California’s hospitals are on the front lines–operating around-the-clock
emergency rooms and providing critical trauma care to all
patients–regardless of their ability to pay.
But California’s hospitals face an unprecedented state mandate to meet
sweeping new earthquake safety standards–an unfunded requirement so enormous
that it dwarfs the ability of even the most financially sound hospitals to
pay for it.
California’s hospital seismic safety law–SB 1953–was passed by the
Legislature a few months after the Northridge earthquake in 1994. This
measure revised legislation enacted in 1971 following the Sylmar earthquake.
The 1994 law requires every hospital building to comply with two deadlines.
By Jan. 1, 2008 (or no later than Jan. 1, 2013) if an extension has been
granted), every hospital building must meet specific construction standards
established to keep these structures standing after a major earthquake. By
Jan. 1, 2030, the law requires all hospital buildings to comply with
standards intended to keep these buildings operational following a severe
The public policy goal of this law is laudable–hospitals should be able to
provide patient care in the aftermath of a serious earthquake. The problem
comes in funding these capital improvements.
Based on an April 2001 survey by the Office of Statewide Health Planning and
Development (OSHPD), approximately 40 percent of the state’s 2,700 hospital
buildings must either be retrofitted or rebuilt to meet the 2008/2013
construction standards. Those buildings that don’t meet this requirement
must be closed to patient care.
The costs of meeting this unfunded mandate continue to skyrocket. In 2002,
RAND estimated the total cost of compliance could be as high as $41 billion.
Since that time, many factors–including inflation, the limited number of
qualified engineers and contractors, and the soaring costs of building
materials – have pushed those costs up by as much as 20 percent annually.
Since 2001, the estimated costs for hospital construction have doubled-from
$1 million to up to $2 million per bed. Compliance costs are now so high,
previous cost projections are obsolete. Most hospitals in California–even
those with strong finances–cannot afford to sustain up to 20 percent annual
increases in facility construction. And the majority of California hospitals
do not have strong financial bottom-lines.
According to the most recent financial data from OSHPD, 56 percent of
California’s hospitals are operating in the red. More than 70 California
hospitals have closed in the past decade, 10 in the past two years.
In the midst of these difficult times, policymakers and the public
increasingly expect hospitals to invest in new, expensive technologies (such
as those aimed at reducing medical errors and adding electronic medical
records) that will improve the quality of care provided to patients. Again,
these are worthy goals–but hospitals cannot do it all.
Policymakers must prioritize the mandates and expectations being placed upon
hospitals. Is seismically retrofitting every hospital building in
anticipation of an earthquake that may or may not cause serious damage in
the future more important than investments that will begin to immediately
improve quality and access to care?
In answering this question, it should be noted that not one patient has died
from a hospital building failure in 35 years, even though the state has
experienced several major quakes during this time.
SB 167 (Speier, D-Hillsborough), sponsored by the California Hospital
Association (CHA), is one approach for prioritizing expectations on
hospitals. SB 167 would allow buildings deemed to have a lower seismic risk
the option of bypassing the 2008 mandate if the hospital agrees to meet the
more stringent 2030 standard by 2020. SB 167 would result in significant
costs savings while still holding to the worthwhile goal of improving the
seismic safety of the state’s hospital buildings.
Addressing the hospital seismic mandate in a manner that balances public
safety with financial realities will take bold leadership. But the risk of
not acting is greater. Otherwise, the very law intended to keep hospitals
open following a major earthquake may instead force some hospitals to close
by January 1, 2008.