A union-sponsored bill that would require hospitals and affiliated medical groups to file annual reports on the compensation of their highest paid executives passed muster Tuesday with the Assembly Committee on Health.
By a vote of 11-6, the committee approved legislation, authored by Assemblyman Jimmy Gomez (D-Echo Park), under which hospitals and integrated health systems would report each year to the Office of Statewide Health Planning and Development on all executives whose total annual compensation exceeded $250,000.
The amount that would be subject to reporting includes wages and salary, perks and benefits, bonuses, stock, options and any pay the executives receive for serving on the boards of outside companies.
The health planning office would be required to post the reports on its website.
Many, but not all, hospitals are already required under current law to report some of this information in tax filings.
The bill would also require hospitals and related medical entities with 100 employees or more to provide pay information on its non-executive workers by job classification, gender, ethnicity and sexual orientation.
Supporters of the bill include labor unions, gay and transgender advocates, and at least one consumer advocacy group, Health Access, according to a health committee analysis. The opponents are almost all hospitals.
Gomez said his proposal would bring more accountability and transparency to the health care system.
Dave Regan, president of the SEIU-United Healthcare Workers West, which supports the bill, said it is simply about sharing information. The California branch of the Service Employees International Union (SEIU California) sponsored the legislation.
“Today, people have more information about a refrigerator or car they purchase than about the organization that is providing health care to them,” Regan told California Healthline.
Consumers, who know first-hand the high cost of hospital and medical bills, are deeply troubled when they learn about hospital executives’ generous pay, he asserted.
The committee’s analysis noted that supporters of the bill cited a report in the health care industry publication “Payers and Providers,” showing that 66 executives in California’s three largest hospital systems, Sutter Health, Dignity Health and Kaiser Permanente, earned more than $1 million each in 2013 — up from 52 executives who made that much in 2011.
Regan argued that if information about hospital executives’ pay was made available to the public, health systems would behave differently when it comes to compensation decisions.
“Sunlight is the best disinfectant,” he said.
SEIU-United Healthcare Workers West, is also sponsoring a state ballot initiative to cap hospital executives’ compensation at $450,000 a year. Voter signatures are currently being collected to place the initiative on the November ballot.
Although the ballot initiative and the Gomez bill are not directly related, they both aim to expand the conversation on transparency, according to the SEIU-UHW.
Opponents of the bill argued Tuesday that it is redundant because compensation for top executives is already in the public domain.
“We support transparency; we have no issue with that,” Jan Emerson-Shea, a spokeswoman with the California Hospital Association, told CHL. “But this bill is very duplicative. We don’t know the public policy purpose of it.”
Emerson-Shea noted that compensation information for executives at nonprofit hospitals is reported to the IRS on tax forms known as 990s that are publicly available and can be downloaded from sites such as Guidestar.org.
She added that private hospitals report their executives’ compensation to the Securities and Exchange Commission.
“When advocates throw around these [compensation numbers], they’re getting that information from somewhere,” Emerson-Shea said.
As the committee analysis noted, however, only publicly traded, for-profit hospitals are required to report executive pay data to the SEC. Privately held ones have no such requirement. Of the 105 for-profit hospitals in the state, about 50 are not publicly traded and thus have no requirement to report that information, the analysis said.
Moreover, nonprofit groups are only required under current law to report their 20 highest earners, according to the committee document. That means that in some large groups, the compensation of many executives – even some CEOs — is not reported on the 990 forms.
Emerson-Shea said the hospital association’s main concern is that the Gomez bill would reach deep into many organizations.
Health care professionals make good money — it’s a field that requires skill and a high level of education, she said. So the reporting requirement would target not only executives, but other professionals in mid-management positions, she said.
The legislation would also increase hospitals’ costs because of the time and money they would have to spend on information gathering and reporting, Emerson-Shea argued.
Jim Gauss, a recruiter for Witt/Kieffer, a search and recruitment firm, said the proposed legislation could drive people out of the health care industry.
There is already intense competition for talent, especially in the information technology sector, he said. “This will make it more difficult to place candidates into hospitals.”
The bill will be considered next by the Assembly Committee on Appropriations.