BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: SB 499
S
AUTHOR: Ducheny
B
AMENDED: September 4, 2009
HEARING DATE: September 10, 2009
4
CONSULTANT:
9
Hansel/sh
9
PURSUANT TO SENATE RULE 29.10
SUBJECT
Hospitals: seismic safety
SUMMARY
Allows hospitals that sought, but did not receive, seismic
reclassifications to qualify for a current up-to-two year
extension that is available to hospital buildings that have
filed building plans, submitted a construction timeline,
and are under construction.
Moves up the deadline for reports that hospitals with SPC-1
buildings must file with the Office of Statewide Health
Planning and Development (OSHPD), from June 30, 2011 to
November 1, 2010, and requires hospitals to file annual
updates to the reports. Requires hospitals to include
additional information in the reports concerning buildings
they intend to retrofit, replace, or remove from acute care
service. Subjects hospitals that do not submit reports as
required to fines, as specified.
Authorizes OSHPD, until January 1, 2013, to utilize
computer modeling, as specified, for purposes of
determining the structural performance category of general
acute care hospital buildings. Provides that OSHPDs
submissions to the California Building Standards Commission
Continued---
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 2
related to this authority, or for the purposes of
implementing conforming changes in nonstructural
performance categories, shall be deemed to be emergency
regulations.
CHANGES TO EXISTING LAW
Existing law:
Requires OSHPD to review and approve all plans relating to
construction, additions to, reconstruction, or alteration
of, hospital buildings, as defined.
Establishes timelines for hospital compliance with seismic
safety standards:
By January 1, 2008, buildings posing a significant risk
of collapse and a danger to the public must be rebuilt or
retrofitted to be capable of withstanding an earthquake,
or be removed from acute care service; and
By January 1, 2030, hospital buildings must be capable of
remaining intact after an earthquake, and must also be
capable of continued operation and provision of acute
care medical services, or else be changed to non-acute
care use.
Allows OSHPD to grant delays of up to five years beyond the
2008 deadline under certain circumstances, including upon a
demonstration 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.
Authorizes an extension of up to an additional two years
beyond this for hospitals that have already received
extensions of the January 1, 2008, seismic safety
compliance deadline, if specified criteria are met,
including that the hospital building is under construction
at the time of the request for extension, and that the
hospital submitted a construction timeline at least two
years prior to the applicable deadline and is making
reasonable progress toward meeting the deadline, but
factors beyond the hospital's control make it impossible
for the hospital to meet the deadline.
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 3
Additionally, permits a hospital owner, in lieu of
retrofitting or rebuilding hospital buildings at risk of
collapse by 2013, to instead replace them by January 1,
2020, if the hospital owner meets several conditions and
OSHPD certifies that the hospital owner lacks the financial
capacity to meet seismic standards, as defined.
Requires an owner of a general acute care hospital building
that is classified as a nonconforming Structural
Performance Category-1 (SPC-1) building (defined in
regulations as a building that is at risk of collapse in an
earthquake) who has not requested an extension of the 2008
deadline, to submit a report to OSHPD no later than April
15, 2007, describing the status of each building in
complying with the deadline.
Requires owners of general acute care hospital buildings
classified as nonconforming SPC-1 buildings who have
requested an extension of the 2008 deadline to submit
similar reports by June 30, 2009, and June 30, 2011.
Allows OSHPD to enter into an agreement with a hospital
governing authority for the phased submittal and approval
of its hospital construction plans.
Existing regulations:
Allow hospital buildings classified as SPC-1 buildings that
have received an extension of the 2008 compliance deadline
to be reassessed to SPC-2 status (buildings that may be
able to withstand an earthquake but may not be operational
following an earthquake) on the basis of a collapse
probability assessment, using the Multi-Hazard Loss
Estimation Methodology, Earthquake Module (HAZUS) developed
by the Federal Emergency Management Agency (FEMA), as
specified.
This bill:
Authorizes OSHPD, until January 1, 2013, to utilize
computer modeling based on HAZUS for purposes of
determining the structural performance category of general
acute care hospital buildings. Provides that OSHPDs
submissions to the California Building Standards Commission
related to this authority, or for the purposes of
implementing conforming changes in nonstructural
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 4
performance categories, shall be deemed to be emergency
regulations.
