LEGISLATIVE ANALYST REPORT

TO: Honorable Members of the Board of Supervisors

FROM: Gabe Cabrera, Office of the Legislative Analyst

DATE: February 11, 2003

SUBJECT: Hospital Regulatory Requirements (File No. 021227)

SUMMARY OF REQUESTED ACTION

Motion (sponsored by Supervisor Gonzalez) requesting the Office of the Legislative Analyst to survey other comparable municipalities on regulatory requirements imposed on hospitals that reduce their services. These requirements could be public notification, fees or other mitigation measures.

EXECUTIVE SUMMARY

Our office conducted an expedited but thorough survey of other jurisdictions and their requirements on hospitals that reduce services. These included two counties in California (Alameda and Los Angeles) and the Commonwealth of Massachusetts.

For the purposes of this analysis, public hospitals are established, operated or maintained by the State or government agency, while private hospitals refers to those which are not established, operated or maintained by the State or government agency. It is important to note that all hospitals, whether public or private, must be licensed by the State Department of Health Services.¹

We discovered that private hospitals in San Francisco are already subject to the strictest public notice and hearing requirements in the State. That is, they are subject to the City's Community Health Care Planning Ordinance (Prop Q). We also discovered that the Commonwealth of Massachusetts, unlike San Francisco, requires all hospitals (both public and private) to submit written plans for assuring access to services following a hospital's closure of those services. In addition, within one year of closure of the services, state officials in conjunction with the hospital must prepare a post closure report evaluating the extent to which access to the services was preserved. The advantages and disadvantages of this course of action, as well as others, are discussed in the Options section of this report.

Lastly, we drafted several "suggested courses of action" for the Board of Supervisors to consider when adopting new or amending existing requirements on hospitals. These are presented in order of most, to least, feasible in San Francisco.

CURRENT LAW

The following is a brief summary of relevant State and local laws with respect to hospitals that reduce their services.

A. The Beilenson Act

Section 1442.5 of the California Health and Safety Code, otherwise know as the "Beilenson Act", requires that before closing, eliminating or reducing its level of medical services, or the leasing, selling or transferring management of a county hospital, the Board of Supervisors must provide public notice.² This notice must be posted at the entrance to all county health care facilities and announce public hearings to be held by the Board prior to its decision to proceed. The notice must be posted not less than fourteen (14) days prior to the public hearings. The notice must also contain a list of the proposed reductions by facility and service, and include the amount and type of each proposed reduction, the expected savings, and the number of persons affected.

B. The Community Health Care Planning Ordinance

In 1988, San Francisco voters approved Proposition Q, "The Community Health Care Planning Ordinance", which requires that before any private hospital or clinic reduces its levels of services, or before any hospital or clinic leased, sold or transferred its management, it must post a public notice of on the building and mail a copy of the notice to the San Francisco Health Commission.³ This notice must be posted and mailed not less than ninety (90) days before any change is made. The notice must contain a detailed list of the proposed changes and the number of patients and employees who will be affected by the change. The ordinance also requires that the Commission decide, based on public hearings, whether the proposed change will have a negative impact on the health care service to the community and to explore other ways of providing the services that are to be reduced. Notably, if a hospital fails to comply with the public notice requirements of the ordinance, the Commission may request the City Attorney to seek a court order restraining the hospital from reducing services until the hospital complies.⁴

OPTIONS

The following are brief descriptions of options, based on our research, which may be used when hospitals reduce their services.

A. Consider Enhancing the Existing Public Notification Requirements

Hospitals in San Francisco are already subject to some of the strictest public notification and hearing requirements in the country. As noted above, the Beilenson Act requires that before reducing the level of services at a "public" hospital, the Board of Supervisors must provide public notice and hold public hearings. The notice must be posted not less than fourteen (14) days prior to the public hearings. "Private" hospitals, on the other hand, are subject to the requirements of San Francisco's Community Health Care Planning Ordinance (Prop Q). Under this law, private hospitals must also provide public notice and hold public hearings. The notice must be posted not less than ninety (90) days before any change is made. Within this context, it is not necessary for the Board of Supervisors to adopt any more public notification and hearings requirements. However, the Board could place a measure on the ballot to amend Prop Q increasing the advance public notification requirement on private hospitals from 90 days to 120 days (for instance). Extending the 90-day period would certainly give patients more time to access alternative services. However, the City Attorney's Office advises that it may also jeopardize a hospital's license and compromise patient care as hospital staff typically leave early on in the 90-day period and seek employment elsewhere.⁵ Therefore, the Legislative Analyst concludes that this approach would be too risky for hospitals and only minimally beneficial to their patients.

