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SEIU, California Hospitals Will Create $100 Million State Medicaid Fund

THE WALL STREET JOURNAL

Nation's Biggest Health-Care Union and the State's Hospital Industry Will Use Fund to Improve State Medicaid System

The nation's biggest health-care union and the California hospital industry said Tuesday they had reached a multiyear deal to create a $100 million fund to improve a state-run Medicaid system they say falls short on hospital reimbursements.

But after months of public threats and private talks, the Service Employees International Union didn't appear to win one of its biggest demands: access to tens of thousands of hospital workers for an organizing drive.

The SEIU's United Healthcare Workers West local in California had sought access to as many as 60,000 nonunion employees, according to negotiation documents reviewed last week by The Wall Street Journal. On Tuesday, the union said the deal doesn't provide for any access.

The SEIU has been trying to negotiate an agreement for several years in which California hospitals agree to cooperate in part with an organization drive. So-called neutrality agreements are a common tactic in labor. In many such agreements, employers allow access to employees and stand aside during organizing. In turn, unions halt negative public campaigns or back political issues favored by employers.

Business groups say the deals violate labor laws, which prohibit employers from giving a "thing of value" to a union, and courts have been divided on the issue. The U.S. Supreme Court recently heard a challenge to the legality of such deals but dismissed it in December.

Dave Regan, president of the SEIU's United Healthcare Workers West, suggested that the union could gain access to workers at a later date. "This is a three-year agreement. We believe there are different phases," he said.

The hospital association and union said the agreement would include a code of conduct that would bar disparaging comments from either side during union organizing, although hospitals could still suggest to workers they not join the union.

The union and hospitals said they hoped the agreement, which covers hundreds of hospitals and thousands of health-care workers, would serve as a "new national model for how employers and unions can effectively cooperate."

Both groups will contribute to the $100 million fund, though they wouldn't say how much each side will provide. The 150,000-member California local took in about $104 million in dues last year and had $37.8 million in cash as of December, according to government filings. The SEIU has about 1.9 million members nationwide.

As expected, the union also agreed to withdraw support for two ballot measures it was pushing for this fall, including one capping executive pay and another limiting how much hospitals could charge consumers.

The fund will pay for lobbying lawmakers and educating the public, the parties said.

A spokesman for Medi-Cal, which operates the state Medicaid system, declined to comment.

During negotiations, the SEIU and association discussed jointly supporting a ballot initiative to increase Medicaid payments to hospitals by as much as $6 billion a year, according to the documents reviewed by the Journal.

But on a conference call to disclose the final agreement Tuesday, Mr. Regan, said they would work toward a November 2016 ballot measure only if the other efforts fall short.

Not all hospitals in the association are on board with the partnership, though the union and the hospital association wouldn't specify which ones or disclose how many are. "We are not releasing a list of specific hospitals. I can tell you that a majority of the hospital beds in California are included in this agreement," said Jan Emerson-Shea, a spokeswoman for the hospital association.

Some unions and outside groups criticized the agreement.

Jamie Court, president of the nonprofit group Consumer Watchdog, said he supported the ballot initiatives SEIU had been gathering signatures for in recent weeks, in order to qualify them for the November ballot, including one to limit hospital executive pay.

"Suddenly those signatures don't mean anything," Mr. Court said. "It would have been nice to see the hospitals face the voters, rather than deal with a few people in a back room."

Sal Rosselli, president of the National Union of Healthcare Workers, which has run hospital-organizing campaigns against SEIU, said he believed the code of conduct agreement could keep workers from voicing complaints about working conditions.

Write to Melanie Trottman at melanie.trottman@wsj.com and Kris Maher at kris.maher@wsj.com

Corrections & Amplifications
The SEIU and the California hospital industry reached a deal to create a Medicaid fund. Earlier headlines that accompanied this article incorrectly said it was a Medicare fund.