November 4, 2015

Dear
I am writing today to make sure you are aware that because of the actions of the California Hospital
Association your trade association hospitals in the state stand to miss out on nearly $6 billion a
year in state and federal funding, and nearly $30 billion over the next five years. Thats an average
of more than $60 million per hospital if the money were split evenly.
Its highly unlikely that you will hear the full story from the CHA, so we wanted you to know how it
came about:
Eighteen months ago, the CHA and our union, SEIU-UHW, reached a formal agreement identifying
Medi-Cal, and the need to reform it, as the centerpiece of our strategic partnership. The inadequacy
of Medi-Cal is a problem that affects 13 million people in California and virtually every hospital in the
state. California is 49th in the nation in what it pays to health care providers for Medi-Cal. That
means Medi-Cal beneficiaries often cannot get the care they need, when they need it, because
many doctors simply can no longer afford to take on new Medi-Cal patients. By necessity, hospitals
are forced to shift costs to people with employer-based insurance and go through all kinds of
financial gymnastics to deal with the shortfall, including paying billions to a hospital provider fee to
draw down contingent federal funding. Still, despite these efforts, hospitals lose billions annually on
treating Medi-Cal patients. The Medi-Cal problem has been decades in the making, but
unfortunately the CHA has failed to identify a strategy to solve it.
That changed recently when UHW presented a plan to the CHA-UHW Labor Management
Committee that would generate billions of new dollars for hospitals through the Medi-Cal program.
Under this plan, the CHA and UHW jointly submitted an initiative called the Invest in Californias
Children Act, an extension of the Prop 30 temporary tax passed several years ago, which will sunset
in 2019. If passed on November 8, 2016, the Invest in Californias Children Act would raise $10
billion annually to more adequately fund K-12 and higher education, Medi-Cal, and early learning
programs for millions of children. Approximately $3 billion of that would go directly to California
hospitals. Our initiative is principled, good public policy, and absolutely viable for passage one year
from now. Two highly respected pollsters have conducted three separate polls and concluded it has
broad support among likely voters in 2016 and has a high probability of passage.
However, in recent weeks the leadership of the CHA has been actively engaged in attempting to
undermine our ability to achieve Medi-Cal and other unprecedented reforms, thus putting hospitals in

direct danger of losing out on this opportunity. It is mystifying to those of us in

UHW as to why the leadership of the CHA would act in a manner that is contrary to the common
public good and the interests of hospitals themselves.
Two incidents have recently taken place that threaten to undermine adequate Medi-Cal funding for
hospitals.
First, on October 29 three separate ballot initiatives directed at the California hospital industry were
filed with the state Attorney Generals office. The initiatives would restrict hospital executive
compensation to $450,000 a year, limit hospital pricing to no more than 25 percent above the cost of
delivering care, and add new requirements for hospital charity care. Despite misleading
communications by the CHA intended to obscure the source of these initiatives, the three measures
were, in fact, filed by the California Teachers Association (CTA), not UHW. The CTA took this action
to put pressure on Duane Dauner, president and CEO of the CHA, and the CHA officers to abandon
the Invest in Californias Children Act and join forces with them. In fact, it was an empty threat as it
was highly unlikely the CTA would spend millions to actually put the initiatives on the ballot given
how much they need to spend on their version of the Prop
30 tax extension.
Second, on November 2 Dauner participated in a series of meetings, facilitated by Gov. Brown's
office, designed to pressure CHA into reaching a compromise measure that preserved the
Governors and CTAs interests but substantially and unnecessarily compromised CHA's interests.
Within hours, Dauner folded and agreed to a compromise initiative with the CTA that instead of
raising $3 billion a year in revenue for hospitals, raises only $1 billion a year. He also agreed to put
up $25 million of hospital money into the inferior initiative. He did this despite knowing that polling
conducted by the same pollster used by the Governor, Jim Moore, showed that the Invest in
Californias Children Act was extremely popular among virtually all demographic groups, and was far
more popular than the measure submitted by the CTA. Whats more, the Invest in Californias
Children Act, in addition to raising three times more for hospitals than the compromise initiative,
would also raise more money for K-12 education than the CTAs initiative, while providing funding for
the UC and CSU systems, community colleges, and early childhood education. In short, Dauner
failed to stand up for the interests of Californias hospitals and pledged $25 million of your money for
the privilege of giving away $2 billion in hospital revenue annually.
That would be bad enough if it was the only monumental failure of the CHA in recent days but it
wasnt. On October 31 the State of California announced it had reached a conceptual agreement
with the federal Centers for Medicaid and Medicare Services for the states new 1115 Medicaid
waiver totaling $6.2 billion. Given the fact that the previous waiver totaled $10 billion and states such

