BILL ANALYSIS
SB 1661
Page 1
Date of Hearing: June 27, 2006
ASSEMBLY COMMITTEE ON HEALTH
Wilma Chan, Chair
SB 1661 (Cox) - As Amended: April 17, 2006
SENATE VOTE : 30-3
SUBJECT : Health facilities: seismic safety: construction.
SUMMARY : Authorizes an extension of up to an additional two
years for hospitals that have received extensions of the January
1, 2008 seismic safety compliance deadline if specified criteria
are met. Specifically, this bill :
1)Authorizes a hospital that has received an extension of the
January 1, 2008, deadline pursuant to existing law to request
an additional extension of up to two years for a hospital
building that it owns or operations.
2)Authorizes the Office of Statewide Health Planning and
Development (OSHPD) to grant the additional extension if the
hospital building subject to the extension meets all of the
following criteria:
a) The hospital building is under construction at the time
of the request for extension;
b) The hospital building plans were submitted to OSHPD and
were deemed ready for review by OSHPD at least four years
prior to the applicable deadline for the building;
c) The hospital received a building permit at least two
years prior to the applicable deadline for the building;
d) The hospital submitted a construction timeline at least
two years prior to the applicable deadline for the building
demonstrating the hospital's intent to meet the applicable
deadline. Requires the timeline to include all of the
following:
i) The projected construction start date;
ii) The projected construction completion date;
iii) Identification of the contractor; and,
e) The hospital is making reasonable progress toward
meeting the timeline set forth in d) above, but factors
beyond the hospital's control make it impossible for the
hospital to meet the deadline.
3)Authorizes a hospital denied an extension pursuant to this
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bill to appeal the denial to the Hospital Building Safety
Board.
EXISTING LAW :
1)Establishes the Alfred E. Alquist Hospital Facilities Seismic
Safety Act (Act), and its amendments, which require:
a) After January 1, 2008, any general acute care hospital
building that is determined to be a potential risk for
collapse or significant loss of life to only be used for
nonacute care hospital purposes. Authorizes a delay to be
granted by OSHPD upon a demonstration that compliance will
result in a loss of health care capacity.
b) OSHPD to authorize extensions to the deadline described
in a) above, if the hospital agrees that by January 1,
2013, designated services will be provided by moving into
an existing conforming building, relocating to a
newly-built building, or continuing in the retrofitted
building, as specified.
c) No later than January 1, 2030, owners of all acute care
inpatient hospitals to demolish, replace, or change
nonacute care use of all hospital buildings not in
substantial compliance, and to seismically retrofit all
acute care inpatient hospital buildings so that they are in
substantial compliance.
d) Any hospital eligible for an extension described in a)
and b) above to meet the January 1, 2030 deadline.
2)Establishes, with in OSHPD, a Hospital Building Safety Board
to advise the director of OSHPD and act as a board of appeals
in all matters relating to the administration and enforcement
of building standards relating to the design, construction,
alteration, and seismic safety of hospital building projects
submitted to OSHPD.
3)Requires OSHPD to notify the Department of Health Services
(DHS) of the hospital owners that have received a written
notice of violation for failure to comply with either the 2008
requirements or the 2030 requirements. Requires DHS, unless
the hospital places its license in voluntary suspense, to
suspend or refuse to renew the license of a hospital that has
received a notice of violation from OSHPD because of its
failure to comply with either of those requirements.
4)Requires the governing board of each hospital or other
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hospital governing authority, before adopting any plans for
the hospital building, to submit the plans to OSHPD for
approved and to pay accompanying fees.
FISCAL EFFECT : According to the Senate Appropriations
Committee:
Fiscal Impact (in thousands)
Major Provisions 2006-07
2007-08 2008-09 Fund
Additional plan reviews $ 60*
$ 0 $ 0 Special**
*Costs are potentially absorbable.
**Hospital Building Fund, financed by a special
assessment on hospitals.
The costs in this measure result from additional plan reviews
required of OSHPD. OSHPD states that the costs are minor and
absorbable. Currently 250 hospitals have extension requests
pending with OSHPD. The Hospital Building Fund has sufficient
funding to cover the costs of this bill.
