How state laws designed to make hospitals earthquake proof are threatening services, forging mergers and jerking costs of care.
As a 2013 deadline looms for meeting the first set of standards of seismic compliance, hundreds of California hospitals ordered to retrofit their buildings are pleading for extensions. The majority of them are facing a lending crunch during the unyielding recession: How will they possibly secure billions in funding needed to get their buildings up to code by 2020?
Code compliance has basically become a sink-or-swim scenario for medical providers that must either conform or risk losing acute care in buildings they fail to upgrade. That threat has prompted public policy observers and industry leaders to condemn the mandate as a huge mess created by naive lawmakers who enacted Senate bill 1953 in 1994 following the Northridge earthquake. It is clear now to the public that those lawmakers failed to consider how much it would cost to make these centers safer than safe, despite the fact most medical buildings have survived past earthquakes without a loss of life.
The scope of a retrofit covers a wide and complex range of hospital features from securing a foundation and walls that might crumble to installing stronger beams to improving plumbing and wiring and securing any precarious objects that might fall when a building shakes. While not part of the mandate, hospitals are using the opportunity of rebuilding to address energy consumption issues in their building envelopes (roofs, walls and insulation) and all systems such as air conditioning, heating, and the timely replacement of energy-hogging equipment.
Some hospitals are taking the effort to also achieve one of the LEED certification standards in overall ecologically friendly design in the performance and reconstruction of their buildings. LEED as it applies to hospital buildings has its own set of challenges. Hospitals use a tremendous amount of energy to operate daily and California architects recognize that even adding solar panels to parking structures will help to make a small dent in the overall consumption. It also sends a message to the community that they are conscious of their own energy consumption.
While embracing the green alternative energy with open arms, teams responsible for moving quickly to secure their walls and foundations are being bogged down with stringent fire safety codes requiring compliance of facilities which are already non- combustible. This also works to complicate an already stressed facility system for hospitals. Architects, designers and project managers complain of being inundated with unreasonable and redundant safety measures all at once, making it even more expensive and convoluted as they strive to do their jobs in providing retrofitted structures for patients and staff.
The largest obstacle, though, is not innovating a master plan to comply with the codes but obtaining the astronomical funding needed to rebuild. The timing couldn’t be worse as CFO’s go begging for money during the recession when already skittish lenders are expected to step forward and do what the state is refusing to do: Finance enormous retrofit projects while incurring an approximate 3% annual escalation rate while awaiting approvals from an already taxed regulatory process.
El Centro Regional Medical Center, one of thousands in the planning stages of compliance with state mandate
The Office of Statewide Health Planning and Development (OSHPD) – which oversees the construction and planning for the hospitals – is said to be short staffed and flooded with plans and taking a year or longer to issue permits for hospitals to actually begin work.
“If the entire project runs $100 million and inflation escalates at 3% per year, then a year of delay by the state regulatory commission is costing $3 million, and that is money that could save lives,” insists Steve Henry Nielsen, architect and project manager on one such project in the planning stages at the El Centro Regional Medical Center near San Diego.
Like many hospitals, this one is choosing a a re-design of each of its non-conforming buildings over shutting down and starting over. And while it is able to meet the 2013 deadline by submitting its master plans and drawings for its central utility plant, the architect argues it is costing taxpayers too much to make changes based on theoretical fears.
“Are we going to lose more lives from people not affording health care due to the rising costs from these upgrades or from buildings falling down on them?” wonders Nielsen, who adds it all boils down to a fear factor in the country which has given rise to excessively stringent building codes. “We’re spending billions statewide – Loma Linda Hospital is estimating $800 million alone for its upgrades – for an added percentile of safety we will never utilize; an added percentile costing a real premium.”
Larger hospitals in Los Angeles and the Bay Area are being hit even harder by the high costs of healthcare infrastructure construction than their rural counterparts which tend to be one-story buildings in valleys at a low earthquake risk. According to the Rand Corporation, the finished cost of a newly furnished and equipped hospital is about $1,000 per square-foot, more than three times the cost of building a new office tower.
Lenders seem to favor the larger hospitals as sure bets when financing these projects, according to outspoken critic Wanda Jones, who runs a San Francisco consulting firm, The New Century Healthcare Institute which educates the public and the industry on healthcare policy issues.