B. Require Quarterly or Semi-Annual Financial Reports

Another approach is to require private hospitals to submit quarterly or semi-annual financial reports to the Board of Supervisors. Most hospitals release only annual reports. Government health officials state that these reports are often published too late after the fiscal year to be considered useful. The advantage to requiring quarterly or semi-annual reports is that they would serve as an early warning system, alerting the Board of Supervisors to a troubled hospital. The Board in turn would have the necessary time to review reports, identify troubled hospitals and explore ways of providing the services that might be reduced. As noted above, private hospitals in San Francisco must currently give 90 days public notice before any change is made. Adopting this approach would have fiscal impact, albeit minimal, to the City. It is likely that the Controller's Office would be designated to review these reports and report their findings to the Board. One disadvantage to this approach is that any negative quarterly or semi-annual financial reports could harm a hospital's image, even deter patients and business. However, this is already true in cases when a hospital releases a negative annual report. Another disadvantage is that it would disparately impact hospitals doing business in San Francisco. It is unclear whether this requirement would cause hospitals to move from the area. Therefore, the Board of Supervisors may want to draft a motion urging the State Legislature, as the primary regulator of hospitals, to require all hospitals statewide to submit quarterly or semi-annual financial reports.

C. Impose Fines for Violations of Proposition Q

The City does not currently fine private hospitals for violating the provisions of Prop Q. Our office researched, but did not discover, any jurisdictions that impose these types of fines. This may be because it is unclear how much leverage government has over hospitals that are financially distressed (as opposed to those that are reducing services merely to increase profits). The City Attorney's Office advises that due process requires that "civil penalties" (fines) be proportional to harm inflicted and that it may be difficult to show that a hospital's failure to comply with the ordinance causes any quantifiable harm. Nevertheless, there are at least two benefits to the City associated with imposing fines. Fines would certainly discourage hospitals from violating Prop Q, and they may raise revenues and thus help offset the City's budget deficit. Notably, under State law, private "non-profit" hospitals are exempt from local property and business taxes. Fines would therefore be a new rather than additional burden on not-for-profit hospitals in the City.

D. Require Written Plans for Assuring Access to Services

As noted above, local law requires the City's Health Commission to decide, based on public hearings, whether a hospital's proposed changes will have a negative impact on the community and to explore other ways of providing the services that are to be reduced. However, the law does not explain the terms "negative impact " or "explore other ways." Instead these determinations are to be made by the Commission. Before a public hearing, the Commission requires a hospital to submit a description of the proposed changes and any alternatives considered to the changes. Hospital officials testify at the hearing on information relating to its proposed changes and respond to matters raised during the hearing. By way of comparison, the Commonwealth of Massachusetts requires all hospitals to submit written plans to the State Department of Health for assuring access to a service following a hospital's closure of that service. In addition, within a year, the Department, in collaboration with the hospital, must prepare a post closure report evaluating the extent to which access to the service was preserved. The advantage to this approach is twofold. Written plans commit hospitals to addressing issues formally, and hospitals as well as the State are held more accountable to the community, as they must prepare a post closure report within a year. Lastly and perhaps most importantly, the onus of "exploring other ways" of providing services that are reduced lies with hospitals (not the City as is the case in San Francisco). However, adopting this approach has at least one major disadvantage. Similar to requiring hospitals to submit quarterly or semi-annual reports, it would disparately impact hospitals doing business in San Francisco. It is possible, but highly improbable, that some hospitals may decide to move from the area. Therefore, the Board of Supervisors may want to draft a motion urging the State Legislature to require all hospitals statewide to submit written plans.

OTHER JURISDICTIONS

The following are brief descriptions of requirements and/or experiences in other jurisdictions. A summary of these findings can be seen in Table 1 (below).

A. Alameda, California

Alameda County Medical Center is a Public Hospital Authority authorized by State legislation and directed by a freestanding Board of Trustees. The Alameda County Medical Center presently consists of one psychiatric facility, two hospitals and four health centers.

Under a local ordinance, the hospital authority must provide the Alameda County Board of Supervisors sixty (60) days' notice prior to closing a facility, eliminating or reducing services. The notice must include a statement of impact as specified by the county or required pursuant to Section 1442.5 of the State Health and Safety Code.⁶ According to Alameda County health officials, the ordinance applies only to public hospitals. Private hospitals are not subject to its requirements. These officials also advised our office that the county does not impose any requirements on private hospitals that reduce their services. The existing ordinance is still significant because public hospitals must give the county 60 days notice before making any changes. Instead of the 14 days required by the Beilenson Act. This provides the Alameda County Board of Supervisors with additional time to address specific situations.

B. Los Angeles, California

The Los Angeles County Department of Health Services (DHS) operates numerous hospitals, clinics and health centers. According to DHS's Office of Planning, private hospitals in Los Angeles County that reduce their services are not subject to any local requirements. Public hospitals, on the other hand, are subject to the requirements of the Beilenson Act, as is the case in Alameda and San Francisco.

