Bill Text: CA AB2467 | 2015-2016 | Regular Session | Amended
Bill Title: Health facilities: executive compensation.
Spectrum: Partisan Bill (Democrat 1-0)
Status: (Introduced - Dead) 2016-06-02 - Read third time. Refused passage. (Ayes 33. Noes 36. Page 5252.). [AB2467 Detail]
Download: California-2015-AB2467-Amended.html
BILL NUMBER: AB 2467 AMENDED
BILL TEXT
AMENDED IN ASSEMBLY MAY 31, 2016
AMENDED IN ASSEMBLY APRIL 21, 2016
AMENDED IN ASSEMBLY APRIL 5, 2016
INTRODUCED BY Assembly Member Gomez
FEBRUARY 19, 2016
An act to add Chapter 2.17 (commencing with Section 1339.85) to
Division 2 of the Health and Safety Code, relating to health
facilities.
LEGISLATIVE COUNSEL'S DIGEST
AB 2467, as amended, Gomez. Health facilities: executive
compensation.
Existing law provides for the licensure and regulation of health
facilities, including general acute care hospitals, by the State
Department of Public Health.
This bill would require covered hospitals and medical entities, as
defined, to annually submit to the Office of Statewide Health
Planning and Development an executive compensation report for every
executive whose annual compensation exceeds a specified threshold.
The bill would also require each covered hospital or medical entity
with 100 or more employees to annually report compensation
information by employee classification and by gender, ethnicity,
race, sexual orientation, and gender identity, as self-reported by
its employees. The bill would require specified information to be
included in these reports, and would require that certain reports be
attested to under penalty of perjury. Because a violation thereof
would be a crime, the bill would impose a state-mandated local
program. The bill would authorize the office to impose a reasonable
fee to cover the costs of implementation and administration of these
provisions. The bill would require the office to post these reports
on its Internet Web site.
The California Constitution requires the state to reimburse local
agencies and school districts for certain costs mandated by the
state. Statutory provisions establish procedures for making that
reimbursement.
This bill would provide that no reimbursement is required by this
act for a specified reason.
Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: yes.
THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:
SECTION 1. This act shall be known and may be cited as the
Hospital Executive Compensation Transparency Act of 2016.
SEC. 2. The Legislature finds and declares all of the following:
(a) The public has a direct and immediate interest in ensuring its
money is spent efficiently and wisely. Through direct cash payments
and exemptions from paying taxes, nonprofit hospitals receive
billions in taxpayer funds.
(b) The compensation packages of chief executive officers,
executives, managers, and administrators of hospitals, hospital
groups, and affiliated medical entities that operate under nonprofit
corporate status are often excessive, unnecessary, and inconsistent
with the corporations' charitable purposes, as revealed by
compensation surveys and other sources.
(c) Payment of excessive compensation to executives, managers, and
administrators undermines the purposes of nonprofit corporations
because it results in fewer funds being available for their
charitable purposes, and it is often the case that the hospitals,
hospital groups, and affiliated medical entities that pay the most
excessive compensation also provide less charitable care than
comparable institutions that pay reasonable compensation to their
executives, managers, and administrators.
(d) Existing requirements of law do not adequately ensure that
assets held for charitable purposes are not instead used to enrich
executives, managers, and administrators of nonprofit hospitals,
hospital groups, and affiliated medical entities through payment of
excessive compensation.
(e) The compensation packages for chief executive officers,
executives, managers, and administrators of for-profit hospitals in
California are often excessive, unnecessary, and inconsistent with
the provision of high-quality, affordable medical care, by diverting
funds that could be used to expand access to affordable medical care
for all Californians.
(f) Chief executive officers, executives, managers, and
administrators at hospitals, hospital groups, and affiliated medical
entities who are also compensated for their positions on boards of
directors of publicly traded companies, privately held companies, and
nonprofit organizations risk spending time away from their primary
responsibilities to the detriment of high-quality, affordable medical
care.
(g) In order to properly assess the scope of excessive
compensation packages in the nonprofit hospital sector and to inform
policy decisions related to escalating health care costs, it is
necessary to understand excessive compensation among private
hospitals.
(h) In order to ensure equal opportunity and compensation among
health care workers in California, it is necessary to understand
compensation by job classification and by race, ethnicity, gender,
sexual orientation, and gender identity.
