Seismic Safety Upgrades May Cost California Hospitals Billions, Increase Number of Hospitals in Financial Distress
Mar 28, 2019
The 1994 Northridge earthquake led to legislation in California — Senate Bill (SB) 1953 — that requires upgrades to hospital buildings to enhance resilience to seismic events. Since the passage of SB 1953, hospitals have been implementing structural and nonstructural upgrades to comply with the standards. The potential costs of SB 1953 have raised significant concerns regarding both the financial burden on hospital systems and the opportunity costs associated with hospitals investing large pools of capital in implementing seismic upgrades.
This report updates previous RAND estimates of the costs to hospitals of future compliance with SB 1953, with a particular focus on the 2030 deadline. In addition to generating direct estimates of the costs of retrofitting or rebuilding noncompliant buildings, the authors assess the affordability of compliance based on recent hospital financial data. Given the challenges of cost and affordability, the authors also present a range of policy alternatives that could be implemented alone or in combination to ease the compliance challenge while building seismic resilience in California hospitals.
Results from quantitative and qualitative analyses indicate that, despite decades of investment in seismic compliance projects, California hospitals still face a financial obligation potentially totaling tens of billions of dollars by 2030. Many hospitals are already experiencing financial stress, and the burden of future compliance is likely to exacerbate this stress. There are options for providing regulatory relief or flexibility to hospitals: public subsidies to share the costs of compliance or reduce financing costs, additional flexibility in compliance deadlines, new standards for what it means for hospitals to remain operational postevent, and streamlined administrative processes. Regardless, addressing long-standing knowledge gaps associated with the benefits and costs of SB 1953 implementation can provide important information to decisionmakers regarding the merits of pursuing future changes in seismic requirements.
Approach to Analysis
SB 1953: Making Decisions for the Next Decade
Estimates of SB 1953 Compliance Costs
Affordability of SB 1953 Compliance for California Hospitals
Learning from Approaches to Seismic Resilience in Other Sectors and Regions
Policy Alternatives for Seismic Resilience
Summary of Findings and Recommendations
Definitions of Hospitals
The Alfred E. Alquist Hospital Seismic Safety Act and Subsequent Policy Changes
History of California Earthquakes