BILL ANALYSIS                                                                                                                                                                                                    



                                                                    AB 2467


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          Date of Hearing:  May 4, 2016


                        ASSEMBLY COMMITTEE ON APPROPRIATIONS


                               Lorena Gonzalez, Chair


          AB  
          2467 (Gomez) - As Amended April 21, 2016


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          Urgency:  No  State Mandated Local Program:  YesReimbursable:   
          No


          SUMMARY:


          This bill requires hospitals and medical groups to report  
          information about employee compensation. Specifically, this  
          bill: 


          1)Requires, on and after October 1, 2017, covered hospitals or  
            medical entities, as defined, to submit an annual hospital  
            executive compensation report to the Office of Statewide  
            Health Planning and Development (OSHPD) for every hospital  
            executive whose total annual compensation meets or exceeds  
            $250,000 per year.








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          2)Requires reporting the number of employees earning annual  
            total compensation in 12 pay bands, as well as demographic  
            data including self-reported gender, ethnicity, and race, and  
            voluntarily self-reported sexual orientation and gender  
            identity.





          3)Requires OSHPD to establish and assess reasonable fees, to be  
            submitted with each annual report, to cover only the  
            reasonable costs of implementation and ensuring compliance.



          FISCAL EFFECT:


          Staff and information technology costs to OSHPD of $390,000 in  
          year 1, $240,000 in year 2, and ongoing costs of $110,000 to  
          implement this bill (fee-supported by fee revenue authorized  
          pursuant to this bill).  


          One-time activities include development of regulations,  
          preparation of system requirements and design documents,  
          information technology system testing,  Ongoing activities  
          include reviewing reports, researching which unlicensed entities  
          must report, contacting report entities with missing or  
          delinquent reports and addressing questions from the public and  
          policy makers.


          COMMENTS:










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          1)Purpose. This bill is intended to assess how hospital  
            executive compensation is contributing to overall rising  
            health care costs and to provide data related to pay equity in  
            California hospitals. 


          2)Background. The level and growth of corporate executive  
            compensation across the United States has been a topic of  
            significant media attention and public dialogue in recent  
            years.  Hospitals and hospital systems are complex for-profit,  
            non-profit, and public organizations that provide executive  
            compensation packages to attract and retain executives.   
            Not-for-profit hospitals must report certain compensation  
            information on federal Internal Revenue Service form 990, but  
            this is reported at the hospital system level, not the  
            individual hospital level.  For-profit publicly traded  
            hospitals must report salaries for the five most highly  
            compensated employees, while private for-profit hospitals have  
            no existing requirement.  This bill would enhance existing  
            compensation-related reporting requirements and expand  
            reporting to more entities.  


            This bill also requires submission of pay data similar to that  
            required by recently proposed federal regulations.  Gender  
            inequity in pay, as well as underrepresentation of females in  
            senior management, have been noted in the health care sector.   
            This bill would add demographic information to allow analysis  
            of pay data by demographic variables. 


          3)Support. The sponsor of this bill, Service Employees  
            International Union (SEIU), asserts hospital executive  
            compensation has spiked to excessive levels in recent years,  
            and that requiring public reporting will assist the public and  
            health care stakeholders to understand these compensation  
            practices, and how they may relate to the level of charity  
            care or community benefits provided, as well as their impact  
            on prices and utilization.  Furthermore, they cite a lack of  








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            data on pay equity among the workforce at California  
            hospitals, and believe increased transparency will increase  
            understanding of such inequity. Labor organizations including  
            the California Labor Federation and the United Nurses  
            Association of California/Union of Healthcare Professionals,  
            as well as LGBT advocacy groups, also support this bill. 


          4)Opposition. The California Hospital Association opposes this  
            bill, citing a lack of connection between executive  
            compensation and charity care, requirements that are both  
            duplicative and onerous, significant privacy and safety  
            concerns, concern about the reliability of self-reported data,  
            concern the bill could actually drive up compensation by  
            providing a basis for executives or boards to increase wages,  
            and prematurity, given federal rules on pay equity reporting  
            are forthcoming.  The California Chamber of Commerce and  
            numerous individual hospitals and health systems also oppose  
            this bill.


          Analysis Prepared by:Lisa Murawski / APPR. / (916)  
          319-2081