HomeMy WebLinkAboutStaff Report 9342City of Palo Alto (ID # 9342)
City Council Staff Report
Report Type: Action Items Meeting Date: 6/11/2018
City of Palo Alto Page 1
Summary Title: Health Care Costs Initiative Measure
Title: Accept the City Clerk’s Report Certifying the Sufficiency of an Initiative
Petition to Limit Health Care Costs that Hospitals and Medical Clinics May
Charge; and Adopt a Resolution Placing the Initiative Petition on the
November 2018 Ballot, or Adopt the Petition as an Ordinance Without
Alteration, or Provide Other Direction to Staff
From: City Manager
Lead Department: City Clerk
Recommendation
Staff recommends that Council:
1.Accept the City Clerk’s Certificate of Sufficiency (Attachment A) of the Initiative
Petition to Impose Limits on Costs that Hospitals and Clinics May Charge in Palo
Alto (“Initiative Measure”) (Attachment B); and
2.Approve an ordinance (on first reading) amending Title 5 of the Palo Alto
Municipal Code to establish regulations related to health care costs, as proposed
by the Initiative Measure, and direct staff to place the ordinance on a future
Council agenda for final adoption (second reading) by August 10, 2018; or
3.Direct staff to return at a later meeting with a resolution calling for an election to
submit the Initiative Measure to the voters at the next General Municipal Election
to be held on November 6, 2018; or
4.Provide other direction to Staff with respect to the Initiative Measure.
Background
Around the beginning of this year, nearly identical initiative measures were submitted in
five Bay Area cities – Palo Alto, Redwood City, Pleasanton, Livermore and Emeryville –
where Stanford Hospital and affiliated clinics are located. The initiative measures are
City of Palo Alto Page 2
spearheaded by the Service Employees International Union (“SEIU”), and seek to cap
the amount that hospitals and medical clinics (not limited to Stanford) in the city may
charge payers of patient services (e.g., patients, insurers, and other private entities).
In Palo Alto, as provided for in the City Charter, the initiative sponsors published a
notice of intent to circulate the initiative petition in a newspaper of general circulation,
and submitted the notice of intent and the text of the proposed ordinance to the City
Clerk on January 9, 2018. These are the only procedural requirements prior to
circulating the petition for signatures under the City Charter. (Charter, Art. VI, Sec. 2.)
On May 22, 2018, the initiative sponsors submitted the petition with signatures to the
City Clerk. On June 3, 2018, the Santa Clara County Registrar of Voters completed
examination and verification of the signatures and determined that sufficient signatures
were submitted to qualify the initiative for the ballot.
Once an initiative measure is determined to qualify through the City’s Clerk’s issuance
of a Certificate of Sufficiency, the Council has two options under the City Charter –
either adopt the measure as written, without change, or place the measure on the
ballot for the next general municipal election (that is no sooner than 88 days from the
date of the Clerk’s Certificate of Sufficiency). Because the Clerk’s Certificate of
Sufficiency is dated June 7, 2018, the next general municipal election more than 88
days from the date of certification is the election on November 6, 2018. The last day to
place a matter on the ballot is August 10, 2018. The Council may request further
information related to the initiative’s impacts, including fiscal impacts, but there would
be no extension of time to determine whether to adopt or place the measure on the
November 2018 ballot.
Initiative Measure
Pricing Limits: The Initiative Measure would cap the amount that hospitals and
medical clinics in Palo Alto can charge private payers, including individual patients,
insurers, and other entities. The amount (referred to as the “acceptable payment
amount”) would be capped at 115 percent of the sum of the “reasonable cost of
direct patient care for a particular patient” and the “pro rata health care quality
improvement cost”. These terms are defined in the Initiative Measure. The
“reasonable cost of direct patient care” would include estimated salaries and
benefits of identified personnel categories, excluding managerial and administrative
positions. “Health care quality improvement costs” would be limited to those costs
paid by a hospital or clinic to “maintain, access or exchange electronic health
information; support health information technologies; train non-managerial
personnel engaged in direct patient care; and provide patient-centered education
and counseling.” Health care providers could petition the City to include other costs
as allowable recoverable costs by demonstrating that the cost was spent on patient
services and activities “designed to improve health quality and increase the
City of Palo Alto Page 3
likelihood of desired health outcomes in ways that are capable of being objectively
measured and producing verifiable results and achievements.”