COMMENTS :
1)PURPOSE OF THIS BILL . According to the author, this bill
would allow OSHPD to grant an extension to hospitals for up to
two years past the 2013 extension, if the hospital is under
construction on January 1, 2013. The author asserts that
without the extension, the existing general acute care
hospital facility would be required to close because it did
not meet the 2008 standard. The author states that
approximately 975 hospital buildings must meet the 2008
seismic deadline and less than half of the hospitals have
applied and been granted an extension to 2013 based on the
potential that compliance could result in diminished capacity
for the region. The author adds that those hospitals that
have the financial capacity to meet the deadline and have
requested an extension have experienced delays in their
projected construction start date, largely resulting from
review delays, dramatically increasing health care
construction costs in California and limited construction
resources.
2)BACKGROUND . The Act, originally passed in 1973 and updated in
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1983, requires all new hospital construction to meet building
standards specifically designed for hospital buildings. These
standards, however, were not originally applied to hospitals
built before March 1973, except when those existing buildings
undergo major renovations.
Following the 6.7 magnitude Northridge earthquake in January
1994, the Legislature passed and then-Governor Wilson signed
into law SB 1953 (Alquist), Chapter 740, Statutes of 1994.
Hospitals built in accordance with the standards of the Act
resisted the 1994 Northridge earthquake with minimal
structural damage, while several facilities built before the
Act experienced major structural damage and had to be
evacuated. In addition, certain nonstructural components of
the hospitals did incur damage, even in facilities built in
accordance with the structural provisions of the Act.
SB 1953 applies to all existing hospital buildings, and the
provisions and subsequent regulations implementing SB 1953
were developed to address the issues of survivability of both
nonstructural and structural components of hospital buildings
after an earthquake. By January 1, 2008, buildings posing a
significant risk of collapse and a danger to the public must
be brought up to the seismic performance category (SPC) 2 or
be removed from acute care service. By January 1, 2030,
hospital buildings must be in substantial compliance with the
structural provisions of the Act. The public safety benefit
of SB 1953 is to have general acute care hospital buildings
that not only are capable of remaining intact after an
earthquake, but also capable of continued operation and
provision of acute medical care services after an earthquake.
3)REQUESTS FOR DEADLINE EXTENSIONS . As of March 30, 2006,
approximately 450 acute care hospitals were serving patients
in California and of those, 248 had submitted requests, and
201 had received approvals for seismic safety compliance
extensions until 2013. Hospitals have until January 1, 2007
to request an extension. Extensions are permitted under the
following criteria:
a) Upon a demonstration by the hospital owner that
compliance will result in a loss of health care capacity
that may not be provided by other general acute care
hospitals within a reasonable proximity, OSHPD can grant
extensions in one-year increments up to a maximum of five
years after January 1, 2008. This is referred to as
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"diminished capacity" criteria and is authorized in
regulation (Title 24, California Building Codes).
b) For certain categories, if the hospital agrees that on
or before January 1, 2013, designated services will be
provided by moving into an existing conforming building,
relocated to a new building or the existing building will
be retrofitted to designated SPCs. [SB 1801 (Speier),
Chapter 850, Statues of 2002]. This extension option is no
longer available.
c) For specific non-structural requirements, if the
hospital is located in inland areas that are less likely to
incur seismic activity of significant force (Seismic Zone
3). [SB 2006 (Leslie), Chapter 851, Statutes of 2000]
4)STATUS OF COMPLIANCE . Self-reported hospital evaluations
completed in January 2001 indicate that 973 hospital buildings
(37%) posed a significant risk of collapse and a danger to the
public (SPC 1), and therefore must comply with the 2008
deadline or seek a delay until 2013. Another 175 hospital
buildings do not significantly jeopardize life but may not be
repairable or functional following a strong earthquake (SPC
2). These buildings must be brought into compliance with the
Act by January 1, 2030 or be removed from service. In
addition, there are more than 1,400 hospital buildings in the
three remaining structural performance categories (SPC 3, SPC
4 and SPC 5). These buildings are considered capable of
providing services following a strong quake and may be used
without restriction. Because hospitals have until January
2007 to apply for extensions to 2013 and not all hospitals
have applied at this time, the state does not have a clear
picture of the status of compliance. In a recent Senate
budget subcommittee hearing OSHPD and the California Hospital
Association (CHA) were tasked to survey hospitals to get a
better sense of compliance efforts. The results of that
survey are incomplete at this time.