Reopens the window for hospitals to qualify for the current
up-to-two year extension that is available to hospital
buildings that have filed building plans, submitted a
construction timeline, and are under construction. This
new option would be available for hospitals that sought,
but did not receive reclassifications of their seismic
status under HAZUS. Specifically, the bill would allow
OSHPD to grant the up to-two-year extension if the hospital
building meets the following criteria:
The owner submitted to OSHPD, prior to June 30, 2009, a
request for review of the building's SPC-1 status using
HAZUS;
The building plans were submitted to OSHPD and deemed
ready for review prior to July 1, 2010;
The hospital receives a building permit for construction
and submits a construction timetable demonstrating the
hospital's intent and ability to meet the applicable
deadline prior to January 1, 2012;
The hospital building is under construction at the time
of the request for the extension and the hospital is
making reasonable progress toward meeting the
construction timeline; and
The hospital completes construction such that the
hospital meets all criteria to be issued a certificate of
occupancy by the applicable deadline for the building.
Makes several changes to the reports hospitals with SPC-1
buildings must file by June 30, 2011 with OSHPD on the
status of compliance with seismic deadlines, including:
Moves the deadline for the reports up to November 1,
2010. Additionally requires hospitals to file annual
updates to the reports;
For buildings the owner intends to retrofit or replace,
requires the reports to document the structural
classification category level the owner intends to meet
through the retrofit or replacement, the deadline the
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 5
owner intends to meet for the retrofit or replacement,
the most recent project status and approvals, the number
of inpatient beds and patient days, by type of unit and
service to be provided;
For buildings to be removed from acute care service,
requires the report to document the projected date or
dates the building will be removed from service, the
planned uses of the building or buildings to be removed
from service, the number of inpatient beds and patient
days, by type of unit and service for the years 2008,
2009, and 2010, whether the acute care services and beds
will be relocated to a new or retrofitted building, any
net change in the number of inpatient beds, by type of
unit and service;
Requires hospital owners subject to the reporting
requirements to report the final configuration of all
buildings on the campus, how each building will meet
SPC-5 requirements and the types of services that will be
provided in each building;
Requires OSHPD to make reporting information available on
its website within 120 days of receipt of the
information; and
Subjects hospitals that do not submit a report to a fine
of $10 per bed per day, up to a maximum fine of $1,000
per day, for each SPC-1 building subject to reporting
requirements, until they have complied with the reporting
requirements.
Contains contingency language to avoid chaptering out
problems with AB 523 (Huffman), currently in enrollment,
which provides a specific extension for Marin General
Hospital.
FISCAL IMPACT
According to the Assembly Appropriations Committee analysis
of SB 499:
1. Absorbable workload to OSHPD to review additional
hospitals for eligibility for the current two-year
extension provided under SB 1661. This is based on an
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 6
assumption that approximately 120 buildings qualify for the
extension.
2. Current law and regulations require OSHPD to levy a
user fee of up to 2 percent of a hospital project's
estimated construction costs to support the workload of
review and technical assistance. The current fee is 1.64
percent of construction costs and is deposited in the
Hospital Building Fund. Assuming an average construction
cost of $20 million for the 120 buildings that qualify for
an extension, approximately $40 million in special funds
will be generated to cover OSHPDs costs over the life of
the projects.
3. Additional unknown revenues into the Hospital Building
Fund, to the extent hospitals pay penalties for failure to
report of $10 per licensed bed up to $1,000 per day per
SPC-1 building.
BACKGROUND AND DISCUSSION
According to the author, SB 499 represents a compromise
short-term approach to assisting hospitals in meeting
pending seismic construction deadlines which was initiated
with the introduction of SB 289 (Ducheny) earlier this
year, and which sought to address the impact of the global
recession on hospitals' access to capital and the slow pace
of hospital seismic improvements. The author states that
it is important for the state to continue it's monitoring
of hospitals' status, and to assist with moving as many as
possible along the path to compliance, while addressing the
very real barriers that hospitals face.
While SB 499 does not change any of the seismic deadlines
in current law, it does contain important provisions,
including requiring more comprehensive data regarding
complance to be reported to the state and shifting forward
to November, 2010 the state's receipt of that data,
providing an expedited process for OHSPD to make
adjustments to its method for assessing seismic risk, and
creating an opportunity for hospitals that applied for but
did not receive a HAZUS reclassification to qualify for the
up-to-two year extension under SB 1661. The author states
that it is her intent to continue to work with stakeholders
on a longer term strategy to ensure that hospital seismic
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 7
compliance deadlines are met without disrupting needed
hospital services.
