Report 2011-113 Recommendation 5 Responses

Report 2011-113: Salinas Valley Memorial Healthcare System: Increased Transparency and Stronger Controls Are Necessary as It Focuses on Improving Its Financial Situation (Release Date: March 2012)

Recommendation #5 To: Salinas Valley Memorial Healthcare System

To help reduce its operating costs and improve its overall financial situation, the Health Care System should continue to try to modify its employee benefits, such as paid time off, so they are aligned with industry practice.

Annual Follow-Up Agency Response From October 2016

The SVMHS Board of Directors and Administrative Team wholly embraced Recommendation #5 and recognize that the future financial stability of SVMHS depends on its ability to reduce overall operating costs, including the alignment of employee benefit costs with industry standards.

The SVMHS employee population includes non-represented staff and staff represented by three different bargaining units.

In fiscal year 2013-2014, SVMHS contract bargaining with the California Nurses Association(CNA)(~600 employees) and International Union of Operating Engineers, Stationary Engineers Local No. 39 (Local 39)(~20 employees) resulted in both unions adopting a Paid Time Off (PTO) cap and lower accrual levels.

In fiscal year 2014-2015, SVMHS initiated contract bargaining with the National Union of Healthcare Workers (NUHW) (~700 employees), to better align the health plan and PTO with industry standards, in line with those presented to CNA and Local 39. In fiscal year 2015-2016, SVMHS and NUHW reached agreement on a new collective bargaining agreement with changes to the employee health plan (effective January 1, 2017) and PTO provisions (effective August 2016).

In fiscal year 2014-2015, health plan and PTO changes were outlined for the non-represented staff (~300 employees), consistent with those presented to CNA, Local 39 and NUHW. PTO caps were implemented in June 2015. Changes to the health plan and PTO accrual levels for non-represented staff were communicated in September 2016 and are effective January 2017.

Over the past three years, SVMHS has made significant progress in better aligning the employee health plan and PTO provisions for all employees, consistent with industry practice.

The SVMHS Administrative Team and Board of Directors will continue to monitor for cost saving opportunities, including maintaining benefit costs in alignment with industry practices.

  • Completion Date: October 2016

California State Auditor's Assessment of Annual Follow-Up Status: Fully Implemented


Annual Follow-Up Agency Response From September 2015

SVMHS, from the Board of Directors through the Administrative Team, wholly embraces Recommendation #5 and recognizes that the future financial stability of the health system depends on its ability to reduce overall operating costs, including the alignment of employee benefit costs with industry standards.

The SVMHS employee population includes non-represented staff and staff represented by three different bargaining units.

During fiscal year 2013-2014, SVMHS initiated contract bargaining with the California Nurses Association (CNA) and International Union of Operating Engineers, Stationary Engineers Local No. 39 (Local 39).

SVMHS provided proposals to CNA (~600 employees) and Local 39 (~20 employees) to better align the employee health plan and Paid Time Off (PTO) accruals with industry standards over a 3 to 4-year period.

While the health plan proposal was not adopted by either bargaining unit, the PTO provisions (cap and accrual level) were adopted by both. PTO caps were implemented on June 6, 2015 for non-represented staff and accrual levels are under revision.

In fiscal year 2014-2015, SVMHS initiated contract bargaining with the National Union of Healthcare Workers (NUHW) (~700 employees). SVMHS provided proposals to NUHW to better align the employee health plan and Paid Time Off (PTO) accruals with industry standards over a 3 year period. These proposals are in line with those presented to CNA and Local 39. Negotiations with NUHW are ongoing. In fiscal year 2014-2015, the health plan and PTO changes were outlined for the non-represented staff (~300 employees). Once changes to the health plan design are implemented with NUHW, commensurate changes will be made with non-represented staff.

The executive leadership team and Board of Directors continue to track progress toward the overall goal of reduced operating expenses, including aligning benefit costs with industry practice.

  • Estimated Completion Date: 10/31/16

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented


Annual Follow-Up Agency Response From October 2014

As a first step in addressing Recommendation 3, effective Fiscal Year 2011-12, SVMHS altered benefits available to non-represented employees by terminating the existing pension plan and creating a new plan (a 403b plan) with decreased costs accruing to SVMHS.

