BILL ANALYSIS �
AB 2115
Page 1
GOVERNOR'S VETO
AB 2115 (Alejo)
As Amended May 31, 2012
2/3 vote
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|ASSEMBLY: |76-0 |(May 14, 2012) |SENATE: |36-0 |(August 9, |
| | | | | |2012) |
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|ASSEMBLY: |78-0 |(August 13, | | | |
| | |2012) | | | |
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Original Committee Reference: P.E., R. & S.S.
SUMMARY : Requires a local health care district, if the district
employs or contracts for a hospital administrator or chief
executive officer, to enter into a written employment contract,
not to exceed four years, as specified.
The Senate amendments make minor and technical changes.
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.
AS PASSED BY THE ASSEMBLY , this bill:
1)Required a local hospital district, if employing a hospital
administrator, to enter into a written contract of employment
with the hospital administrator.
2)Provided that reimbursement to local agencies shall be made if
the Commission on State Mandates determines that this act
contains cost mandated by the state.
AB 2115
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FISCAL EFFECT : According to the Senate Appropriations
Committee, pursuant to Senate Rule 28.8, negligible state costs.
COMMENTS : 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.
This bill, an author-sponsored measure, stems from the recent
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 conflict-of-interest laws in one instance, and the
AB 2115
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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."
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.
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: None on file.
GOVERNOR'S VETO MESSAGE :
"It is obvious that written employment contracts between local
health care districts and hospital administrators would provide
the transparency people have a right to expect. In fact, most
local health care districts already do this.
"Other local health care district boards should adopt this
practice forthwith if they have not yet done so. In this way we
will get the transparency we need without the state being forced
to pay for what is a responsibility of local districts."
AB 2115
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Analysis Prepared by : Debbie Michel / L. GOV. / (916)
319-3958
FN: 0005915