(i) It is the intent of the Legislature in enacting this act to
ensure that compensation packages for chief executive officers,
executives, managers, and administrators of for-profit and nonprofit
hospitals are consistent with the goal of providing affordable,
high-quality medical care to all Californians.
(j) The intent of the Legislature in enacting this act is also to
ensure that compensation packages for chief executive officers,
executives, managers, and administrators of nonprofit hospitals,
hospital groups, and affiliated medical entities are consistent with
the charitable purposes of those nonprofits and are reasonable and
not excessive in light of the substantial public benefit that the
state tax exemption for nonprofit organizations conveys.
(k) It is also the intent of the Legislature in enacting this act
to ensure that compensation packages for employees of for-profit and
nonprofit hospitals are not discriminatory based on race, ethnicity,
gender, sexual orientation, or gender identity.
SEC. 3. Chapter 2.17 (commencing with Section 1339.85) is added to
Division 2 of the Health and Safety Code, to read:
CHAPTER 2.17. HOSPITAL EXECUTIVE COMPENSATION TRANSPARENCY ACT
OF 2016
1339.85. For purposes of this chapter, the following definitions
shall have the following meanings:
(a) "Annual hospital executive compensation report" refers to the
report described in Section 1339.87.
(b) "Board compensation" shall mean the total annual compensation
provided to each hospital executive by any publicly traded company,
privately held company, or nonprofit organization on whose board of
directors a hospital executive sits and from which the hospital
executive received total annual compensation of more than one
thousand dollars ($1,000).
(c) (1) "Covered hospital or medical entity" shall mean any of the
following:
(A) A private nonprofit general acute care hospital, as defined in
subdivision (a) of Section 1250.
(B) An acute psychiatric hospital, as defined in subdivision (b)
of Section 1250.
(C) Any private for-profit general acute care hospital that is
licensed under subdivision (a) or (b) of Section 1250 and operated
within the state for profit under Division 1 (commencing with Section
100) of Title 1 of the Corporations Code, including by a foreign
corporation.
(D) A hospital group, which shall mean any group of two or more
hospitals described in subparagraphs (A) to (C), inclusive, or any
person, corporation, partnership, limited liability company, trust,
or other entity that owns, operates, or controls, in whole or in
part, any such group.
(E) A hospital-affiliated medication foundation, which shall mean
a medical foundation, as described in subdivision (l) of Section
1206, that satisfies either or both of the following conditions:
(i) The medical foundation is a disregarded entity of, or would be
required to be designated as a related organization on Internal
Revenue Service Form 990 (or its accompanying schedules or the
successor of such forms or schedules) of, a hospital, hospital group,
hospital-affiliated physicians group, or a nonprofit corporation
that owns, operates, or controls, in whole or in part, a hospital,
hospital group, or hospital-affiliated physicians group.
(ii) A majority of the medical foundation's assets are owned by a
hospital, hospital group, or hospital-affiliated physicians group or
by a nonprofit corporation that owns, operates, or controls, in whole
or in part, a hospital, hospital group, or hospital-affiliated
physicians group, or the medical foundation owns a majority of the
assets of a hospital, hospital group, or hospital-affiliated
physicians group or of a nonprofit corporation that owns, operates,
or controls, in whole or in part, a hospital, hospital group, or
hospital-affiliated physicians group.
(F) A hospital-affiliated physicians group, which shall mean any
physicians group or medical group that satisfies either or both of
the following conditions:
(i) The physicians group is a disregarded entity of, or would be
required to be designated as a related organization on Internal
Revenue Service Form 990 (or its accompanying schedules or the
successor of such forms or schedules) of, a hospital, hospital group,
or hospital-affiliated medical foundation or a nonprofit corporation
that owns, operates, or controls, in whole or in part, a hospital,
hospital group, or hospital-affiliated medical foundation.
(ii) A majority of the physicians group's assets are owned by a
hospital, hospital group, or hospital-affiliated medical foundation
or a nonprofit corporation that owns, operates, or controls, in whole
or in part, a hospital, hospital group, or hospital-affiliated
medical foundation.
(G) A health care district organized pursuant to Chapter 1
(commencing with Section 32000) of Division 23.