Annual Rebates: The Initiative Measure would require each hospital and medical
clinic to calculate for each patient the “reasonable cost of direct patient care for a
particular patient” and the “pro rata health care quality improvement cost” no later
than 150 days from the end of each fiscal year for the prior fiscal year, and if the
amount actually billed or paid for the patient’s services exceeds the “acceptable
payment amount”, reduce the billing or issue a rebate with interest, no later than
180 days from the end of the fiscal year. Failure to meet this timeframe would
result in fines.
City Responsibility to Implement, Administer and Enforce: The Initiative
Measure would require the City’s Administrative Services Department (“ASD”) to
implement, administer and enforce the regulatory program, and require the City to
appropriate sufficient funds for ASD to execute these responsibilities. These new
responsibilities include the following:
- Fines. ASD would need to issue notices of violation and receive payment of
fines.
- Recordkeeping. ASD would need to receive and maintain records from
hospitals and medical clinics (a) identifying the reasonable cost of direct
patient care for each patient each fiscal year, and (b) describing each
instance a required rebate or reduction was not timely issued. Records would
be submitted at least annually. ASD would be required to annually publish
information on rebates, reductions and fines.
- Petitions to include additional “health care quality improvement
costs”: As described above, ASD would evaluate and make determinations
on petitions by hospitals and clinics to include a cost not specified in the
Initiative Measure as an eligible “health care quality improvement cost”. The
hospital or clinic would need to demonstrate to ASD’s satisfaction, that the
cost was actually paid and spent on certain activities to improve health
quality and outcomes.
Impacts on Palo Alto
City of Palo Alto Page 4
The Initiative Measure would impose limits on the amount that hospitals and medical
clinics in Palo Alto could charge, and require the City of Palo Alto to assume and fund a
number of new responsibilities related to health care pricing regulation.
At this time, the City does not have expertise or experience in the regulation of health
care costs or health care generally. If the measure were to pass and become effective,
the City would need to establish and identify funding for an administrative structure to
implement and enforce the new law. The City does not currently have on staff
personnel who would be able to implement this program. The Administrative Services
Department that the Initiative Measure tasks with implementation, administration and
enforcement currently performs functions related to the budget, investments,
purchasing and contract administration, real estate and property management,
warehouse, print shop and revenue collections. Because this type of program has not
been adopted at the local level, it is unclear how much it would cost and the feasibility
of implementation by the effective date of the ordinance. The City has been reducing
staffing levels since 2010 and currently has 33 full time equivalent (FTE) positions fewer
than before the great recession in FY 2009 (nearly 65 less in the General Fund). In
addition, the Finance Committee recommended to the City Council that it direct staff to
reduce the General Fund Operating Budget by an additional $4 million dollars by the
end of this calendar year; this will most likely lead to further reductions in staff.
Beyond the fiscal impacts to the City organization, which costs would ultimately be
borne by City taxpayers, there could well be impacts associated with the potential loss
of health care providers that may relocate out of Palo Alto due to the unique
requirements and limitations that would not apply in adjoining cities like Menlo Park and
Mountain View. Staff is not at this time able to fully account for and analyze the
potential for this kind of exodus. In the letter from Stanford Health Care, attached to
this report as Attachment C, they state that based on preliminary estimates the
implementation of the initiative would result in a 20-24% reduction in revenue, which is
much greater than its margin. To the extent that this type of result would apply to
other providers, and the uncertainty inherent in navigating this new system, it is
possible, if not likely, that a fair number of providers would elect to relocate their
practices. The City has not performed an economic impact study, but direct and
indirect revenue impacts are very likely if these providers were to relocate. The type of
revenues potentially impacted would be unsecured property tax, sales and use tax and
transient occupancy tax (hotel tax).
