas Valley
Memorial Healthcare System (SVMHS) SVMHS, subtitling the
report "Increased Transparency and Stronger Controls Are
Necessary as It Focuses on Improving Its Financial
Situation." SVMHS is an independent special health care
district with an elected five-member board of directors
that governs its activities. At the core of SVMHS is the
Salinas Valley Memorial Hospital, which employed more than
1,700 employees as of June 20, 2011, and maintains 269
beds. According to the report, "although as a public agency
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SVMHS's decisions regarding compensation for its top
executives should be transparent, this has not been the
case for such board decisions." The report goes on to
state that in an environment characterized by the lack of
an executive compensation policy and limited transparency
in executive compensation matters, SVMHS's executives were
granted compensation at the upper level of industry
practices. The former CEO, who retired in April 2011,
received $4.9 million in retirement and severance benefits
between 2008 and 2011, the majority of which came from
multiple retirement investment plans that SVMHS provided
him as part of his overall retirement benefits package.
The Bureau of State Audits made several recommendations as
part of this report, including recommending that SVMHS
develop a formal policy that establishes a process for
determining executive compensation that clearly documents
all executive compensation decisions. Additionally, the
report recommended, in order to ensure that the terms of
its CEO's employment and compensation are clear and to aid
the board in its oversight role, that SVMHS should engage
its next permanent CEO in a written employment contract.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
Local: Yes
SUPPORT : (Verified 7/2/12)
Association of California Healthcare Districts
California Nurses Association
OPPOSITION : (Verified 7/2/12)
Department of Finance
ARGUMENTS IN SUPPORT : The Association of California
Healthcare Districts (ACHD) states most district hospitals
currently maintain written agreements with their
administrators. ACHD believes this bill creates a uniform
approach which fosters good governance for all district
hospitals and the communities in which they serve. The
California Nurses Association states that this is a simple
bill that will result in clarity, transparency and
accountability in terms of employment and compensation.
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ARGUMENTS IN OPPOSITION : The Department of Finance (DOF)
states that this bill could result in a reimbursable state
mandate by requiring local hospital districts to enter into
written contracts when hiring hospital administrators. DOF
states that the cost of this mandate is currently unknown
but may be significant.
ASSEMBLY FLOOR : 76-0, 5/14/12
AYES: Achadjian, Alejo, Allen, Ammiano, Beall, Bill
Berryhill, Block, Blumenfield, Bonilla, Bradford,
Brownley, Buchanan, Butler, Charles Calderon, Campos,
Carter, Cedillo, Chesbro, Conway, Cook, Davis, Dickinson,
Donnelly, Eng, Feuer, Fong, Fuentes, Furutani, Beth
Gaines, Galgiani, Garrick, Gatto, Gordon, Gorell, Grove,
Hagman, Halderman, Hall, Harkey, Hayashi, Roger
Hern�ndez, Hill, Huber, Hueso, Huffman, Jeffries, Jones,
Knight, Lara, Logue, Bonnie Lowenthal, Ma, Mansoor,
Mendoza, Miller, Mitchell, Monning, Morrell, Nestande,
Nielsen, Norby, Olsen, Pan, V. Manuel P�rez, Portantino,
Silva, Skinner, Smyth, Solorio, Swanson, Torres, Wagner,
Wieckowski, Williams, Yamada, John A. P�rez
NO VOTE RECORDED: Atkins, Fletcher, Perea, Valadao
CTW:d 7/3/12 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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