Notably, a Superior Court judge in Los Angles County recently blocked the closure of Daniel Freeman Marina Hospital (a private hospital) in Marina del Rey, saying the hospital's owners had failed to meet the State's requirements for closing. When the Tenet Corporation purchased the Marina del Rey hospital from a non-profit Catholic group, it agreed to abide by several conditions (tailored by the State Attorney General) in the event it closed the hospital. Eventually, Tenet decided to close the hospital, but failed to comply with the conditions. The Attorney General asked for injunctive relief from the courts and the judge granted it because of Tenet's non-compliance. Specifically, the judge said that Tenet had not shown it sought community input properly and had not consulted its governing board formally. He then enjoined Tenet from closing the hospital until Tenet completed a comprehensive assessment and planning process and consulted the hospital's governing body.⁷ As of the writing of this report, this case had not yet gone to trial. Of course, the Board of Supervisors does not have the same powers as the State to proscribe the terms of a hospital's ownership change. Neither the Beilenson Act nor Prop Q can be adjusted by the Board to address these cases in the way afforded to the Attorney General by the law. This anecdote is provided simply to convey the experiences of a jurisdiction facing reductions in hospital services.

C. The Commonwealth of Massachusetts

Under state law, any hospital in Massachusetts that contemplates reducing a service must provide ninety (90) days notice to the State Department of Public Health, which in turn must hold a public hearing and determine whether the proposed change will "significantly reduce access to necessary services."⁸ If the Department makes such a determination, it then requires the hospital to submit written plans, within fifteen (15) days, for "assuring access to such necessary services following the hospital's closure of the services." The plan must include the following elements:

Information on the utilization of the service prior to the proposed closure;

Information on the location and service capacity of alternative delivery sites;

Travel times to alternative service delivery sites;

An assessment of transportation needs post discontinuance and a plan for meeting those needs; and

A protocol that describes how patients in the hospital's service area will access the services at alternative delivery sites.

The State Department of Health must monitor the implementation of the hospital's plan. In addition, within a year, the Department, in conjunction with the hospital, must prepare a post-closure report that evaluates the extent to which access to necessary services has been preserved. According to the law, whenever possible, the hospital must collaborate with the Department and help develop the report by submitting additional data and information.

Table 1: Summary of Other Jurisdictions

* 90 days advance notice for private hospitals per local law and 14 days for public hospitals per the Beilenson Act.

CONCLUSION

In conclusion, our office found only a handful of options for the Board of Supervisors to undertake on the issue of hospitals that reduce their services. As discussed above, private hospitals in San Francisco are already subject to the strictest public notice and hearing requirements in the State. However, we did identify several areas for potential improvement, ranging from requiring quarterly or semi-annual financial reports to written plans for assuring access to services following a hospital's closure of those services. Arguably, any of these polices could mitigate the negative impact of service reductions on the community. However, they could also benefit from further research and analysis. This is a preliminary look at the pool of available policies. Whether any of these policies should be adopted for San Francisco is, of course, a policy matter for the Board of Supervisors.

SUGGESTED COURSES OF ACTION

The following are several courses of action for the Board of Supervisors to consider when adopting new or amending existing requirements on hospitals. These are presented in order of most, to least, feasible in San Francisco.

1. Urge the State Legislature to adopt legislation requiring private hospitals to provide the Board of Supervisors with quarterly or semi-annual financial reports and/or a written plan for assuring access to services following a hospital's closure of those services.

2. Amend the Community Health Care Planning Ordinance (Prop Q) requiring private hospitals to provide the Board of Supervisors with quarterly or semi-annual financial reports and/or a written plan for assuring access to services following a hospital's closure of those services.

3. Amend Prop Q to fine private hospitals for violating the provisions of the ordinance. It is important to keep in mind that due process requires that fines be proportional to harm inflicted and that it may be difficult to show that a hospital's failure to comply with Prop Q causes any quantifiable harm.

¹ California Code of Regulations, Title 22, Section 70103.

² California Health and Safety Code, Section 1442.5.

³ San Francisco Charter, Appendix Q.

⁴ San Francisco Health Commission, Procedures for Public Hearings to Determine Whether the Proposed Change Will or Will Not Have a Detrimental Impact on the Health Care Service of the Community, Page 4.

⁵ Notably, the Beilenson Act has been amended several times to shorten its original 90-days notice requirement because, according to the City Attorney's Office, this time period proved to be unworkable for hospitals and their patients.

⁶ Alameda County Administrative Code, Title 2, Section 2.120.040

⁷ The People of the State of California vs. Tenet Healthsystem DFH, Inc., Case No. BC277716

⁸ 105 Code of Massachusetts Regulations (CMR) 130.122