The medical sector, along with the high technology sector, is a significant part of Palo
Alto’s vibrant economy. Stanford University Medical Center (SUMC), which includes the
Stanford University School of Medicine, the Stanford University Clinic, Stanford
University Hospital and Lucile Salter Packard Children’s Hospital, currently employs
approximately 10,000 people and is one of the largest concentrations of health care
services in the Bay Area. SUMC is one of three Business Employment Districts identified
in the Comprehensive Plan’s Land Use and Community Design Element (the others are
Stanford Research Park and East Bayshore and San Antonio Road/Bayshore Corridor).
City of Palo Alto Page 5
As described in the Comprehensive Plan, “These districts provide thousands of local
jobs, establish a customer base for many other Palo Alto businesses and generate tax
revenues for the city. Because each plays a central role in maintaining the fiscal health
of the City, it is important to support their long-term viability and ability to respond to
changing global economic conditions.” (Comprehensive Plan 2030, p. 194.)
If the Initiative Measure passes and becomes effective, there would likely be a number
of direct impacts on Palo Alto residents, which staff cannot fully quantify at this time.
Residents who use affected medical providers could experience a decrease in their
health care costs. If these service providers left Palo Alto, however, those cost
reductions would not occur andcity residents would need to travel further to obtain
medical services.
Status of Initiative in Other Cities
As of the date of this report, the initiative measure has only qualified for the ballot in
Palo Alto. City staff understands that the initiative petition and signatures were
submitted to the City of Livermore last week and are in the process of being evaluated
to determine if the initiative has qualified, and signature gathering efforts are underway
in Redwood City.
The City of Emeryville filed a pre-election challenge to the initiative there based on the
alleged invalidity of the initiative on preemption and due process grounds. In that
litigation, Emeryville also filed a motion for a temporary stay seeking a declaration from
the court that its City Attorney is not required to prepare a ballot title and summary
prior to signature gathering (a ministerial duty under the general state law that does
not apply in Palo Alto) pending a court determination on the legality of the initiative.
The hearing on the City of Emeryville’s motion for a stay is scheduled for June 21, 2018
in the Alameda County Superior Court.
In contrast to Emeryville and the other affected cities, Palo Alto’s initiative process is
guided by its Charter, not the California Elections Code. The Elections Code requires
the City Attorney to provide a ballot title and summary prior to the circulation of the
petition for signatures. The Palo Alto Charter does not include this process. As noted
above, after submittal of the notice of intent to circulate an initiative petition, Palo Alto
initiative sponsors may begin gathering signatures, which they have done.
Legal Concerns
The Initiative Measure raises significant issues as to its legal validity based on federal
and state law preemption. Health care pricing and reimbursement are complex areas of
regulation that are addressed by several federal and state laws. Cities cannot regulate
by local ordinance in those areas that the state has fully occupied either expressly or
impliedly, or where the local ordinance would conflict with state law.
City of Palo Alto Page 6
These legal concerns are described in greater detail in the Stanford Health Care and
Stanford University letters dated June 1, 2018 (Attachment C) and June 6, 2018
(Attachment D), which reflect the arguments also presented in the legal briefs filed by
the City of Emeryville and Amici Curiae in the pending litigation in Alameda County on
the similar Emeryville initiative measure. In addition to preemption, those documents
also raise legal concerns about the initiatives’ violating due process as unconstitutionally
vague and by preventing providers from realizing a fair and just return on their
investment.
The legality of an initiative measure can be challenged at multiple points in the process,
both pre-election and post-election if the measure passes.
Conclusion
Sponsors of the Initiative Measure have obtained sufficient voter signatures to qualify
the measure for placement on the ballot at the next general municipal election on
November 6, 2018. The Council’s choices are to adopt the measure or to place it on
the ballot, which it must do by August 10, 2018.
Stanford Health Center has stated its intent to file a pre-election challenge to the Palo
Alto measure. Stanford, together with other hospitals, has already filed an amici curiae
brief in the Emeryville litigation in support of that City.
