BILL ANALYSIS Ó SENATE COMMITTEE ON GOVERNANCE AND FINANCE Senator Robert M. Hertzberg, Chair 2015 - 2016 Regular ------------------------------------------------------------------ |Bill No: |AB 1350 |Hearing |7/15/15 | | | |Date: | | |----------+---------------------------------+-----------+---------| |Author: |Salas |Tax Levy: |No | |----------+---------------------------------+-----------+---------| |Version: |6/16/15 |Fiscal: |No | ------------------------------------------------------------------ ----------------------------------------------------------------- |Consultant|Weinberger | |: | | ----------------------------------------------------------------- KERN COUNTY HOSPITAL AUTHORITY Makes numerous changes to state laws allowing the Kern County Board of Supervisors to create the Kern County Hospital Authority. 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 restructure their governance, merge, or affiliate with other hospitals in their areas. Kern Medical Center is a 222-bed acute care teaching hospital owned and operated by Kern County. The Medical Center serves a community of approximately 650,000 and employs approximately 1,800 staff members. Kern Medical Center provides care for over 16,000 inpatients annually, while the clinics provide care and services for over 100,000 patients. The emergency room experiences 43,000 visits per year. As one of California's public safety-net hospitals, Kern Medical Center serves a high proportion of underinsured and uninsured patients, providing healthcare access to all patients regardless of their ability to pay. AB 1350 (Salas) 6/16/15 Page 2 of ? As a public safety-net hospital, Kern 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. The Medical Center is confronting significant fiscal challenges. The medical center's management team has taken steps to reduce costs and has succeeded in significantly reducing operating deficits in recent months. 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). Recently, the Legislature granted similar authority to the Monterey County Board of Supervisors (AB 276, Alejo, 2012). Last year, the Legislature passed AB 2546 (Salas, 2014), which allowed the Kern County Board of Supervisors to create a hospital authority to govern the Kern Medical Center (KMC). Now that the county has started the process of forming a hospital authority, stakeholders have identified more changes to state law that will help facilitate KMC's transfer to the new authority. Proposed Law State law authorizes the Kern County Board of Supervisors to establish, by ordinance, the Kern County Hospital Authority (KCHA) as a separate public entity, specifies KCHA's purpose, and charges it with the management, administration, and control of Kern Medical Center (KMC) and other health related resources. Assembly Bill 1350 requires the enabling ordinance establishing the KCHA to specify whether KCHA's funds are to be deposited in the custody of, and paid out solely through, the county treasurer's office. The bill clarifies that if the enabling ordinance does not require funds to be deposited in the county treasury, KCHA can establish its own treasury. State law requires the Department of Health Care Services take AB 1350 (Salas) 6/16/15 Page 3 of ? all necessary steps to ensure that KCHA is permitted to operate KMC. Assembly Bill 1350 clarifies that this requirement includes ensuring that KCHA has all of the licenses, permits, and approvals needed. Assembly Bill 1350 defines "transfer of control" of KMC as the transfer by the county to KCHA of the maintenance, operation, management, and personnel of KMC, whether by lease, transfer of ownership, or other means, as provided by, and subject to, any conditions and limitations specified by the board of supervisors in the enabling ordinance. State law requires the enabling ordinance adopted by the board of supervisors, to establish the terms and conditions of the transfer to KCHA from the county, including the maintenance, operation, and management or ownership of the KMC. Assembly Bill 1350 clarifies that the county, has the option to require KCHA to lease KMC, in addition to the option of transferring ownership of KMC. State law contains extensive provisions relating to KCHA's effects on current medical center and county employees, including requirements related to 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. Assembly Bill 1350 requires KCHA, if a memoranda of understanding (MOU) is expired on the date of the transfer of control of KMC, to continue to be bound by the terms and conditions of the most recent MOU for 24 months, unless modified by a mutual agreement with each of the exclusive employee representatives, and requires the benefits and wages of transferred employees to be retained, as specified. State law specifies the manner in which current KMC employees would retain membership in specified retirement systems after a transfer to KCHA. Assembly Bill 1350 requires KCHA to be considered a public employer that offered a plan of replacement benefits prior to January 1, 2013, for purposes of a statute prohibiting a public employer from offering a replacement benefits plan for employees after January 1, 2013, if it had not already been offering such a plan prior to January 1, 2013. Assembly Bill 1350 deems the County's plan of replacement benefits in effect prior to January 1, 2013 to also be the KCHA's replacement plan for the sole purpose of allowing