Hospital Seismic Safety Requirements
In response to 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), establishing seismic standards for
hospital buildings as well as deadlines for compliance with
those standards. Under SB 1953, by January 1, 2008,
buildings posing a significant risk of collapse and a
danger to the public must be rebuilt or retrofitted to be
capable of withstanding an earthquake, or be removed from
acute care service. By January 1, 2030, hospital buildings
must be capable of remaining intact after an earthquake,
and must also be capable of continued operation and
provision of acute care medical services, or else be
changed to non-acute care use.
OSHPD has currently classified 875 (32 percent) of
California's hospital buildings as Structural Performance
Category-1 (SPC-1) buildings, meaning that they are at risk
for collapse in an earthquake. These buildings must be
retrofitted, replaced, or removed from acute care services
by January 1, 2008 (or 2013 if they receive extensions).
Another 288 buildings (roughly 11 percent) are categorized
as SPC-2 buildings, meaning that they are not at risk of
collapse, but may not be reparable or functional following
a strong quake. These buildings must be brought into
compliance with the requirements of SB 1953 by 2030 or be
removed from acute care service. Finally, over 1,560
buildings (57 percent) are categorized as SPC-3, SPC- 4,
and SPC- 5 buildings, meaning that they are considered
capable of providing services following a strong quake and
may be used without restriction beyond 2030.
Extensions permitted under existing law
Current law allows an extension of the 2008 deadline if
compliance will result in an interruption of health care
services provided by hospitals within the area. Hospital
owners can request extensions in one-year increments up to
a maximum of five years after January 1, 2008. Hospitals
may also request extensions of up to five years if acute
care services will be moved to an existing conforming
building, relocated to a new building, or if the existing
building will be retrofitted to designated seismic
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 8
performance categories. Virtually all SPC-1 buildings that
have requested these extensions have been granted them.
SB 1661 (Cox, Chapter 679, Statues of 2006) authorizes an
extension of up to an additional two years for hospitals
that have already received extensions of the January 1,
2008 seismic safety compliance deadline if specified
criteria are met, including that the hospital building is
under construction at the time of the request for extension
and the hospital is making reasonable progress toward
meeting its deadline, but factors beyond the hospital's
control make it impossible for the hospital to meet the
deadline.
To be eligible for this extension, hospitals must meet
several interim deadlines, including submitting building
plans by December 31, 2008, and securing a building permit
and submitting a construction timetable by December 31,
2010.
In addition, SB 306 (Ducheny) of 2007-2008 permits a
hospital owner to comply with seismic safety deadlines and
requirements in current law by replacing its buildings
subject to seismic retrofit by January 1, 2020, rather than
retrofitting by 2013, and then replacing them by 2030, if
the hospital meets several conditions and OSHPD certifies
that the hospital owner lacks the financial capacity to
meet seismic standards, as defined. Among the conditions a
hospital must meet to be eligible for this extension are
that it maintains a contract to provide Medi-Cal services,
maintains a basic emergency room, and is either in an
underserved area, serves an underserved community, is an
essential provider of Medi-Cal services, or is a heavy
provider of services to Medi-Cal and indigent patients.
Twenty-seven hospitals have qualified for extensions to
2020 under this authority.
Reclassification of hospital buildings
In May 2006, the Hospital Safety Board authorized OSHPD to
reevaluate the seismic risk of SPC-1 buildings utilizing a
more up-to-date seismic risk analysis tool, known as HAZUS.
Under this authority, OSHPD is reclassifying SPC-1
buildings to SPC-2 status if they are found to have a small
(.75 percent) probability of collapse. To date, requests
for reclassification have been submitted for 550 SPC-1
buildings. Of the 294 hospital buildings that have been
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 9
reassessed under HAZUS, about 205 (70 percent) have been
reclassified to SPC-2 status. Another 256 buildings are
awaiting review.
According to OSHPD, of the requests for reclassification
under HAZUS, 239 have been for hospital buildings that have
not submitted building plans to OSHPD, which is required in
order to qualify for the SB 1661 extension. OSHPD assumes
roughly half of these will succeed in getting reclassified,
leaving the remainder as potentially eligible to apply for
the SB 1661 extensions under SB 499.
OSHPD estimates that relatively few buildings, perhaps six
to eight, will qualify for reclassification to SPC-2 status
under the provisions of SB 499 allowing OSHPD to submit
revisions to HAZUS using emergency regulation authority.