5)OSHPD 2005 REPORT . According to a 2005 OSHPD report,
California's Hospital Seismic Safety Law - Its History,
Implementation and Progress there is $10 billion in hospital
planning and construction under way in California. There are
1,693 projects valued at $4.4 billion under review at OSHPD.
Another 2,651 projects valued at $4.6 billion have received
plan approval and are under construction. Since enactment of
SB 1953, 53 hospitals have constructed new or replacement
buildings. While the new buildings meet the requirements of
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the law, there may be older buildings on the same hospital
campus that may not yet comply.
6)ESTIMATED COST TO COMPLY . The California HealthCare
Foundation commissioned RAND to estimate the compliance costs
of SB 1953 for California hospitals. RAND found that
approximately 50% of California's hospital buildings will need
to be retrofitted, reconstructed or closed over the years
leading to 2030. RAND estimated the total expenditures by
hospitals to be as large as $41.7 billion. However, the
study points out that actual compliance costs may be more like
$3 billion. According to RAND, the average age of the
affected buildings will be between 45 and 49 years, and their
analysis indicates that the approximate lifespan for a
California hospital is 40 to 50 years. The study suggests
that much of the $41.7 billion would be normal hospital
construction and modernization. The study also notes recent
construction trends and financial data from the hospital
industry indicate that such a modernization program for
California hospitals may be unlikely. RAND is conducting
another study to attempt to get a better estimate of actual
compliance costs. The challenge is to determine which costs
are attributable to the seismic requirements versus other
government requirements, modernization, and other costs not
specific to compliance with the Act.
CHA commissioned a January 2006 report prepared by a
construction cost planning firm, Davis Langdon, which
indicates that construction costs for hospitals have increased
66% in three years (between 2003 and 2006) from $330 a square
foot to $550 a square foot. According to the report,
construction costs have risen for all types of construction in
California, but increases in healthcare construction are
significantly higher than other building types, and healthcare
facilities in California have higher costs than in other
states. The report attributes the cost escalation figures to
a variety of factors; most significant among them is the high
demand for construction services across the state and in
neighboring states. Additionally, health care construction
requires specialized contractors who are limited in supply.
The report discusses a perception in the construction
community that regulatory inspection and enforcement disrupt
productivity and increase cost risks to the contractor. In
addition, the schedule of health care projects, because they
are large and complex and involve interface with ongoing
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operations, also creates risks for contractors. The Davis
Langdon report states that while material cost increases have
received much attention, increases in material and labor costs
make up a small portion of the overall cost increase.
7)RELATED LEGISLATION .
a) SB 167 (Speier) would permit delays of the 2008 seismic
safety deadline for specified hospitals that do not exceed
maximum allowable seismic risk, as determined by OSHPD, and
would expedite the final compliance deadline to 2020 for
hospitals granted the delay. SB 167 failed passage in the
Assembly Health Committee last year and was granted
reconsideration. SB 167 is scheduled for a reconsideration
vote in this committee on June 27, 2006.
b) SB 491 (Ducheny) would authorize issuance of bonds in an
unspecified amount for allocation to nonprofit and public
hospitals, and would establish criteria for hospitals that
would be given priority for funding. SB 491 is pending in
the Assembly.
c) SB 1659 (Cox) would authorize OSHPD to permit electronic
submission of seismic construction plans and require OSHPD
to adopt, and the California Building Standards Commission
approve, regulations amending the Mechanical Code to
address ventilation issues in toilet facilities. SB 1659
is also scheduled to be heard in the Assembly Health
Committee on June 27, 2006.
d) AB 1046 (Frommer), which is pending in the Senate Health
Committee, has been amended and contains substantially
similar provisions to AB 1275 (described below).
e) AB 1783 (Nunez) expresses legislative intent that new
financing be developed for nonprofit hospitals
demonstrating financial need and providing significant
levels of care to low-income communities and the uninsured,
for purposes of meeting the requirements of the Act. AB
1783 is pending in the Assembly.
