As local hospitals prepare to fight a recently passed Los Angeles ordinance raising the minimum wage they pay their workers to $25 an hour, a 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 June 27 that it has already raised its pay to $23 an hour and plans to increase it to $25 an hour by 2025. And that’s despite the fact that, as a federally qualified health center, AltaMed appears to be exempt from the Los Angeles ordinance, which is set to go into effect next month.
“During the Covid-19 pandemic, our staff have selflessly continued to serve the critical health needs of the communities in which they live, and we are now recognizing them with a living wage increase,” said Castulo de la Rocha, CEO of AltaMed, in the organization’s announcement for an increase in wages. “AltaMed employees are our greatest asset, and they deserve stability in their lives so they can fulfill our mission of providing exceptional care to our patients,” he added.
A sharp increase in wages
AltaMed’s move contrasts with a coalition of local hospitals trying to stop a minimum wage increase in Los Angeles that was passed by the Los Angeles City Council on June 29 and signed by Los Angeles Mayor Eric Garcetti on July 8 .
The wage increase proposal originally came to the Council as a ballot measure from the Service Employees International Union-United Health Workers West, which is trying to get similar measures on municipal ballots across the region as part of a campaign to raise the minimum wage. wage for all health care workers immediately to $25 an hour.
The Oakland-based health care workers union said hospitals can afford the pay increases.
“Hospitals have experienced record pandemic windfalls as workers grapple with staff shortages and an exodus of caregivers to better-paying jobs,” said Dave Regan, president of SEIU-United Healthcare Workers West, in the union’s response to the petition launch for the referendum. “Cedars-Sinai CEO (Thomas Pryselak) made $5.7 million in 2020, but somehow the people who were on the front lines of the pandemic don’t deserve $25 an hour?”
The SEIU initiative sets a minimum wage of $25 an hour for workers in certain private facilities, including hospitals, physician groups, affiliated clinics and nursing facilities. In the city of Los Angeles, this included about 100 health care facilities, from large 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 employ a total of about 20,000 healthcare workers.
Under Los Angeles city election laws on initiatives, the City Council could either place the SEIU measure directly on the ballot or pass it as written; council, at the urging of councilors Curren Price and Marqueece Harris-Dawson, decided to pass the measure and avoid a costly campaign.
The law is due to take effect on August 13; on that date, all healthcare workers in covered facilities must be paid a minimum wage of $25 an hour. This represents a 55% increase in the minimum wage from the current level of $16.04, which went into effect on July 1.
The hospital coalition, led by the Hospital Association of Southern California, a downtown Los Angeles-based industry advocacy organization, took a two-pronged approach to halting the city’s ordinance.
He launched a campaign to sign the measure onto the November ballot as a referendum with the intention of campaigning against it. The coalition must deliver 41,000 signatures to the Los Angeles City Clerk’s office within 30 days of launching the petition. On the date a sufficient number of signatures are verified, the law is suspended; in which case it will likely happen before the law’s Aug. 13 effective date.
And on July 19, the hospital association and three local hospitals filed a lawsuit in U.S. District Court – Central District, alleging the ordinance violates the federal Equal Protection Clause; The suit seeks an immediate suspension and then a permanent injunction. The three hospitals acting as plaintiffs are Barlow Respiratory Hospital, which has facilities in Elysian Park and Van Nuys, PIH Health Good Samaritan Hospital in Los Angeles’ Westlake neighborhood and Providence Holy Cross Medical Center in Mission Hills.
The coalition’s main argument in both the referendum campaign and the lawsuit is that the city ordinance unfairly targets only large private health care providers, leaving the majority of the city’s health care workers uncovered.
“This ordinance is deeply flawed, unfair and discriminatory,” George Green, chief executive of the hospital association, said in an announcement about the referendum effort. “It requires wage increases for only some workers at some facilities, while completely excluding workers doing the exact same job at other suppliers,” he added.
But hospitals also made a financial case, pointing out that the pandemic has put severe strains on many facilities’ finances and that federal pandemic relief has often been too little to deal with repeated waves of Covid hospitalizations.
AltaMed absorption costs
Still, AltaMed executives say they can handle the steep minimum wage increase without making layoffs to offset the budget hit.
De la Rocha told the Business Journal that implementing the wage increases cost between $12 million and $15 million. That includes the increase to $23 an hour that happened on June 26 and future increases to $25 an hour through 2025.
In preliminary information released from its 2020 IRS Form 990 filing, AltaMed reported $871 million in revenue that year; in recent years, that revenue has come from a combination of managed care contract fees, patient fees, and a relatively small amount of government subsidies.
De la Rocha said the money to pay for the minimum wage increase comes from AltaMed’s contribution margin, which is defined as the difference between the selling price of a product or service and the variable costs associated with the manufacturing and selling process.
“Nothing is being cut to increase wages,” he said.