Current status of compliance
According to OSHPD, 63 percent of hospitals have one or
more SPC-1 buildings, most of which must be retrofitted,
rebuilt, or removed from service by 2013. SB 1661 (Cox)
requires these hospitals to report the status of their
compliance efforts by June 30, 2009 and June 30, 2011,
including projected construction start dates and completion
dates. According to data compiled by OSHPD from the most
recent reports, hospitals are only on track to meet
existing seismic deadlines for about 40 percent of all
SPC-1 buildings. A large number of hospitals reported to
OSHPD that they intend to meet seismic deadlines after
2020, well beyond the deadline that applies to most of
these buildings. Ninety-one hospitals indicated no
timeline for compliance.
Cost of seismic compliance
A 2002 RAND study estimated that California hospitals would
be required to spend up to $41.7 billion to meet SB 1953
standards. The study found that all but $3 billion of that
total would be of expenditures required to upgrade and
modernize facilities regardless of the state's seismic
requirements. According to RAND, the average age of the
noncompliant buildings will be between 45 and 49 years in
2008, while the approximate lifespan for a California
hospital is 40 to 50 years. A more recent study by RAND in
January 2007 found that, based on building permit data,
about half of the existing SPC-1 buildings are not likely
to meet the 2008 and 2013 deadlines. The study also noted
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 10
that hospital construction costs have almost doubled since
2001, driven by a limited number of qualified contractors,
competition for labor and materials from other types of
commercial construction, and inflation.
According to a survey commissioned by the California
Hospital Association in July, 2009, 64 percent of
California hospitals indicate they will not be able to
secure the capital necessary to comply with the hospital
seismic deadlines. According to the survey, 28 percent of
hospitals have seen interest expenses increase in the first
quarter of 2009 and many have been frozen out of the credit
markets entirely.
Risk of future earthquakes
According to a report issued in 2008 by the U.S. Geological
Survey, the California Geological Survey, and the Southern
California Earthquake Center, California has a 99 percent
chance of having a magnitude 6.7 or greater earthquake
within the next 30 years. The probability of an earthquake
with magnitude of 6.7 or greater occurring over the next 30
years in the greater Los Angeles area is 67 percent. In
the San Francisco Bay Area, the probability of such an
earthquake occurring is 63 percent. For the entire
California region, the fault with the highest probability
of generating at least one magnitude 6.7 earthquake or
larger is the southern San Andreas (59 percent in the next
30 years). For northern California, the most likely source
of such earthquakes is the Hayward-Rodgers Creek Fault (31
percent probability in the next 30 years). Such quakes can
be deadly, as
shown by the 1989 magnitude 6.9 Loma Prieta and the 1994
magnitude 6.7 Northridge earthquakes.
Related bills
SB 289 (Ducheny) requires owners of hospital buildings that
are classified as nonconforming, SPC-1 buildings, who have
requested extensions of the 2008 deadlines for retrofitting
or rebuilding, to include additional information in the
reports they are required to file with OSHPD by June 30,
2011, regarding buildings they intend to remove from acute
care service. On Assembly Third Reading.
AB 303 (Beall) allows specified county and University of
California (UC) disproportionate share hospitals (DSH) that
contract with the California Medical Assistance Commission
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 11
(CMAC) to serve Medi-Cal patients to receive supplemental
Medi-Cal reimbursement from the Construction and Renovation
Reimbursement Program
(CRRP) for new capital projects to meet state seismic
safety deadlines for which plans have been submitted to the
state after January 1, 2007, and before December 31, 2011.
To enrollment.
AB 523 (Huffman) allows OSHPD to grant up to a two-year
extension of the 2013 seismic deadline for a hospital
building that is owned by a health care district, but is
operated by a third party under a lease that extends at
least through December 31, 2009, based on a declaration
that the district has lacked, and continued to lack,
unrestricted access to the hospital building for seismic
planning purposes during the time of the lease. To
enrollment.
AB 1235 (Hayashi) authorizes OSHPD to approve, in lieu of a
current extension for a hospital building that is owned and
operated by a county, city, or city and county, under which
the hospital owner is allowed to replace a hospital
building by January 1, 2020 with a building that meets the
January 1, 2030 standards in lieu of retrofitting the
hospital, a specific extension for a hospital building that
is owned or operated by Alameda County on the Alameda
County Medical Center's Fairmont campus. On Senate Third
Reading.
