As local hospitals are gearing up to fight a recently enacted Los Angeles ordinance to raise the minimum wage they pay their workers to $25 an hour, one local health clinic operator has embraced the wage increase.
City of Commerce-based AltaMed Health Services Corp., which operates a network of 46 health clinics in underserved communities in Los Angeles and Orange counties, announced on June 27 that it had already raised its wage to $23 an hour and plans to increase it to $25 an hour by 2025. And this despite the fact that as a federally qualified health center AltaMed appears to be exempt from the Los Angeles ordinance set to take effect next month.
“Throughout the Covid-19 pandemic, our staff selflessly continued to serve the critical health needs of the communities where they live and now we are recognizing them with a living wage increase,” Cástulo de la Rocha, AltaMed’s chief executive, said in the organization’s announcement of the wage hike. “AltaMed employees are our greatest asset, and they deserve stability in their lives so that they can fulfill our mission to provide exceptional care to our patients,” he added.
Steep wage rise
AltaMed’s move stands in contrast to a coalition of local hospitals that is trying to halt the Los Angeles minimum wage increase, which was passed by the Los Angeles City Council on June 29 and signed into law by Los Angeles Mayor Eric Garcetti on July 8.
The wage-hike proposal initially came before the Council as a ballot measure from the Service Employees International Union – United Healthcare Workers West, which has been attempting to place similar measures on municipal ballots throughout the region as part of a campaign to raise the minimum wage. for all health care workers immediately to $25 an hour.
The Oakland-based health care workers’ union has said hospitals can afford the wage increase.
“Hospitals have experienced record pandemic windfalls, while workers struggle with staff shortages and an exodus of caregivers to better-paying jobs,” Dave Regan, president of SEIU-United Healthcare Workers West, said in the union’s response to the referendum petition launch. “The CEO of Cedars-Sinai (Thomas Priselac) made $5.7 million in 2020 but somehow the people who have been on the frontlines of the pandemic don’t deserve $25 an hour?”
The SEIU initiative set a $25 per hour minimum wage for workers at certain privately owned facilities including hospitals, doctor groups, affiliated clinics, and nursing facilities. In the city of Los Angeles, that included about 100 health care facilities, from major hospital campuses such as Kaiser Permanente Los Angeles in East Hollywood and Cedars-Sinai Medical Center in Beverly Grove to dozens of dialysis centers. These facilities cumulatively employ roughly 20,000 health care workers.
Under Los Angeles city election laws regarding initiatives, the city council could either have placed the SEIU measure directly on the ballot or passed it as written; the council, at the urging of Councilmen Curren Price and Marqueece Harris-Dawson, decided to pass the measure and avoid a costly campaign.
The law is set to take effect on Aug. 13; on that date, all health care workers at the covered facilities must be paid a minimum wage of $25 an hour. That represents a 55% increase in the minimum wage over the current $16.04 level that took effect on July 1.
The hospital coalition, led by the Hospital Association of Southern California, a downtown Los Angeles-based industry advocacy organization, has taken a two-pronged approach to stopping the city ordinance.
It launched a petition drive to place the measure on the November ballot as a referendum with the intent to campaign against it. The coalition must submit 41,000 signatures to the Los Angeles City Clerk’s office within 30 days after the petition launch. On the date that a sufficient number of signatures are verified, the law is halted; in this case, that would likely take place before the Aug. 13 effective date of the law.
And on July 19, the hospital association and three local hospitals filed a lawsuit in US District Court – Central District, alleging that the ordinance violates the federal equal protection clause; the suit seeks an immediate stay and then a permanent injunction. The three hospital facilities acting as plaintiffs are Barlow Respiratory Hospital, which has facilities in Elysian Park and Van Nuys, PIH Health Good Samaritan Hospital in LA’s Westlake district and Providence Holy Cross Medical Center in Mission Hills.
The coalition’s main argument in both the referendum drive and the lawsuit is that the city ordinance unfairly targets only large-scale privately-run health care providers, leaving the bulk of health care workers in the city uncovered.
“This ordinance is deeply flawed, inequitable, and discriminatory,” George Greene, the hospital association’s chief executive, said in the announcement of the referendum effort. “It requires pay increases for only some workers at some facilities, while completely excluding workers doing the exact same jobs at other providers,” he added.
But hospitals have also made a financial argument, pointing out that the pandemic placed severe strains on the finances of many facilities and that federal pandemic relief was often too little to handle the repeated waves of Covid hospitalizations.
AltaMed absorbing costs
Yet AltaMed executives say they can handle the steep minimum wage hike without making any cuts to offset the budget hit.
De la Rocha told the Business Journal that the wage hike is costing between $12 million and $15 million to implement. That includes the hike to $23 an hour that took place on June 26 and the future increases to reach $25 an hour by 2025.
In preliminary information released from its IRS Form 990 filing covering the year 2020, AltaMed reported $871 million in revenue that year; in past years, that revenue has come from a mix of managed care contract fees, patient fees and a relatively small amount of government grants.
De la Rocha said the money to pay for the minimum wage increase is coming from AltaMed’s contribution margin, which is defined as the difference between the sale price of a product or service and the variable costs associated with its production and sales process.
“Nothing is being cut to increase wages,” he said.