BILL ANALYSIS �
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|SENATE RULES COMMITTEE | SB 1094|
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THIRD READING
Bill No: SB 1094
Author: Lara (D)
Amended: 4/21/14
Vote: 21
SENATE HEALTH COMMITTEE : 6-1, 4/24/14
AYES: Hernandez, Beall, De Le�n, DeSaulnier, Evans, Monning
NOES: Morrell
NO VOTE RECORDED: Nielsen, Wolk
SENATE JUDICIARY COMMITTEE : 5-2, 4/29/14
AYES: Jackson, Corbett, Lara, Leno, Monning
NOES: Anderson, Vidak
SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8
SUBJECT : Health facilities: sale of assets: approval
SOURCE : Department of Justice
DIGEST : This bill permits the Attorney General (AG) to amend
the conditions of an agreement or transaction involving a
non-profit health facility after a decision is issued under
specified circumstances, provides an additional 30 days for the
AG to review proposed transactions involving a non-profit health
facility, and provides the AG with the authority to enforce the
conditions of a transaction or agreement. This bill provides
that the waiver of right to judicial relief would not apply to
conditions amended after the close of the transaction.
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ANALYSIS :
Existing law:
1.Requires any non-profit corporation that operates or controls
a health facility, as defined, to provide written notice to,
and obtain the written consent of, the AG prior to entering
into any agreement or transaction to do either of the
following:
A. Sell, transfer, lease, exchange, option, convey, or
otherwise dispose of, its assets to a for-profit
corporation or entity, or another non-profit corporation;
or
B. Transfer control, responsibility, or governance of a
material amount of the assets or operations of the
non-profit corporation to any for-profit corporation or
entity, or another non-profit corporation.
2.Requires the AG, within 60 days of the receipt of a written
notice of a proposed transaction involving a non-profit health
facility, to notify the non-profit corporation in writing of
the decision to consent to, give conditional consent to, or
not consent to the agreement or transaction.
3.Permits the AG to extend the 60-day deadline described above
for one additional 45-day period if specified conditions are
satisfied.
4.Provides the AG with the discretion to consent to, give
conditional extent to, or not consent to any agreement or
transaction involving a non-profit health facility based on
the consideration of any factors that the AG deems relevant,
including but not limited to:
A. Whether the agreement or transaction is at fair market
value;
B. Whether the proposed use of the proceeds from the
transaction is consistent with the charitable trust on
which the assets are held by the health facility or by the
affiliated non-profit health system;
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C. Whether the transaction would create significant effects
on the availability or accessibility of health care
services to the affected community; or
D. Whether the transaction is in the public interest.
5.Prohibits the AG from consenting to a health facility
transaction in which the seller restricts the type or level of
medical services that may be provided at the health facility
that is the subject of the transaction.
6.Permits the AG to contract with experts when deciding whether
to give consent to a transaction, or to monitor ongoing
compliance with the terms and conditions of any transaction,
and requires the non-profit corporation to reimburse the AG
for all reasonable and necessary costs to conduct the review
or monitoring ongoing compliance.
This bill:
1.Extends, from 60 days to 90 days from the receipt of a notice
of a proposed transaction, the time in which the AG must
notify a non-profit corporation in writing of the decision to
consent or not consent to a transaction of health facility
assets from a non-profit corporation to a for-profit
corporation or between two non-profit corporations.
2.Permits the AG to enforce conditions imposed on the AG's
approval of an agreement or transaction involving a non-profit
health facility, and to require the transferee to fulfill all
representations made during the application process, including
those regarding levels of care.
3.Permits the AG to amend the conditions of an agreement or
transaction involving a non-profit health facility after the
decision is issued, if either of the following occur:
A. A party to the transaction or agreement made material
misrepresentations to the AG. Requires any amended
condition imposed pursuant to this provision to be
substantially related to the material misrepresentation; or
B. A party to the transaction or agreement violated the
conditions set forth in the AG's decision. Requires any
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amended condition imposed pursuant to this provision to be
substantially related to the violation, and be necessary to
mitigate, and provide appropriate restitution for, the
effects of the violation.
4.Specifies that once the agreement or transaction involving a
non-profit health facility is closed, the parties are deemed
to have explicitly and implicitly consented to the
applicability and compliance with each condition set forth in
the AG's consent, and to have waived any right to seek
judicial relief with respect to each condition set forth in
the AG's consent. Specifies that this waiver of the right to
seek judicial relief does not apply to any amended condition
imposed pursuant to #3 above.
Background
In late October of 2012, Hoag Memorial Hospital Presbyterian in
Orange County notified the AG's office of its intent to merge
with St. Joseph Health System, triggering the 60-day approval
process. In early February 2013, the AG's office approved the
transaction with several conditions, including that Hoag
maintain levels of care in various services. The approval terms
also included conditions related to women's reproductive health
services, including a requirement that levels of care for
women's health services would be preserved for a minimum of ten
years. According to the AG, during the public notice portion of
the approval process, the proposed transaction was only met with
a few concerns from members of the community, all of which the
AG attempted to address through its conditions. However, after
the approval was issued and the transaction closed, certain
reproductive services ceased. Doctors at Hoag expressed outrage
and claimed they had been repeatedly assured that there would be
no change in certain reproductive services at Hoag.