Prior legislation
SB 306 (Ducheny) Chapter 642, Statutes of 2007 amends the
Alfred E. Alquist Hospital Facilities Seismic Safety Act
(Act) to permit specified hospitals to delay compliance
with the July 1, 2008 seismic retrofitting deadline, and
the 2013 extension, to the year 2020, by filing a
declaration with the Office of Statewide Health Planning
and Development (OSHPD) that the owner lacks financial
capacity to comply with the law.
SB 1661 (Cox) Chapter 679, Statutes of 2006 authorizes an
extension of up-to-two additional years for hospitals that
have already received extensions of the January 1,
2008 seismic safety compliance deadline, if specified
criteria are met. Requires owners of SPC-1 general acute
care hospital buildings who have not requested extensions
of the January 1, 2008 deadline to submit a report to OSHPD
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 12
no later than April 15, 2007, describing their progress in
complying with the 2008 requirement. Requires hospitals
that have requested an extension of the 2008 deadline to
submit reports to OSHPD by June 30, 2009 and June 30, 2011,
describing the status of each building in complying with
the 2008 requirement.
SB 1838 (Perata) Chapter 693, Statutes of 2006 authorizes
OSHPD to establish a training program for personnel who
review hospital construction and design plans. Exempts
hospital and skilled nursing facility projects that cost
less than $50,000 from the OSHPD plan review process.
Requires a pre-submittal meeting with OSHPD plan review
staff on hospital and skilled nursing facility projects
costing over $20 million.
SB 491 (Ducheny) of 2005 - 2006 would have enacted the
Earthquake Safety and Hospital Preservation Bond Act and
would have authorized the issuance of general
obligations bonds in an unspecified amount for purposes of
financing a seismic safety program for nonprofit and public
general acute care hospitals. Held at Assembly Desk.
SB 1801 (Speier) Chapter 850, Statutes of 2000 permits
OSHPD to grant a five-year extension of the January 1,
2008, seismic safety deadline for a functional contiguous
grouping of hospital buildings, as defined, if specified
conditions are met.
SB 2006 (Leslie) Chapter 851, Statutes of 2000 extends
deadlines for seismic safety compliance for hospitals in
low seismic risk zones.
Arguments in support
The California Hospital Association (CHA) states that the
emergency regulatory authority granted to OSHPD by SB 499
will enable it to make more timely updates to its seismic
classification system and to adopt conforming changes to
the existing nonstructural performance requirements. These
updates will be available in 6 to 18 months, as opposed to
the three years it would ordinarily take OSHPD to propose
and have the changes adopted by the Building Standards
Commission. In addition, CHA states that reopening the
window for hospitals that failed HAZUS to qualify for the
existing two-year extension under SB 1661 will encourage
many to take meaningful steps towards compliance. Finally,
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 13
CHA states that the enhanced reporting requirements for
hospital owners with SPC-1 buildings contained in SB 499,
with the earlier reporting deadline of November, 2010 will
provide the state with a clearer picture of where hospitals
are with their compliance efforts as well as a clearer
picture of of the potential impacts of the current
deadlines.
Arguments in opposition
The California Nurses Association objects to allowing
hospitals a second opportunity to qualify for up-to-two
year extensions made available under SB 1661. CNA argues
that these hospitals made a conscious choice to pursue a
reclassification of their seismic category under HAZUS and
should not be given an opportunity to buy more time when
that fails to yield a satisfactory result. CNA also states
that there is insufficient data to evaluate the impact of
the bill's provisions allowing OSHPD to adopt changes to
the HAZUS methodology by emergency regulations. CNA states
that it opposes additional extensions of the seismic
deadlines, including SB 499, when there is inadequate
information to justify those extensions and the resulting
risks to patients and health care workers.
COMMENTS
1. Provisions of bill have changed.
As heard by the Senate Health Committee on April 15,
2009, SB 499 would have required MRMIB to report to the
Legislature no later than March 1, 2010, and annually
thereafter, on the amount and use of moneys transferred
to the Major Risk Medical Insurance Fund from the Managed
Care Administrative Fines and Penalties Fund. These
provisions were deleted from the bill in the Assembly,
and the current provisions dealing with hospital seismic
compliance requirements were inserted.
The current provisions of the bill attempt to reflect a
consensus among stakeholders on a short term strategy to
assist certain hospitals in meeting pending seismic
construction deadlines.
POSITIONS
Support: California Hospital Association
STAFF ANALYSIS OF SENATE BILL SB 499 (Ducheny)Page 14
Oppose: California Nurses Association