KCHA to AB 1350 (Salas) 6/16/15 Page 4 of ? continue to offer the replacement benefit plan, to an employee who was employed as of January 1, 2013, or to employees who are part of a member group to which the County offered a replacement benefit plan prior to January 1, 2013. Assembly Bill 1350 defines "legacy employees," for purposes of KCHA, as county employees who retired from KMC before the date of transfer of control of KMC, county employees who are initially transferred to KCHA on the date of transfer of control of KMC, and employees first hired by or retired from KCHA during the 24-month period following the date of transfer of control of KMC. Assembly Bill 1350 requires legacy employees, as defined, to be deemed county employees for purposes of participation in a benefit plan administered by the Kern County Employees' Retirement Association, but only for that purpose, and not be employees of the County for any other purpose. The bill requires Kern County, upon the transfer of control of KMC, to include legacy employees in a special county employee group for which the county has primary financial responsibility to fund all employer contributions that, together with contributions by employees and earnings, are necessary to fund all benefits for legacy employees administered by the Kern County Employees' Retirement Association, notwithstanding the fact that KCHA must make periodic employer contributions for legacy employees following the transfer of control of KMC. The bill requires the county to be obligated to make employer contributions in the event the KCHA fails to make the required contributions. Assembly Bill 1350 defines "new employees," for purposes of KCHA, as employees first hired by KCHA after the 24-month period following the date of transfer of control of KMC. Assembly Bill 1350 requires KCHA to be primarily responsible for any employer contributions necessary to fund benefits for new employees, but requires the county to be obligated to make the required contributions in the event KCHA fails to make the required contributions for new employees. The bill requires the county to maintain this obligation until KCHA demonstrates, and the Kern County Employees' Retirement Association's Board of Retirement determines, that KCHA is sufficiently capable financially to fully assume the obligation to make all employer contributions, as specified. However, in the event that KCHA fails to make contributions due to dissolution or bankruptcy, the County is again obligated to make the required contributions. AB 1350 (Salas) 6/16/15 Page 5 of ? State law allows the county to lend KCHA funds or issue revenue anticipation notes to obtain funds necessary to meet KCHA's operational or capital needs. Assembly Bill 1350 clarifies the county's ability to lend KCHA funds to meet its operating and capital needs by permitting the County to use any borrowing power the County otherwise has under law, and not just issue revenue anticipation notes. State law requires KCHA's board of governors to have authority over procurement and contracts for KCHA, subject to written rules, regulations, and procedures adopted by the board. Assembly Bill 1350 allows the county to contract for services or purchase items on behalf of KCHA. The bill specifies that KCHA's ability to contract for personnel or other services and items it deems necessary is only limited by the obligations under specified provisions of law which govern the relationship between employee groups and local governments. Assembly Bill 1350 makes other technical, clarifying and conforming changes to the statutes governing KCHA. State Revenue Impact No estimate. Comments 1. Purpose of the bill . The Kern Medical Center (KMC), which is owned and operated by the Kern County Board of Supervisors, serves a community of over 650,000 residents, including indigent individuals with no other means of obtaining medical care. KMC provides the only trauma care between Los Angeles and Fresno, and is vital to training physicians through academic residency and education programs. Last year, AB 2546 gave Kern County the option to establish the KCHA to manage and administer KMC. AB 1350's provisions will ensure that employees transferred from KMC to KCHA are covered under the most current MOU and receive the same health and retirement benefits. The bill also protects retiree benefits should KCHA dissolve, allows KCHA to deposit and borrow funds from the county treasury, and gives KCHA the option of establishing its own treasury. In addition, AB 1350 AB 1350 (Salas) 6/16/15 Page 6 of ? clarifies the scope of the transfer of control of KMC operations, KCHA's responsibilities as hospital operator, and the conditions under which the transfer must occur. By facilitating the establishment of KCHA, AB 1350 will allow Kern County to benefit from the cost savings, that can be generated by operating KMC under a separate governance structure and provide opportunities for increased flexibility, responsiveness, and innovation. 2. Double-referred . Because AB 1350 relates to 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 24 hearing, the Senate Health Committee passed AB 1350 on an 8-0 vote. Assembly Actions Assembly Local Government Committee: 9-0 Assembly Floor: 80-0 Support and Opposition (7/9/15) Support : Kern County Board of Supervisors; Kern Health Systems; Service Employees International Union, California State Council Opposition : Unknown. -- END --