as Texas recently negotiated waivers as high as $17 billion (with far fewer Medicaid beneficiaries), it
was widely assumed within the federal administration that California would seek something truly
groundbreaking and proportional in magnitude to the size of its Medi-Cal population, by far the
largest in the nation. Unfortunately, despite a mountain of evidence indicating the Obama
Administration was likely to oppose the states approach and reject its application for a waiver
premised on an exclusive public-sector safety net model, the state soldiered on, with the support of
the CHA. The Obama Administration ultimately threw up its hands and approved a wholly
inadequate and small waiver. The refusal by California and the CHA to change their approach left at
least $20 billion on the table over the next five years.
The chart below shows just how much Dauner and the CHA have failed hospitals in California
because they were unwilling to stare down an empty threat from the CTA, play a winning political
hand in Sacramento, or push the state to take a different approach to 1115 waiver negotiations:

Funding
Source
Prop 30
Extension

UHW
Approach
$3
billion/year
$5
1115 Waiver
billion/year

CHA
Approach

$8
billion/year
5-year Total $40 billion

$2.25
billion/year
$11.25 billion

Total

$1 billion/year
$1.25
billion/year

DIFFERENCE: Hospitals lose $28.75 billion over five years

After the CHA and UHW reached our strategic agreement last year, we quickly realized that before
the end of 2016, there were four key opportunities to enact the reform of the Medi-Cal system that
California desperately needs:
1) The 2015 California state budget;
2) The 2016 California state budget;
3) The 1115 waiver negotiations with the federal government, and;
4) A November 2016 ballot initiative.

Because of the failure of Duane Dauner and the CHA to act in the best interests of California
hospitals and 13 million Medi-Cal beneficiaries, all four of those opportunities are likely to be
squandered and California hospitals will lose a major opportunity to fix healthcare financing that
wont come again for the foreseeable future.
As a hospital executive in California, its worth asking why your trade association, despite
representing one of the biggest and most well funded industries in the state, keeps playing get
along-go along politics and keeps losing on major issues, such as failing to stop unfunded seismic
requirements and failing to prevent California from having among the worst Medicaid reimbursement
rates in the country, 49th out of 50 states.
SEIU-UHW intends to move ahead with the Invest in Californias Children Act with or without the
support of the CHA. The measure has been submitted and cannot be withdrawn without UHWs
agreement. We have the ability to put it on the ballot and pass it in November 2016. California is the
most diverse state in our country with, by far, the largest population of Medicaid beneficiaries, over
13 million individuals. A majority of Medi-Cal beneficiaries are children. A super-majority of Medi-Cal
beneficiaries are children and moms. A super-majority of Medi-Cal beneficiaries are people of color,
with the vast majority of these individuals being Latinos. Hospitals and doctors in California want to
be able to fully serve this population without worrying that doing so will blow up their finances, and
we can accomplish that.
We urge you to tell Duane Dauner and the leadership of the CHA that you want them to support the
Invest in Californias Children Act, which does far more to fully fund Medi-Cal, pumps $3 billion
annually in much needed revenue into hospitals, and helps far more people than the watered down,
compromise measure they are now supporting.
Thanks for your interest. Feel free to contact me for more information and Ill keep you up to date as
things unfold.
Sincerely,
Dave Regan, President
SEIU-UHW