Cost of seismic regulations leaves California hospitals shaking

Seismic regulations requiring California hospitals to conduct billions of dollars' worth of rebuilding, remodeling and retrofitting have shaken the state's health care industry to its foundation.

Doctors and hospital leaders say a health care crisis is brewing in California as hospitals struggle to find ways to meet a 2008 deadline to make facilities strong enough to withstand a major earthquake without collapsing, raising fears that hospitals will be forced to close, and access to care will suffer.

Already, Tenet Healthcare announced in January that it would sell 19 hospitals in California, largely because of the cost of meeting the seismic regulations. Tenet estimated that it would have to pay $1.6 billion for the work on just those facilities.

Physicians such as Marcy Zwelling-Aamot, MD, worry that there won't be enough buyers to take over all of the Tenet hospitals for sale. She also is concerned that other hospitals will be forced to follow Tenet's lead or just plain shut down because of the seismic regulations.

"There are some hospitals that we think will be basically trashed to the ground," said Dr. Zwelling-Aamot, an internist and critical care specialist and president of the Los Angeles County Medical Assn. "They just can't afford it. We have to remember that hospitals are a business. When the costs overwhelm the profit margin, they've got to go under."

The regulations were created with a 1994 law that was passed after the Northridge earthquake in the Los Angeles area. No hospitals collapsed during the quake, but 23 hospitals were taken out of service because their operating systems failed.

Hospitals in other earthquake-prone states don't face the same dilemma, according to their state hospital associations. Oregon has a law requiring hospitals to meet seismic standards, but it hasn't been implemented yet because there is no funding for it. New hospital construction in Washington must be reviewed to meet seismic standards, but there is no law requiring retrofitting of older facilities.

California's law outlined two deadlines. First, all hospitals must meet structural integrity standards by 2008 to survive a major quake. Second, by 2030 they must all have adequate infrastructure to keep operating after a major quake. That means work on mechanical systems, plumbing, heating, technology and more. The law did not include funding to help hospitals meet the requirements.

At the time it was passed, the law had the support of groups such as the California Healthcare Assn., which represents hospitals statewide.

"The policy goal of the law is that every hospital will remain operational after a major quake. It is a laudable goal," said Jan Emerson, spokeswoman for the hospital group. "And we still support the goal."

But times have changed since 1994. Then, Emerson said hospitals weren't losing money like they are now. Also, it was believed at the time that the total cost would be $14 billion. Now, Emerson said, CHA estimates the total costs to hospitals at $24 billion.

She said the hospital group estimates that 40 to 50 hospitals could be forced to close because they can't afford the work. That follows the last decade in which more than 60 hospitals closed statewide.

Brian Johnston, MD, an emergency physician at White Memorial Hospital in Los Angeles, worries that patients ultimately will bear some of the costs because hospitals have no other way to pay for the unfunded mandate. "It's obviously going to have an adverse effect on physicians. But my concern is for patients. Physicians can change their practice or move out of state. But patients live there. They will be at greater risk," said Dr. Johnston, a California Medical Assn. trustee.

The law affects every hospital in the state of California, regardless of whether it is in an area prone to earthquakes. Emerson said there are 470 hospitals in the state, but 2,700 hospital buildings, and the law applies to each building.

In 2001, the state issued an evaluation of each building and determined that 975 were at the greatest risk of collapsing during an earthquake. Those are the buildings that must be retrofitted or rebuilt by 2008, or else they must close to patient care. Emerson said a majority of California hospitals have at least one of those buildings.

Larger hospital chains such as Sutter Health and Kaiser Permanente have developed building plans and said they expected to have the capital necessary to pay for the work. Emerson said the larger hospital systems had the ability to borrow money to pay for the work, but smaller, independent hospitals and rural hospitals had "no place to turn."

Emerson said the issue was becoming urgent as hospitals outline their building plans and realize how much it was going to cost. "Hospitals are very complex buildings to build," she said. "They're second only to nuclear plants. They take time, then you have the government approval processes, which are really backlogged. From a hospital perspective, 2008 is staring down at us face to face."

Emerson said there is no government money available to help hospitals pay for the work. Federal money isn't available because it's a state mandate, and the state can't contribute because of its budget crisis.

In some cases, hospitals can get relief in the form of a deadline extension. But it's good up to only five years.