SB 525 to Increase Healthcare Workers Minimum Pay

On September 15, the California legislature passed SB 525, a bill that will give more than 400,000 healthcare workers the first $25 per hour minimum wage in the country. Staff in hospitals, skilled nursing facilities, dialysis clinics and community clinics will receive the pay increase.

Governor Gavin Newsom signed the bill into law on October 13.

The SEIU-United Healthcare Workers West, a healthcare justice union of more than 100,000 healthcare workers, patients and healthcare activists celebrated the passage of SB 525. The union calls it "an important step in fixing California's healthcare worker staffing crisis," explaining that, "According to a 2022 survey of healthcare workers, 83% say their department is understaffed. Raising the minimum wage for healthcare workers will help hospital systems attract and retain staff and improve patient care."

"Many of my coworkers are struggling to make ends meet and are leaving for jobs that offer higher pay with fewer health risks. I have personally seen how short staffing hurts patient care," said Jimmie Morris, a respiratory therapist in Manteca. "A $25 minimum wage will keep healthcare workers in their jobs, help recruit new ones to our healthcare system, and improve the quality of care our patients receive."

Meanwhile, hospital administrators are not celebrating.

Craig S. Castro, president and CEO of Community Health System, wrote in a guest commentary in Cal Matters that "SB 525 is another crushing blow for hospitals struggling in the inflation-laden, economic aftermath of COVID-19 without a commensurate increase in Medi-Cal and Medicare reimbursement rates. This is especially true for safety-net hospitals caring for high volumes of patients insured by these government programs.

"Sadly, nothing in the bill will help cover the cost of this new unfunded mandate," he added. "Medi-Cal and Medicare reimbursements lag behind inflation and don't cover the dramatically rising costs of health care labor and supplies. Last year alone, Community Health System incurred a nearly $214 million shortfall in Medi-Cal and Medicare reimbursements even with supplemental reimbursement streams aimed to minimize the strain for hospitals...

"Our state government continues to expand Medi-Cal benefits, enforce unnecessary and antiquated seismic requirements, and now institute a healthcare minimum wage, seemingly without regard for how hospitals will absorb the additional costs."

Kaweah Health is among the many health providers across the state concerned about the effects of the new bill.

"Kaweah Health is disconcerted and disappointed in Governor Newsom's signing of Senate Bill 525 on Friday, October 13, requiring a mandatory $25 minimum wage for all employees of the healthcare sector by 2033 or sooner," said Karen Tellalian, director of marketing and media relations for Kaweah Health. "The unfunded mandate places 100% of the financial burden on healthcare providers and is estimated to increase annual staffing costs at Kaweah Health by $13 million in 2024.

"Without question, Kaweah Health greatly values and appreciates its employees, and while we welcome the opportunity to raise their wages, we would have much preferred a more balanced approach, determined by our self-governing body, focusing on competitive and sustainable compensation, while also investing in professional development, job security, and a positive work environment," she added. "That way, Kaweah Health could have ensured the well-being of both its district hospital and valued staff long into the future."

How the Bill Works

There are four groupings of healthcare facilities, each with their own timeline to reaching the $25 minimum wage:

• Large health systems and hospitals and all dialysis clinics (over 50% of hospital workers are in this group): $25/hour by June 1, 2026;

• Smaller health facilities (40% of hospital workers): $25/hour by June 1, 2028;

• Truly financially distressed facilities (less than 10% of hospital workers): $18/hour on June 1, 2024, then 3.5% increase annually until reaching $25; and

• Community clinics with more than 100,000 workers: $25/hour by June 1, 2027.