Environmental Review
The potential actions in response to a voter-sponsored initiative are not a project under
the California Environmental Quality Act (CEQA).
Attachments:
Attachment A: Healthcare Cert
Health Care Initiative
Attachment C - Letter to Molly Stump from Sarah DiBoise re Palo Alto Accountable and
Affordable Health Care Initiative - 06-01-2018
Attachment D - Letter to Molly Stump re Legal Challenge - 06-06-2018
County of Santa Clara
Registrar of Voters
1555 Berger Drive, Bldg.2
san Jose. cA 95112
Mailing Address: P.O. Box 611360. San Jose. CÀ 9SI6H36O(4oa) 2e9-VOTE (4683) 466-43O-VOTE (86s3) FÀX: (4oa) 99a-7314www.sccvote.org
June 3, 2018
Ms. Beth Minor, City Clerk
City of Palo Alto
250 Hamilton Ave.
Palo Alto, CA 94301
RE: Limit Overpricinq Healthcare
Dear City Clerk Minor:
ïhe petition submitted to our office on May 23,2018 contained a raw
Pursuant to your request and based on six percentum of the number
1 signatures.
rs at the
last general municipal election for the city of palo Alto, the petition
valid signatures to pass.
on needs 2,407
Your jurisdiction requested that the Registrar of Voters' Office conduct a full count of signatureverification in an attempt to reach 2,407 valid signatures.The Registrar of Voters' Office verifiedthe necessary number of signatures filed in accordance with Eleðtions Code Section g1 1S.
The signature verification resulted in the verification of 2,825 signatures of the 3,541signatures
submitted, with 2,430 signatures found valid.
Please contact us to make arrangemensts to pickup your petition. lf you have any questions
concerning this matter, please feelfree to contact our office at (a08) 282-3OOg.
Sincerely,
lia Saenz, Elections Process Supervisor ll
Registration Division
County of Santa Clara
Attachments: Clerk's Certificate to lnitiative petition
Petition Result Breakdown Report
Statistics Summary Report
Statistics Detail Report
Board of Superrzisors: Mike \ /asserman. George Shirakawa. Dave Cortese, Ken yeager. Liz KnissCount¡z Executive: Jeffrey V. Smith
regsr
Â6'
Santa Clara County
Registrar of Voters
CLERK'S CERTIFICATE TO IN¡TIATIVE PETITION
I, SHANNON BUSHEY, Registrar of Voters of the Gounty of Santa Ctara, State of
California, hereby certify:
That the "City of Palo Alto Accountable and Affordable Health Gare" lnitiative
measure has been filed with this office on May 23,2018.
That said petition consists of 534 sections;
That each section contains signatures purporting to be the signatures of qualified
electors of this county;
That attached to this petition at the time it was filed was an affidavit purporting to be the
affidavit of the person who solicited the signatures, and containing the dates between
which the purported qualified electors signed this petition;
That the affiant stated his or her own qualification, that he or she had solicited the
signatures upon that section, that all of the signatures were made in his or her
presence, and that to the best of his or her knowledge and belief each signature to that
section was the genuine signature of the person whose name it purports to be;
That after the proponent filed this petition I verified the required number of signatures by
examining the records of registration in this county, current and in effect at the
respective purportive dates of such of signing, to determine what number of qualified
electors signed the petition, and from that examination I have determined the following
facts regarding this petition:
1. Number of unverified signatures filed by proponent 3,541
2. Number of signatures verified 2,925
a. Number of signatures found SUFFICIENT 2.420
b. Number of signatures found NOT SUFFICIENT 395
1. NOT SUFFICIENT because DUPLICATE 32
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my official
seal this 3d day of June, 2018.