8)PREVIOUS LEGISLATION .
a) AB 1047 (Levine) of 2005 would have authorized the
issuance of bonds in an unspecified amount for allocation
to provide for the construction, replacement, renovation,
and retrofit of currently licensed hospitals. The funds
would have been administered by OSHPD. This bill was held
in the Assembly Appropriations Committee.
b) AB 1275 (Frommer) of 2005 would have authorized the
issuance of bonds in an amount up to $5 billion for
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allocation to nonprofit and public general acute care
hospitals, established circumstances under which seismic
deadlines would be delayed, established broad selection
criteria for determining which hospitals would be eligible,
and the amount of financial assistance that would be
available for individual hospitals under the bill. The
bill was held in the Assembly Appropriations Committee.
c) AB 1673 (Nation and Richman) also introduced in 2005,
would have repealed provisions of the Act that require
specified hospitals to meet seismic retrofitting
requirements by 2008, revised the final 2030 deadline
requirement to 2020, and made the bill contingent upon the
enactment of AB 1672 relating to electronic medical
recordkeeping. The bill failed passage in the Assembly
Health Committee.
9)SUPPORT . According to the CHA, which sponsors this bill,
there are 975 hospital buildings in over 300 hospitals that
must meet the 2008 seismic standard to remain standing in a
major earthquake. The newest building within the SPC 1
category is 33 years old, while the average non-compliant
building is 49 years old. CHA states that retrofitting in
many cases is more expensive then rebuilding when maintaining
access is factored into the cost. According to CHA, hospitals
are facing extreme challenges meeting the deadline. Kaiser
Permante indicates that it is building 14 new seismic
replacement hospitals and has seven new replacement hospitals
in construction with planned opening dates of 2008-2009.
Kaiser hopes to open the other seven by 2013. However, it is
conceivable that a hospital may not make the compliance date
for reasons that cannot be controlled. Current law offers no
flexibility in such a situation, which makes this bill very
important to Kaiser and other hospitals serving Californians.
Sutter Health believes this bill is a common-sense approach to
the problem of hospital seismic safety compliance when the
hospital is making a good faith effort to comply with
deadlines.
10) OPPOSITION UNLESS AMENDED . The California Nurses
Association (CNA) suggests that there is not enough
information available to decide which hospitals, if any, are
deserving of a delay of their seismic safety requirements.
According to CNA, this bill should be amended to delete the
current contents and instead require all of California's acute
care facilities to immediately report to OSHPD the current
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status of their seismic compliance.
11) AMENDMENTS REQUESTED . The Service Employees International
Union (SEIU) has consistently and strongly opposed extensions
of the seismic retrofit deadline but recognizes that hospitals
that are attempting to comply with the law may be unable to
meet that deadline despite their best efforts. SEIU seeks
amendments to assure that hospitals with unsafe buildings make
progress toward complying with the law and as such requests
reporting by those hospitals. SEIU requests the following
amendments:
a) On page 4, lines 38-39, amend as follows:
(d) (2) (A) The hospital building is under construction for
the purpose of compliance with subdivision (a) at the
time of the request for extension under the this
subdivision. The office shall revoke the additional
extension for any hospital building when the work of
construction is suspended or abandoned for a period of
one year or more.
b) On page 5, lines 4-5, amend as follows:
(d)(2)(C) The hospital received a building permit for the
purpose of compliance with subdivision (a) at least two
years prior to the applicable deadline for the building.
c) On page 5, line 19, add a new subdivision (e) as
follows:
(e) The owner of a general acute care hospital building
subject to subdivision (a) shall report annually to the
office, in a form to be determined by the office, on its
progress in complying with the requirements of this
section. At a minimum, the report shall list all of the
following:
(i) each building subject to subdivision (a);
(ii) whether the owner has requested an extension of the
January 1, 2008 deadline or any subsequent deadline;
(iii) whether the request for extension has been granted
by the office;
(iv)the progress made in planning for and undertaking
construction necessary to bring the building into
compliance with subdivision (a), including whether the
hospital has obtained financing, zoning changes or other
publicly known actions indicating an intent to comply
with this section; and
(v) A construction timeline including the projected
construction start date, the projected construction
completion date, and identification of the contractor.
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The first report to the office shall be due no later than
July 1, 2007. The office shall make this information
available on its website on receipt of the information.
(f) (e) A hospital building that is?..
REGISTERED SUPPORT / OPPOSITION :
Support
California Hospital Association (sponsor)
Adventist Health and Loma Linda University Medical Center
California Children's Hospital Association
California Medical Association
City and County of San Francisco
Kaiser Permante
Sutter Health
Opposition
None on file.
Analysis Prepared by : Teri Boughton / HEALTH / (916) 319-2097