(2) "Covered hospital or medical entity" shall not include any of
the following:
(A) Hospitals operated or licensed by the United States Department
of Veterans Affairs or public hospitals as defined in paragraph (25)
of subdivision (a) of Section 14105. 98 of the Welfare and
Institutions Code, with the exception of hospitals owned or operated
by a health care district organized pursuant to Chapter 1 (commencing
with Section 32000) of Division 23.
(B) Designated public hospitals, as described in subdivision (d)
of Section 14166.1 of the Welfare and Institutions Code.
(d) "Executive compensation reporting threshold" shall mean the
total annual compensation from any source for work performed or
services provided at or for the covered hospital or medical entity
that is greater than two hundred fifty thousand dollars
($250,000) three hundred thousand dollars ($300,000)
in a year.
(e) (1) "Hospital executive" shall mean all persons whose primary
duties are executive, managerial, or administrative at or for the
covered hospital or medical entity, even if that person also performs
or performed other duties.
(2) "Hospital executive" shall include, but is not limited to,
chief executive officers, chief executive managers, chief executives,
executive officers, executive directors, chief financial officers,
presidents, executive presidents, vice presidents, executive vice
presidents, and other comparable positions.
(3) The definition of "hospital executive" shall apply
irrespective of whether the person exercising executive, managerial,
or administrative authority is or was an employee of a covered
hospital or medical entity or a nonprofit corporation that owns,
operates, or controls, in whole or in part, a covered hospital or
medical entity. The definition shall also apply to any person who
exercises or exercised such authority even if the arrangements for
such authority or for compensation or both are pursuant to a contract
or subcontract.
(4) "Hospital executive" shall include any person who held the
duties described under this paragraph during the period covered by
the annual report, even if the person is postemployment or
postservice.
(5) "Hospital executive" shall not apply to medical or health care
professionals whose primary duties are or were the provision of
medical services, research, direct patient care, or other
nonmanagerial, nonexecutive, and nonadministrative services.
(f) "Office" means the Office of Statewide Health Planning and
Development.
(g) (1) "Total annual compensation" shall mean all remuneration
paid, earned, or accrued in the course of a fiscal year for work
performed or services provided, including the cash value of all
remuneration (including benefits) in any medium other than cash,
except as otherwise specified in paragraph (2), and including, but
not limited to, all of the following:
(A) Wages; salary; paid time off; bonuses; incentive payments;
lump-sum cash payments; the fair market value of below-market-rate
loans or loan forgiveness; housing payments; payments for
transportation, travel, meals, or other expenses in excess of actual
documented expenses incurred in the performance of duties; payments
or reimbursement for entertainment or social club memberships; the
cash value of housing, automobiles, parking, or similar benefits;
scholarships or fellowships; the cash value of dependent care or
adoption assistance or personal legal or financial services; the cash
value of stock options or awards; payments or contributions for
insurance, except as exempted in paragraph (2), to a Section 125
cafeteria plan or equivalent arrangement, to a health savings
account, or for severance or its equivalent; and deferred
compensation earned or accrued, even if not yet vested nor paid.
(B) The total value in the aggregate of the compensation or
payments authorized or paid under a severance or similar postservice
or postemployment arrangement, to include the fair market value of
all cash remuneration as well as the fair market value of all
remuneration (including benefits) paid in any medium other than cash,
as defined in paragraph (1), subject to the exclusion set forth in
paragraph (2).
(C) Payments, compensation, or remuneration for work performed or
services provided at or for a covered hospital or medical entity even
if made by a separate person or entity, including, but not limited
to, any of the following:
(i) A for-profit or unincorporated entity.
(ii) A corporation, partnership, or limited liability company.
(iii) A trust or other entity that is controlled by the same
person or persons who govern a covered hospital or medical entity.
(iv) A supporting or supported organization within the meaning of
Sections 509(a)(3) and 509(f)(3) of the Internal Revenue Code.
(v) A disregarded entity of, or related organization as set forth
within, the Internal Revenue Service Form 990 of a covered hospital
or medical entity or a nonprofit corporation that owns, operates, or
controls, in whole or in part, a covered hospital or medical entity.