Shannon Bushey
Regis
By:
JOBD84
Deputy
Petition Result Breakdown
Signatures Required
Raw Gount
Sample Size
Sigs Checked
Sigs Not Checked
Sigs Valid
Sigs lnvalid
Duplicated
Non-duplicate lnvalids
Percent of Sigs
Checked
86.0 %
14.0%
1.0 %
13.0 %
2407
3,541
3,541
2,925
716
2,430
395
32
363
Percent of
Sample Size
20.2%
68.6 %
11.2%
0.9 %
10.3%
Approved
NotReg
OutOfDist
Duplicate
RegLate
RegDiffAdd
NoResAdd
NoSig
PrintedSig
SigNoMatch
Approved
Not Registered
Out of District
Signed more than once
Registered Late
Registered at a Different Address
No Residence Address Given
No Signature
Printed Signature
Signatures Don't Match
2,430
216
20
32
14
70
2
1
2
38
86.0 %
7.6%
0.7 %
1.1%
0.5%
2.5%
0.1%
0.0%
0.1%
1.3%
Pages Processed
Total Checked
Uncorrected Valid
Duplicate Adjustment
Estimated Valid
534
2825
2430
0
2430
100.0 %
79.8 %
68.6 %
117.4 %
100.9 %
68.6 % 100.9 %
Min Required (95%): 22A6.7
Min Required to pass
Based on Sampte (110%l: 2647.7
PCMR012 - Petition Result Breakdown
Printed: 5131 12018 11 :00:50AM Page 1 of 1
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County of Santa Clara
Registrar of Voters
1555 Berger Drive. Bldg.2
San Jose. CA 95112
Mailing,\ddress: p,O. Box 611360. San Jose, CA 9SI6H36O(4Oa) 299-VOTE (a643) a66-43O-VOTE (36A3) FAX: (4OA) 99A-7314www.sccvote.org
June 3,2018
Ms. Beth Minor, City Clerk
City of Palo Alto
250 Hamilton Ave.
Palo Alto, CA 94301
RE: Limit Overpricinq Healthcare
Dear City Clerk Minor,
The petition submitted to our office on May 23,2018 contained a raw count of 3,541signatures.Pursuant to your request and based on six percentum of the number of regsiered voters at thelast general municipal election for the City of Palo Alto, the petition needs þetition needs 2,407valid signatures to pass.
Your jurisdiction requested that the Registrar of Voters' Office conduct a full count of signatureverification in an attempt to reach 2,407 valid signatures. The Registrar of Voters' Office verifiedthe necessary number of signatures filed in accordance with Eleciions Code Section 91 1S.
The signature verification resulted in the verification of 2,825 signatures of the 3,S4l signaturessubmitted, with 2,430 signatures found valid.
Please contact us to make arrangemensts to pickup your petition. lf you have any questionsconcerning this matter, please feel free to contact our office at (408) iAZ-gOOg.
Sincerely,
Julia Saenz, Elections Process Supervisor ll
Voter Registration Division
County of Santa Clara
Attachments: Clerk's Certificate to lnitiative petition
Petition Result Breakdown Report
Statistics Summary Report
Statistics Detail Report
Board of Superrrisors: Mike Wasserman, George Shirakawa, Dave Cortese, Ken yeager, Liz KnissCount¡, Executi\/e: Jeffrey V. Smith ÃÐ
OFFICE OF THE GENERAL COUNSEL Sarah J. DiBoise Chief Hospital Counsel
Telephone (650) 723-0380 Facsimile (650) 723-4323 sdiboise@stanford.edu
Building 170, 3rd Floor, Main Quad, Post Office Box 20386, Stanford, CA 94305-2038 http://ogc.stanford.edu/
June 1, 2018
Molly Stump City Attorney Office of the City Attorney
City Hall, 8th Floor 250 Hamilton Avenue Palo Alto, CA 94301
Re: “Palo Alto Accountable and Affordable Health Care Initiative” Dear Ms. Stump:
I write on behalf of Stanford Health Care (“Stanford”) to express concerns regarding the “Palo
Alto Accountable and Affordable Health Care Initiative” (the “Initiative”) that was recently submitted for certification by individuals affiliated with the Service Employees International Union – United Healthcare Workers West (“SEIU-UHW”). Stanford believes that the Initiative is facially invalid and an improper exercise of the initiative power. In fact, the city attorney in Emeryville, where SEIU-UHW is funding a nearly identical initiative, has filed suit to prevent
that initiative from proceeding for those very reasons. If the Palo Alto city clerk certifies the sufficiency of the signatures submitted in connection with the Initiative and the city council votes to place the initiative on the ballot, Stanford intends to challenge the validity of the measure. We hope that, rather than place the Initiative on the ballot, the City of Palo Alto would join us in that
effort to stop this unconstitutional and otherwise unlawful measure from appearing on the ballot.