During Fiscal Year 2012-13, SVMHS focused on putting in place a new Chief Executive Officer (hired in April 2013) and a new Administrative Team (completed in August 2013). Since coming on board, the CEO and Administrative Team have devoted significant attention to building relationships with employees and their representatives that will facilitate making the changes required to better secure SVMHS's future.

This team also has further refined and continues to implement a strategy to carry forward additional cost savings related to benefits provided to all employees. In addition, the strategy addresses overall operational efficiencies through various labor and non-labor initiatives.

During fiscal year 2013-2014, SVMHS initiated contract bargaining with the California Nurses Association (CNA) and International Union of Operating Engineers, Stationary Engineers Local No. 39 (Local 39).

SVMHS provided proposals to CNA (~600 employees) and Local 39 (~20 employees) to better align the employee health plan and Paid Time Off (PTO) accruals with industry standards over a 3 to 4 year period.

Negotiations with CNA are ongoing.

Agreement was reached with Local 39 and ratified with the union's 21 members at SVMHS. The Agreement includes reduction in PTO accrual, dependent on implementation with CNA, and transfer of the SVMHS Local 39 employees to the Local 39 group health plan.

In fiscal year 2014-2015, the health plan and PTO changes were outlined for the non-represented staff (~300 employees). Once changes are implemented with CNA, commensurate changes will be made with non-represented staff.

  • Estimated Completion Date: 10/1/2015

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented


Annual Follow-Up Agency Response From October 2013

SVMHS, from the Board of Directors through the Administrative Team, wholly embraces Recommendation 3 and recognizes that the future financial stability of the health system depends on its ability to reduce overall operating costs, including the alignment of employee benefit costs with industry standards.

As a first step in addressing this objective, effective Fiscal Year 2011-12, SVMHS altered benefits available to non-represented employees by terminating the existing pension plan and creating a new plan (a 403b plan) with decreased costs accruing to SVMHS.

During Fiscal Year 2012-13, SVMHS focused on putting in place a new Chief Executive Officer (hired in April 2013) and a new Administrative Team (completed in August 2013). Since coming on board, the CEO and Administrative Team have devoted significant attention to building relationships with employees and their representatives that will facilitate making the changes required to better secure SVMHS's future.

This team also has further refined and continues to implement a strategy to carry forward additional cost savings related to benefits provided to all employees. In addition, the strategy addresses overall operational efficiencies through various labor and non-labor initiatives.

Admittedly, a goal of this nature cannot be achieved immediately and unilaterally. Opportunities to make progress arise through periodic negotiations of contract renewals with represented units. As SVMHS makes incremental progress towards the goal of overall and equitable reductions in employee benefit costs, the challenge for the hospital is to maintain stability, retain qualified employees, attract qualified candidates and meet the needs of the community.

  • Estimated Completion Date: 10/1/2014

California State Auditor's Assessment of Annual Follow-Up Status: Not Fully Implemented


1-Year Agency Response

The Health Care System stated that it recognizes the opportunity to improve the alignment of employee benefits to industry standards. It indicated that in light of current union contracts it is challenged with balancing nonunion benefits to union benefits to ensure it is able to retain qualified employees and candidates. The Health Care System stated that the executive leadership team and the board continue to evaluate opportunities to shift this variance between the Health Care System's employee benefits and industry practice.

  • Response Date: March 2013

California State Auditor's Assessment of 1-Year Status: Pending

  • Auditee did not address all aspects of the recommendation

6-Month Agency Response

In its six-month response, the Health Care System stated that in light of current union contracts, it is challenged with balancing nonunion benefits to union benefits to ensure it is able to retain qualified employees and candidates. Nonetheless, the Health Care System indicated that its executive leadership team and the board continue to evaluate opportunities to shift this variance between the Health Care System's employee benefits and industry practice. (See 2013-406, p. 83)

  • Response Date: September 2012

California State Auditor's Assessment of 6-Month Status: Pending


All Recommendations in 2011-113

Agency responses received after June 2013 are posted verbatim.


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