August 5, 2014

To: Members, Assembly Appropriations Committee

From: Mira Guertin, Policy Advocate

SUBJECT: SB 1094 (LARA) HEALTH FACILITIES: SALE OF ASSETS: APPROVAL
HEARING SCHEDULED AUGUST 6, 2014
OPPOSE AS AMENDED AUGUST 4, 2014

The California Chamber of Commerce regretfully must OPPOSE SB 1094 (Lara), which seeks to allow the
California Attorney General (AG) to retroactively amend contract terms in transactions between hospitals rather
than resorting to traditional remedies for breach of contract and material misrepresentations. We believe this is an
overly aggressive and unnecessary remedy, and are concerned with the precedent it would set for other situations
in which state agencies oversee private contracts and business practices.

The stated purpose of SB 1094 is to protect communities by maintaining access to crucial hospital services, and to
hold health facilities accountable for withholding material information from the AG or for violating conditions
established by the AG. These are important objectives, but we believe they are adequately served by the existing
procedures and judicial remedied in place. The AG already has oversight authority and the right to grant conditional
approval for any agreement to transfer control of a hospital or health facility, and if any of those conditions are
violated, the AG may file an injunction and proceed with an enforcement action. In fact, in the examples cited by the
AG in the policy committee analysis, when the AG believed a condition had been violated by one of the parties, he
or she filed an action and was able to resolve matters through new settlement agreements with the violating parties,
protecting access to care for the communities involved. We do not see how these examples demonstrate a need to
grant a state agency authority to retroactively alter contract terms.

Certainty is critical for employers trying to conduct business and enter into contracts. Unless contracting parties
have certainty that the terms of their agreement are, in fact, the terms they will be held to, the risk of entering into
an agreement can be too great. Similarly, a lack of certainty can hinder the ability of contracting parties to secure
financing for their transactions. While SB 1094 limits the AGs ability to amend conditions by requiring that those
changes be, substantially related to the material misrepresentation, or the violation made by the party to the
transaction, this still allows for changes that could undermine the long-term profitability of the transaction. As such,
the measure will likely discourage future agreements to purchase struggling hospitals and health facilities, and
undermine funding opportunities for those transactions. Ironically, this would pose a bigger threat to health access
for local communities by making it more likely that struggling hospitals would have to close completely.

To our knowledge, if SB 1094 passed, it would be the only situation in which an elected state official would have
the authority to assert a contract has been breached and unilaterally change its terms. We are concerned that, in
this context, the approach is apt to jeopardize arrangements that preserve affordable access to health care
services. We are similarly concerned that, should the measure pass, other agencies who oversee private contracts
could seek similar authority, unnecessarily creating uncertainty in other contexts. Furthermore, we have not seen
any facts that suggest such a dramatic grant of power is necessary to protect the public interest.

For these reasons and more, we must respectfully OPPOSE SB 1094 (Lara).

cc: The Honorable Ricardo Lara
Lark Park, Office of the Governor
Lisa Murawski, Assembly Appropriations Committee
Peter Anderson, Assembly Republican Caucus
Carol Gallegos, Department of Healthcare Services
Thomas Lawson, Department of J ustice
District Offices, Members, Assembly Appropriations Committee