However, I write today for a different reason—to request that the City (a) set the Initiative as a separate agenda item if the clerk certifies the signatures for presentation to the city council, and (b) order a report addressing the fiscal impact and the impact on the community’s ability to attract and retain business and employment.
The stated purpose of the Initiative is “to impose reasonable limits on prices that hospitals and other health facilities may charge.” Sec. 5.40.010. To do so, the Initiative would require Palo Alto hospitals, medical clinics, and certain “other providers” to calculate the “reasonable cost of direct patient care” and the pro-rata “health care quality improvement costs” for each patient, and caps the amount a provider can recover in reimbursement for care provided to that patient at
115% of the sum of those amounts, which the Initiative defines as the “acceptable payment amount.” Secs. 5.40.020, 5.40.030(a). If a provider collects from or bills the “person or persons who paid or are financially responsible for payments for services provided to a particular patient”
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10166266.1
an amount greater than the acceptable payment amount over the course of a fiscal year, the
provider must issue that “payer” a rebate (plus interest) or reduction in the amount collected or
billed “in excess of the acceptable payment amount” and pay fines of up to $1,000 per rebate or reduction, with those fines continuing to accrue if they are not timely paid. Secs. 5.40.030(a)(2)-(4), (6)-(7). While the Initiative allows providers to petition the City to obtain relief from the 115% cap, such a variance may be granted only when the City’s Administrative Services
Department (the “Department”)—a city agency that has no experience or expertise as a health care payer or with health care costs or reimbursement—decides that the Initiative’s application would be “confiscatory or otherwise unlawful.” Sec. 5.40.030(d)(2). And, even if it grants a petition, the Department must evaluate the increase to ensure that it does “not increase the
acceptable payment amount to any amount greater than that minimally necessary under
California and federal law.” Sec. 5.40.030(d)(3)
Setting aside for the moment the fact that the Initiative would be, if enacted, unconstitutional, the billing, rebate, and penalty process set out in the Initiative would place extraordinary burdens on the City. While the Department must wade into legal determinations when a provider petitions
for relief from the 115% cap as discussed above, the Department must analyze the economics behind other petitions. Before granting a provider’s petition to include in its cost calculations any health care quality improvement costs not specified by the Initiative, the Department must evaluate and find that each cost was “spent on activities designed to improve health quality and increase the likelihood of desired health outcomes in ways that are capable of being objectively
measured and of producing verifiable results and achievements.” Sec. 5.40.030(c)(2). Similarly, before granting a provider’s petition to include in its cost calculations any reasonable costs of care not specified by the Initiative, the Department must evaluate and find that each cost was “directly associated with operating a hospital, medical clinic, or other provider in Palo Alto and providing care to patients in Palo Alto and is reasonable in light of market rates for similar goods
or services.” Sec. 5.40.030(c)(3). And, if a provider seeks to apply a cost incurred in one year over a longer period (up to five years), the Department must evaluate and find that “the cost is reasonably expected to provide health care quality improvements or support direct patient care during that period.” Sec. 5.40.030(c)(4).
The Initiative would require the Department not only to hear and assess provider petitions for
relief from the 115% cap and the restrictions on allowable costs, but also to take on many other new administrative responsibilities. For example:
• The Department must obtain from every covered provider “information identifying the
reasonable cost of direct patient care for each patient to whom services were provided in
the fiscal year.” Sec. 5.40.030(b)(1). Those costs must be calculated according to the Initiative’s determination of which costs are reasonable, on a category-by-category basis. Id.