According to the AG, Hoag's failure to adequately disclose
details of the proposed affiliation's potential impact on access
to health for women compromised the integrity of the approval
process. Additionally, there were allegations that Hoag was in
violation of the conditions of the approval, particularly
related to preserving alternative access to reproductive health
services for members of the community. The AG argues that had
it known these facts prior to approval, the conditions imposed
would have included more detailed requirements related to
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reproductive health services.
In response to the above situation this bill seeks to give the
AG the authority to amend conditions related to the transfer of
the assets of a nonprofit health facility after the agreement
has closed.
Prior Legislation
SB 932 (Bowen, Chapter 65, Statutes of 2003) prohibits the AG
from consenting to an agreement or transaction involving the
sale, transfer, lease or other disposition of a health facility
owned by a non-profit corporation to a for-profit corporation, a
mutual benefit corporation or another non-profit corporation, if
the seller restricts the type or level of medical services that
may be provided at the facility.
AB 890 (Cedillo, Chapter 427, Statutes of 2002) subjects health
facilities owned by religious corporations to the same
requirements as other non-profit hospitals with regard to
obtaining the consent of the AG prior to transferring hospital
ownership. The bill also adds to the factors that may be
considered by the AG when considering transfers of a health
facility from one non-profit to another non-profit, and
clarifies that the AG may collect the costs of the review from
either the transferring or receiving entity.
AB 254 (Cedillo, Chapter 850, Statutes of 1999) requires
non-profit health facilities to obtain the consent of the AG
prior to the sale, transfer or lease of a material amount of
assets to another non-profit corporation.
AB 3101 (Isenberg, Chapter 1105, Statutes of 1996) requires
profit health facilities that are subject to public benefit
corporation law to obtain written consent from the AG prior to
entering into an agreement to (1) sell, transfer, lease,
exchange, option, convey, or otherwise dispose of assets, or (2)
transfer control or governance of assets. The bill requires the
AG to conduct at least one public meeting in the county where
the facility is located, to contract with experts, and to obtain
reimbursement for the costs from health facilities being
reviewed.
FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes
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Local: No
SUPPORT : (Verified 5/14/14)
Department of Justice (source)
AFSCME, AFL-CIO
Congress of California Seniors
Health Access California
Latino Coalition for a Healthy California
SEIU, California State Council
United Nurses Associations of California/Union of Health Care
Professionals
OPPOSITION : (Verified 5/14/14)
Adventist Health
Alliance of Catholic Health Care
California Hospital Association
Loma Linda University Health
Providence Health & Services, Southern California
Scripps Health
Sutter Health
ARGUMENTS IN SUPPORT : This bill's sponsor, the Department of
Justice, states that since the AG's role in overseeing
non-profit health facility transactions was first
conceptualized, the proposed transactions have become more
complex and numerous, including a notable spike observed in
recent years. This has resulted in an increased amount of time
needed both for review by the AG. In addition, the AG states
that recent cases have revealed scenarios in which the AG's
inability to revisit approved transactions following significant
new developments seriously hinders its ability to preserve the
level of access to care for patients in accordance with the
public trust. The AG states that this bill is designed to
provide modest but crucial updates to the AG's oversight
authority to account for these developments.
This bill is supported by the California State Council of the
SEIU, which states it would hold hospital facilities
accountable, further protecting communities by ensuring that
access to crucial health care services remain available. The
United Nurses Associations of California/Union of Health Care
Professionals states that the AG will often impose conditions to
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ensure that the quality of care in a community is not diminished
by the sale or transfer, and that this bill specifically
authorizes the AG to enforce any conditions of a sale, even
after the sale has occurred. Health Access California states
that an additional 30 days to review a transaction would be
helpful to those in the community and advocacy organizations,
and that allowing the AG to enforce conditions on a transaction
is an important improvement on existing law. The Congress of
California Seniors notes that the complex, and often rushed,
process regarding non-profit hospital transactions does not
serve California well, and this bill will give the AG more time
to review a hospital's request. The AFSCME, AFL-CIO, state that
this bill will give the AG the authority to amend and enforce
the conditions of an agreement to better reflect the public's
interest.
ARGUMENTS IN OPPOSITION : In opposition to this bill a number
of groups have raised concerns that it would create significant
uncertainty for non-profit hospitals. A coalition of health
care providers, including the California Hospital Association,
Loma Linda University, Adventist Health, Scripps, Alliance of
Catholic Health Care, and Sutter Health writes, "Existing law
provides vigorous protection of the public interest in these
types of transaction. However, this bill grants broad
regulatory discretion to keep changing the terms of the
transaction, after these terms have been agreed to by both
parties. It is important to recognize that the Attorney General
already had broad and comprehensive enforcement authority to
monitor and legally compel compliance with all of the conditions
of consent that it imposes in hospital transactions-and has done
so in the past. Thus, the true essence of this bill is to allow
the Attorney General the ability to change the terms of the
deal."
Adventist Health and Loma Linda University Medical Center write
that "there are no limitations in the bill as to the nature,
timing, process, or extent of the permissible changes that the
AG could impose. This would expose the entity buying a
nonprofit hospital to a massive unknown liability that could
appear at any time in the future."
Finally, the California Hospital Association writes "this bill
requires the parties to the transaction to waive their
constitutional rights and due process protections. We believe
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the rule of law should continue to apply to these transactions."
JL:k 5/14/14 Senate Floor Analyses
SUPPORT/OPPOSITION: SEE ABOVE
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