“The recession is causing a downturn in hospital demand as workers lose their co-pay or insurance and lenders aren’t interested in loaning to places with 50% occupancy,” she stresses, “And at the same time the state won’t provide lending or grants. These lawmakers who passed this are just so ignorant in their hubris of not knowing anything about interest rates. They thought this was merely a matter of retrofitting buildings but you can’t retrofit when you have patients with all of the dust and noise and shutting down proves untenable.”
Jones adds that lawmakers originally estimated the cost of the bill would reach $24 million for retrofitting only, clarifying the state would foot the bill for anything over that amount.
“We now have a majority of urban and suburban hospitals choosing to do replacement down to the foundations and re-designing their operating systems, but only one, St. Johns Hospital in Santa Monica has shut down and reopened so far,” she says. “The actual cost of the bill has been estimated at $400 billion and escalate that by inflation and you see why a lot of smaller hospitals won’t be able to get the funding.”
El Camino Hospital, $200 million seismic facelift
As an example of one of the behemoths that has persevered, Jones credits El Camino Hospital of Mountain View, California which not only retrofitted from the ground up to meet seismic upgrade building codes but also introduced construction innovations, improved its department by department efficiency as well as patient flow, emerging as the most technologically advanced hospital in the country, according to Jones.
Unlike most large hospitals, El Camino had the land to allow project officer Ken King to erect the new building between the old ones and then slowly phase out the outmoded units.
However, the norm affects hospitals without enough real estate to even adequately address their own current parking problems. The result has been a pattern of shotgun mergers in which some of the smaller hospitals join forces. This partnering mollifies the impact of the current climate of rising inflation and a Medicare crisis in the reimbursement for services.
“We had 450 hospitals in the state in the 1980’s and now we have 388 and we aren’t done yet,” says Jones. “The upside is we might end up with a higher quality hospital in the case of an old one from the 60s merging with a more modern building, but the downside is that as a rule, new hospitals are not being built in California.”
The mergers could mean patients are driving farther for care, but Jones says California is a state where the population is used to driving one hour for dinner and that people in the outlying towns near Bakersfield are now driving to the larger city hospital because they can secure good care. As a result, she argues the state should revisit opening more emergency and urgent care facilities as it once had before larger hospitals lobbied to close and absorb them.
While some lawmakers have openly expressed regret about signing off on the 1994 bill prior to fully understanding the scope of the work, most realize there is no turning back now that many entities have already invested millions on compliance while others have spent thousands of man hours in planning sessions to simply get the ball rolling.
In the meantime, at least OSHPD has been “malleable” in granting deadline extensions to those demonstrating progress, according to Nielsen, and the agency admits acute care hospitals that must comply by 2013 may encounter unforeseen delays beyond their control.
But one of the benefits of all of this is the construction provides an opportunity for hospitals to upgrade all of their systems from an ecological perspective. This includes insulating exterior walls and roofs, and upgrading all equipment to being more energy efficient. For instance, new imaging equipment can be up to 40% more energy efficient than the same equipment ten years ago. Also, all standard building utilities such as air conditioning, heating, hot water and electrical management can conform to current energy strategies as well.
Among the hospitals seizing the chance to go greener is El Centro Regional Medical Center which is looking at co-generation to become more energy efficient in its new services for the hospital. “If a building is down, you are not going to build it to previous energy strategies,” observes Nielsen. “You are naturally going to embrace the current technological knowledge that is out there.”
Still, once hospitals are ready to begin construction and move ahead on such beneficial improvements, they are getting mired in bureaucratic red tape resulting from over-taxed regulators. OSHPD must review all of these plans and refuses to take the sole blame for the growing backlog for permit approval.
“These delays could range from contractor issues to local ordinance requirements,” explains David Byrne, Information Officer of OSHPD. As far as the agency’s own delays in approving plans, Byrne says the responsibility for the hold up can be widely distributed among hospitals, their design team and regulatory agencies.
“Hospital buildings are some of the most complex buildings in the state requiring the highest level of building standards, codes and regulations and the review is a collaboration process between the architects and engineers designing the facility and OSHPD,” Byrne says. “The number of back checks and the amount of time the designers have the plans before resubmitting plans for back check can have a substantial impact on the overall duration of a project from first submittable to approval. On average, plans are with OSHPD less than 50% of the time.”
Counter to this, Nielsen is of the opinion that OSHPD is generally checking for things that aren’t going to matter if a theoretical earthquake ever hits.