BILL ANALYSIS Ó SENATE COMMITTEE ON HEALTH Senator Ed Hernandez, O.D., Chair BILL NO: AB 232 --------------------------------------------------------------- |AUTHOR: |Obernolte | |---------------+-----------------------------------------------| |VERSION: |September 4, 2015 | --------------------------------------------------------------- --------------------------------------------------------------- |HEARING DATE: |September 10, | | | | |2015 | | | --------------------------------------------------------------- --------------------------------------------------------------- |CONSULTANT: |Vince Marchand | --------------------------------------------------------------- PURSUANT TO SENATE RULE 29.10 SUBJECT : Hospitals: seismic safety. SUMMARY : Permits a critical access hospital located in the City of Tehachapi to submit a seismic safety extension application, pursuant to specified provisions of existing law that allow an extension up to January 1, 2020, notwithstanding a deadline of September 2012 to apply for this extension. Existing state law: 1)Establishes, under the Alfred E. Alquist Hospital Facilities Seismic Safety Act of 1983 (Alquist Act), timelines for hospital compliance with seismic safety standards, including a requirement that buildings posing a significant risk of collapse and a danger to the public (referred to as SPC -1 buildings) be rebuilt or retrofitted to be capable of withstanding an earthquake, or removed from acute care service, by January 1, 2008, and a requirement that hospital buildings be capable of continued operation after an earthquake by January 1, 2030. 2)Permits the Office of Statewide Health Planning and Development (OSHPD) to grant an extension of up to five years to the 2008 deadline, which would be January 1, 2013, for hospitals for which compliance will result in a loss of health care capacity, as defined. 3)Permits OSHPD to grant various further extensions beyond the initial five year extension in 2) above, under various eligibility requirements, with January 1, 2020, being the final permissible extension for SPC-1 buildings allowed under AB 232 (Obernolte) Page 2 of ? any of the various extensions. 4)Requires owners of general acute care hospital buildings that are classified as SPC-1 buildings to submit reports to OSHPD annually describing the status of each building in complying with the January 1, 2013, deadline. 5)Allows OSHPD to utilize computer modeling based on HAZUS, which is a seismic risks analysis tool, for purposes of determining the structural performance category of general acute care hospital buildings. Existing federal law: 1)Establishes the Medicare Rural Hospital Flexibility Program to permit states to designate certain health facilities to be critical access hospitals. Requires critical access hospitals to meet specified criteria, including that the facility be a rural public or nonprofit hospital that is located more than a 35-mile drive from any other hospital or is certified by the state as being a necessary provider of health care services to residents in the area. 2)Requires critical access hospitals to receive reasonable cost-based reimbursement for their services from Medicare. This bill: 1)Permits a critical access hospital located in the City of Tehachapi to submit a seismic safety extension application, pursuant to specified provisions of existing law that allow an extension of the deadline until up to January 1, 2020, notwithstanding deadlines in those provisions of existing law that are earlier than the effective date of this bill, including the September 2012 deadline to submit an application. 2)Requires the application submitted pursuant to 1) above to include a timetable, as required under existing law, detailing how the hospital intends to meet the requested deadline. 3)Contains an urgency clause so that the bill will take effect immediately, in order to prevent the loss of hospital licensure and Medicaid and Medicare Funding that would lead to closure of a critical access hospital and a loss of access to health care in the City of Tehachapi. AB 232 (Obernolte) Page 3 of ? FISCAL EFFECT : This version of the bill has not been analyzed by a fiscal committee. COMMENTS : 1)Author's statement. According to the author, this bill would assist a small critical access hospital serving a remote rural community located in the Tehachapi Mountains. The next closest hospital is more than 38 miles away. Tehachapi Hospital has set out to comply with the state's seismic mandate by building a brand new hospital. The new Tehachapi Hospital is currently under construction. However, in the interim, the hospital must retrofit existing buildings in order to remain operational and to ensure continued access to critical health care services. The author states that under the current seismic mandate, this hospital will be unable to continue operating in its existing hospital buildings beyond January 1, 2016. Should the hospital not be granted an extension to this deadline, the consequences are severe - including loss of hospital licensure and the exclusion from federal participation in Medicaid and Medicare. According to the author, this bill would provide an exception for Tehachapi Hospital to resubmit their seismic safety extension application to OSHPD in accordance with laws that would provide an extension through January 1, 2020, for them to retrofit their existing buildings. 