• The Department must obtain from every covered provider (i) the information used to
calculate the reasonable cost of direct patient care per patient discussed above; (ii) the information used to determine whether a rebate or reduction is required after calculating health care quality improvement costs, amounts received from each payer for a patient, the reasonable cost of direct patient care, the acceptable payment amount per patient, and
the amount any payments exceed the acceptable payment amount; (iii) “information
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10166266.1
describing every instance during the period covered by the submission when the rebate or
reduction required … was not timely issued in full, and the reasons and circumstances
therefor”; and (iv) an opinion by a “certified public accountant as to whether the information contained in the report fully and accurately describes … the information required to be reported.” Sec. 5.40.030(b)(2).
• The Department must establish a schedule, format, and form for accepting the reports
containing the information discussed above. Sec. 5.40.030(b)(3).
• The Department must “annually publish information showing the number and aggregate amount of rebates provided, as well as the number and aggregate amount of fines paid, by
each hospital, medical clinic, or other provider,” and make that information available to the public upon request after evaluating and taking into account “limitations on the public disclosure in the interest of personal privacy.” Sec. 5.40.030(b)(5). Thus, the City will also have to assume the significant compliance costs and potential liability under the Health Insurance Portability and Accountability Act (HIPAA).
Implicit in these provisions is a further responsibility for the City to maintain this vast quantity of information so that it can evaluate compliance and enforce the Initiative.
The Initiative also requires the City to engage in extensive implementation and enforcement activities. The Department must “promulgate appropriate guidelines, regulations or rules” for implementation and enforcement “consistent with” the Initiative, while ensuring that the
implementation is also “consistent with the requirement of due process imposed by the California and United States Constitutions.” Sec. 5.40.040(a). The Department must also “provide guidance concerning the process for bringing a petition … with the goals of minimizing the burden to the petitioner and increasing the efficiency of the petition review process.” Id.
Where the Initiative has been violated, the City must revoke or suspend registration certificates,
permits, and licenses held by the violator at the Department’s request. Sec. 5.40.040(b). And while the City may bring a civil action against a provider for violating this chapter, the City may also be named as a defendant in an action for review of any determinations it makes on a provider’s petition for a variance from the Initiative’s terms. Sec. 5.40.040(c).
The Initiative does not identify any source of funding for the City’s new responsibilities, which the City will have to discharge regardless of whether any provider violates the Initiative. Instead, the Initiative simply directs the City to “appropriate to the Administrative Services Department sufficient funds to enable the department to implement and enforce” the new law. Sec. 5.40.040(a). And while the Department is charged with collecting any fines that may be paid
under the Initiative, those hypothetical funds are not even ear-marked for the Initiative’s enforcement, but instead are to be used generally “to implement and enforce laws governing hospitals, medical clinics, and other providers.” Sec. 5.40.030(a)(8).
Given the significant administrative burdens the Initiative would place on the City, we request that the City set the Initiative as a separate item on it is agenda if the city clerk certifies the
signatures submitted in support of the Initiative and order a staff report to address the Initiative’s impact on the City’s administrative function. Further, we request that the City refer the Initiative to the appropriate city agency or agencies for a report addressing the Initiative’s fiscal impact
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and its impact on the community’s ability to attract and retain business and employment. See,
e.g., Cal. Elec. Code § 9212(a)(1) & (6); id. § 9215. In that regard, Stanford’s preliminary
calculations indicate that implementation of the initiative would result in a 20-25% drop in its revenues, which is many times greater than Stanford’s margin. As a consequence, Stanford would have to implement cuts to its staffing and benefit levels, facilities, and/or programs to avoid violating the statute and incurring still greater expenses in the form of fines and interest on
rebates required by the Initiative. Given the dramatic impact on the City and its health care providers—and, as a necessary consequence, the community and the employers that rely on Palo Alto’s world-class health care providers—we urge the City to refrain from considering whether the Initiative should be placed on the ballot until the City has received and evaluated the reports
requested here.
Thank you for the opportunity to express Stanford’s concerns, and for your attention to this important matter. Please let me know if you believe that any further information would be of assistance.
Sincerely,
Sarah J. DiBoise