Report Finds Nearly Half of California Hospitals Unprepared to Meet Deadlines for Seismic Safety

Cost of complying with SB1953 could reach $110 billion in current dollars

Thirteen years after the devastating Northridge earthquake, a new analysis shows that almost half of California hospitals will not meet seismic safety standards by a 2013 state deadline, according to a report prepared by the RAND Corporation for the California HealthCare Foundation.

The report, a follow-up to a similar 2002 study, finds that upgrading hospital facilities to meet the deadlines set by a 1994 state law known as SB1953 could total as much as $110 billion. The cost of financing construction upgrades could double the price tag, the RAND report found. The report, “Seismic Safety: Will California's Hospitals Be Ready for the Next Big Quake?,” will be presented today at a legislative briefing in Sacramento.

“Our analysis shows that not only will many hospitals have trouble meeting the near-term deadline, but many may have trouble becoming earthquake safe by the final 2030 deadline,” said Charles Meade, lead author of the report and a senior physical scientist at RAND. “Unfortunately, hospitals face several obstacles that make it difficult for them to comply.”

Firm Deadlines

The California Legislature passed SB1953 in the wake of the 6.7 magnitude Northridge earthquake, which caused an estimated $3 billion in damage to Southern California hospitals and resulted in 12 “red tagged” as unsafe for occupancy. The law established specific deadlines to ensure that hospitals would remain operational following a significant earthquake.

The legislature anticipated that hospitals would meet the state's seismic safety goals in two phases. The most vulnerable buildings — those subject to collapse during an earthquake — were required to undertake safety retrofitting or reconstruction by 2008 (later extended to 2013). All other buildings not compliant with the new standards were required to be rebuilt by 2030.

However, according to an analysis of state data, about half of collapse-hazard hospital structures — classified as Structural Performance Category-1 (SPC-1) buildings — will not meet the 2008/2013 deadlines. Many of those will likely not meet the 2030 deadline either, according to the RAND report. Indeed, based on the amount of infrastructure to re-built and the current pace of construction, it may take more than 30 years for SB1953 to be fully implemented, the RAND researchers found.

Slow Pace of Compliance

It is difficult to determine how much progress hospitals have made retrofitting or replacing SPC-1 structures, the report finds. The State Office of Hospital Planning and Development (OSHPD) has limited data about the scale and purpose of hospital construction projects. In addition, there is no guarantee that planned projects under OSHPD review will be completed, because in some cases the required funds may be unavailable.

OSHPD also intends to use new seismic risk analysis software, called HAZUS, developed by the Federal Emergency Management Agency and the National Institute of Building Sciences, to re-assess the risk of earthquake damage to individual buildings. This could result in a re-classification of a number of facilities to a lower-risk category.

Bigger, Costlier Facilities

Hospitals are among the most expensive infrastructure projects. In California, the finished cost of a fully furnished and equipped new hospital building is about $1,000 per square foot – more than three times that of a new office building.

Recent trends also suggest that hospitals are replacing old structures with new buildings that are 35% to 60% larger, yet designed to handle the same number of patients. In part, this is due to consumer preference for private rooms, as well as larger spaces to accommodate sophisticated diagnostic imaging services, surgery, and postpartum and neonatal care. Since 2001, hospital construction costs in the state have almost doubled, driven by a number of factors.

Few Options to Recoup Costs

According to OSHPD data, in 2004 the average “cost per adjusted patient day” — an industry term that refers to the cost to provide a day of inpatient acute care with an adjustment to take outpatient care into account — among California hospitals was $1,980. The report estimates those costs could rise as much as $950 because of construction costs triggered by the seismic safety standards.

“Hospitals will be required to pay $1,000 a square foot to replace infrastructure that nets around $40 per square foot per year,” said David O'Neill, senior program officer at CHCF. “Many hospitals are operating below or very close to break even. For them, it will be difficult, if not impossible, to finance new construction with revenue from health care operations.”

Los Angeles and Bay Area Particularly Vulnerable

The report finds that nearly half (47%) of California hospital floor space in need of retrofitting is in buildings that are considered vulnerable to collapse during a major earthquake, with the vast majority (nearly 80%) in heavily populated greater Los Angeles and the Bay Area.

According to the U.S. Geological Survey, there is an 80% probability of an earthquake with 7.0 or greater magnitude striking the Los Angeles area by 2030. In the San Francisco Bay Area, the likelihood of a similar-magnitude earthquake by 2030 is 62%.

Difficult Policy Choices

The RAND issue brief outlines three potential options for policymakers in fully implementing SB1953:

• Push ahead with implementation of SB1953. This could lead to substantial problems, as the state would be forced to close large numbers of noncompliant hospitals.
• Modify or eliminate SB1953's requirements so most facilities can comply. This approach raises the question of policy fairness, given that a significant number of California hospitals have already made a large investment to comply with the original law, and the issue of seismic vulnerability would remain mostly unaddressed.
• Provide public financing for hospitals unable or unwilling to comply with SB1953. Hospitals are critical public facilities and there is a history of state funding for seismic strengthening of public infrastructure. However, this approach would also raise fairness questions among hospitals that have already invested in SB1953 compliance.

“Ultimately, patients, employers and taxpayers will pay for the cost of new hospital buildings,” said CHCF's O'Neill. “And the high cost of earthquake disaster mitigation may force some hospitals to close, reducing vital access to services in some communities.”

The issue brief, fact sheet and full report are available at www.chcf.org.