2)Hospital seismic requirements. Following the 1971 San Fernando Valley earthquake, California enacted the Alquist Act, which mandated that all new hospital construction meet stringent seismic safety standards. In 1994, after the Northridge earthquake, the Legislature passed and the Governor signed SB 1953 (Alquist, Chapter 740, Statutes of 1994) which required OSHPD to establish earthquake performance categories for hospitals, and established a January 1, 2008, deadline by which general acute care hospitals must be retrofitted or replaced so that they do not pose a risk of collapse in the event of an earthquake, and a January 1, 2030, deadline by which they must be capable of remaining operational following an earthquake. Hospital buildings are categorized under a structural performance category (SPC) rating system, whereby buildings with a relatively high probability of collapse are designated as SPC-1, and these are the buildings subject to the original January 1, 2008 deadline and its various extensions. Current law allowed most hospitals to qualify for AB 232 (Obernolte) Page 4 of ? an extension of the 2008 deadline, with hospitals able to request extensions in one-year increments up to a maximum of five years after January 1, 2008. Therefore, practically speaking, the real initial deadline for hospitals to retrofit or replace SPC-1 buildings was January 1, 2013. In addition to this five-year extension, the Legislature has passed additional bills allowing hospitals to extend the deadlines for retrofitting or replacing SPC-1 buildings beyond the 2013 deadline, with the very latest of the extensions ending on January 1, 2020. After January 1, 2020, all SPC-1 buildings will either have been removed from service, or brought up to at least SPC-2 status. The next deadline is the January 1, 2030 deadline for hospitals to remain operational following an earthquake, and at that time SPC-2 buildings will no longer be permitted, and all buildings will have to at least meet SPC-3, and in many cases, SPC-4 or SPC-5 (the highest rating). According to OSHPD, only about 10 percent of remaining hospital buildings are still classified as SPC-1. The following are the Alquist Act deadline extensions that are relevant to Tehachapi Hospital and this bill: a) SB 306 (Ducheny, Chapter 642, Statutes of 2007) permitted a hospital owner to comply with seismic safety deadlines and requirements in current law by replacing all of its buildings subject to seismic retrofit by January 1, 2020, rather than retrofitting to SPC-2 by 2013 and 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. Eighteen hospitals have qualified for extensions to 2020 under this authority. Tehachapi Hospital applied for an extension under SB 306, but the application was denied by OSHPD due to financial criteria. b) SB 608 (Alquist, Chapter 623, Statutes of 2010) provided for an extension of hospital seismic deadlines, for hospitals that have already received the five year AB 232 (Obernolte) Page 5 of ? extension to January 1, 2013, of up to three years for hospitals that document that a local planning delay will cause them to miss the January 1, 2013 deadline. Tehachapi Hospital was approved for an extension under SB 608 for the maximum of three years, to January 1, 2016. This is the deadline currently facing Tehachapi Hospital. c) SB 90 (Steinberg, Chapter 19, Statutes of 2011) allowed a hospital to seek an extension for seismic compliance for its SPC-1 buildings of up to seven years based on the following elements: the structural integrity of the building, the loss of essential hospital services to the community if the hospital closed, and financial hardship. The deadline for submitting an application under SB 90 was September 30, 2012. A hospital applying under SB 90, as part of its application, was required to specify whether it intended to rebuild, replace, or retrofit the building, and the amount of time necessary to complete the construction. Additionally, a hospital seeking an SB 90 extension was required to submit to OSHPD, as part of its application, a structural reassessment, known as a HAZUS assessment, for each of its SPC-1 buildings. Tehachapi Hospital initially submitted an application for an extension under SB 90 in 2012, but withdrew the application because it intended to build a new facility rather than retrofit their existing building to SPC-2 standards. 3)Background on Tehachapi Hospital. Tehachapi Hospital is operated by the Tehachapi Valley Healthcare District, and is licensed as a 24-bed general acute care hospital, of which 19 beds are classified as "swing" beds, and can be used for long-term skilled nursing care. Tehachapi Hospital is located in the City of Tehachapi, which is about 35 miles southeast of Bakersfield. The nearest hospital is Kern Medical Center in Bakersfield, 38 miles away. Tehachapi Hospital is designated by the Department of Public Health as a critical access hospital, which under federal Medicare law means they are eligible to receive cost-based reimbursement from Medicare, and is intended to reduce hospital closures in rural areas. As discussed above, Tehachapi Hospital was granted extensions from the original January 1, 2008, deadline to bring their SPC-1 buildings into SPC-2 compliance. Under its SB 608 extension, they have until January 1, 2016 to bring their SPC-1 buildings into compliance, or stop providing services as AB 232 (Obernolte) Page 6 of ? a general acute care hospital. According to OSHPD, in March of 2012, Tehachapi Hospital applied for an extension under SB 90, which would have provided for an extension of up to 7 years beyond the 2013 deadline, or as late as January 1, 2020. Because this application did not include the required HAZUS assessment, OSHPD issued a letter to Tehachapi informing the hospital that their application was in jeopardy of being denied without the HAZUS assessment. Rather than complete a HAZUS assessment, Tehachapi Hospital withdrew their request for an SB 90 extension in June of 2012. According to Tehachapi Hospital, the reason it withdrew its SB 90 application was because it was planning on building a new hospital. Because