(D) Payment of compensation or remuneration by any person,
corporation, partnership, limited liability company, trust, or other
entity that a covered hospital or medical entity, or a nonprofit
corporation that owns, operates, or controls, in whole or in part, a
covered hospital or medical entity, participates in, belongs to, is a
member of, or pays into shall be presumed compensation for work
performed or services provided at or for the covered hospital or
medical entity.
(2) "Total annual compensation" shall not include the cost of
health insurance or disability insurance or payments or contributions
to a health reimbursement account.
1339.87. (a) On and after October 1, 2017, each covered hospital
or medical entity shall submit an annual hospital executive
compensation report to the office for every hospital executive whose
total annual compensation met or exceeded the executive compensation
reporting threshold. The report shall include all of the following
information for the prior fiscal year:
(1) The names, positions, or titles of each hospital executive and
the aggregate total annual compensation for each hospital executive
at or exceeding the executive compensation reporting threshold,
including all of the information described under subdivision (g) of
Section 1339.85, with a description of each entity that has
contributed to the total annual compensation of each hospital
executive, in any form, and the amount of such compensation.
(2) A detailed breakdown of all wage and nonwage compensation.
(3) Identification of any benefit or remuneration excluded from
the definition of total annual compensation pursuant to paragraph (2)
of subdivision (g) of Section 1339.85.
(4) A detailed breakdown of board compensation, which shall
include all of the following:
(A) The name of the publicly traded company, privately held
company, or nonprofit organization that provided the board
compensation.
(B) The number of hours the hospital executive spent on matters
related to their duties as a director of the publicly traded company,
privately held company, or nonprofit organization for which the
board compensation was received.
(b) Consistent with the annual equal employment opportunity and
compensation report on employees' ethnicity, race, and sex by job
category and compensation required by Part 1602 of Chapter XIV of
Subtitle B of Title 29 of the Code of Federal Regulations, on or
after October 1, 2017, and annually thereafter, each covered hospital
or medical entity with 100 or more employees shall submit to the
office all of the following information for the prior fiscal year:
(1) The number of employees earning annual total compensation in
12 pay bands, as proposed by the federal Equal Employment Opportunity
Commission in the Federal Register, Volume 81, Number 20, on
February 1, 2016, on pages 5113 to 5121, inclusive, for each of the
eight employee classifications defined in the office's hospital
annual financial data and by self-reported gender, ethnicity, and
race, and voluntarily self-reported sexual orientation and gender
identity.
(2) The total number of hours worked by the employees included in
each pay band described in paragraph (1).
(c) On and after January 1, 2018, the office shall post the annual
hospital executive compensation report for each covered hospital or
medical entity on the office's Internet Web site.
(d) The annual report shall be submitted on the form or in the
format required by the office.
(e) (1) The board of directors of any nonprofit or for-profit
corporation that owns, operates, or controls, in whole or in part, a
covered hospital or medical entity shall approve the annual report
before it is submitted to the office.
(2) Each director shall act in good faith and with reasonable care
and inquiry in approving the annual report and in ensuring that the
corporation complies with the requirements of this section.
(3) For each covered hospital or medical entity governed, owned,
or controlled by a board of directors, the annual report shall state
that it was approved by the board of directors and set forth the date
of such approval, and shall be attested to under penalty of perjury
by an authorized representative of the covered hospital or medical
entity board of directors.
(f) (1) Any scheme or artifice that has the purpose of avoiding
the reporting requirements established by this section shall
constitute a violation of this section.
(2) Payments, compensation, or remuneration by a separate entity
that is purported not to be for work performed or services provided
at or for a covered hospital or medical entity, but that is
disproportionate to its purported purpose so as to evade the annual
hospital executive compensation reporting requirements specified in
this section, shall constitute a violation of this section.
(g) The office shall establish and assess reasonable fees, to be
submitted with each annual report, to cover only the reasonable costs
of implementing and ensuring compliance with this section and each
activity authorized or required by this section.
SEC. 4. No reimbursement is required by this act pursuant to
Section 6 of Article XIII B of the California Constitution because
the only costs that may be incurred by a local agency or school
district will be incurred because this act creates a new crime or
infraction, eliminates a crime or infraction, or changes the penalty
for a crime or infraction, within the meaning of Section 17556 of the
Government Code, or changes the definition of a crime within the
meaning of Section 6 of Article XIII B of the California
Constitution.