Tehachapi Hospital planned to have this building completed by their current deadline, the hospital determined that an SB 90 extension was unnecessary. However, Tehachapi Hospital states that in the ensuing years, it has had construction delays, and inconsistent leadership. The hospital is on its third Chief Executive Officer (CEO) in the last year and a half. According to the current CEO, the new hospital construction, while behind schedule by more than a year, is moving forward, and the health care district is on much firmer financial footing as well. Construction on the new hospital is expected to be finished by the end of May 2016, and after inspections, setting up the new hospital, and achieving licensure, the new Tehachapi Hospital is expected to be operational by sometime in November of 2016. In addition to completing the new building, the CEO of Tehachapi Hospital states that it is continuing with efforts to retrofit the existing hospital to meet SPC-2 standards, so that even once the new hospital is up and running, the existing building can continue to be used to provide non-acute care services. 4)Prior legislation. AB 2557 (Pan, Chapter 821, Statutes of 2014) permitted hospitals located in the Counties of Sacramento, San Mateo, or Santa Barbara, or the City of San Jose, that had received an additional extension of the January 1, 2008, seismic safety requirements under specified provisions of existing law to January 1, 2015, to request an additional extension until September 1, 2015, in order to obtain either a certificate of occupancy or a construction final from OSHPD. AB 232 (Obernolte) Page 7 of ? SB 90 (Steinberg, Chapter 19, Statutes of 2011) allowed a hospital that had already received an extension to January 1, 2013, to seek an extension for seismic compliance for its SPC-1 buildings of up to seven additional years, if the hospital meets several interim deadlines and requirements. Required OSHPD, in deciding whether to grant the extension and in deciding how long the extension should be, to base its decision on the following elements: the structural integrity of the building, the loss of essential hospital services to the community if the hospital closed, and financial hardship. SB 608 (Alquist, Chapter 623, Statutes of 2010) provided for an extension of hospital seismic deadlines of up to three years for hospitals that document that a local planning delay will cause them to miss the January 1, 2013 deadline. Permitted OSHPD to grant an additional extension of up to two years, beyond the three years, for projects that do not provide acute care services and meet other criteria regarding life support systems and structural risk, as specified. SB 499 (Ducheny, Chapter 601, Statutes of 2009) required all general acute care hospitals that have SPC-1 buildings to report to OSHPD by November 1, 2010, and annually thereafter, on the status of their compliance with the seismic safety deadlines. SB 306 (Ducheny, Chapter 642, Statues of 2007) amended the Alfred E. Alquist Hospital Facilities Seismic Safety Act to permit hospitals to delay compliance with the July 1, 2008, seismic retro deadline, and the 2013 extension, to the year 2020, by filing a declaration with OSHPD that the owner lacks financial capacity to comply with the law. SB 1661 (Cox, Chapter 679, Statutes of 2006) authorized an extension of up to an additional two years for hospitals that had already received extensions of the January 1, 2008, seismic safety compliance deadline if specified criteria were met, and required specified hospital reports to be posted on the OSHPD Web site. 5)Support. This bill is sponsored by the Association of California Healthcare Districts (ACHD), which states that without the authority granted by this bill, Tehachapi Hospital will be unable to continue operating in its existing hospital as of January 1, 2016. ACHD states that as a critical access hospital serving a remote rural community located west of the Mojave Desert in the Tehachapi Mountains, Tehachapi Hospital AB 232 (Obernolte) Page 8 of ? faces a greater disadvantage than larger, urban hospitals and has faced both financial and design challenges. Tehachapi Hospital planned to comply with the state's seismic mandate by building a new hospital, and is in the midst of constructing this hospital, which is more than 50 percent completed. ACHD states that this bill will ensure that Tehachapi Hospital can continue to provide critical health care services to a very rural and underserved community. This bill is supported by the Tehachapi Valley Healthcare District (TVHD), which states that under SB 90, hospitals were allowed to apply for an extension through January 1, 2020. According to TVHD, although its hospital meets the criteria for this extension, it is unable to take advantage of the time frame established under this law because they failed to submit an application, believing that construction of the new hospital would be complete by January 1, 2016. TVHD states that this bill would provide an exception for TVHD to resubmit the seismic safety extension application and acceptable plan to OSHPD in compliance with the 2020 deadline established under SB 90. Adventist Health states in support that ensuring that a hospital's structural, electrical, mechanical and plumbing systems can remain operational following an earthquake is a very complex and expensive process, and this bill will provide the hospital with adequate time to retrofit the appropriate buildings and allow Tehachapi Hospital to remain operational until the new hospital is built. SUPPORT AND OPPOSITION : Support: Association of California Healthcare Districts (sponsor) Adventist Health California Hospital Association Tehachapi Valley Healthcare District Oppose: None received -- END --