BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 303
A
AUTHOR: Beall
B
AMENDED: June 18, 2009
HEARING DATE: July 8, 2009
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CONSULTANT:
0
Dunstan/
3
SUBJECT
Medi-Cal: Hospitals: designated public hospitals: seismic
safety requirements
SUMMARY
Allows specified county and University of California
disproportionate share hospitals (DSH) that contract with
the California Medical Assistance Commission (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.
CHANGES TO EXISTING LAW
Existing federal law:
Establishes the Medicaid program to provide comprehensive
health benefits to low-income persons. Establishes the
federal Medicaid Disproportionate Share Hospital (DSH)
program to provide financial assistance to hospitals that
serve large numbers of Medicaid and uninsured patients.
Existing state law:
Continued---
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Establishes the Medi-Cal program as California's Medicaid
program, administered by the Department of Health Care
Services (DHCS), which provides comprehensive health care
coverage for low-income individuals and their families;
pregnant women; elderly, blind, or disabled persons;
nursing home residents; and refugees who meet specified
eligibility criteria.
Establishes the CRRP, also referred to as the SB 1732
program, under which DSH hospitals may receive supplemental
Medi-Cal reimbursement for the debt service incurred on
revenue bonds for the construction, renovation, or
replacement of hospital facilities, including buildings and
fixed equipment, for which final plans have been submitted
to Office of Statewide Health Planning and Development
(OSHPD) after September 1, 1988 and prior to June 30, 1994.
Establishes seismic safety requirements under the Alfred E.
Alquist Hospital Facilities Seismic Safety Act, and its
amendments, which:
a) Require, 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 that may not be provided
by other general acute care hospitals within a
reasonable proximity;
b) Authorizes OSHPD to permit extensions to the
deadline, if the hospital agrees that by January 1,
2013, basic service or 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, and permits an
additional two-year extension under certain
circumstances; and,
c) Requires owners of all acute care inpatient
hospitals, no later than January 1, 2030, to either
demolish, replace, or change to nonacute care use all
hospital buildings not in substantial compliance with
the seismic safety regulations and standards developed
by OSHPD, or seismically retrofit all acute care
inpatient hospital buildings so that they are in
substantial compliance with the seismic safety
regulations and standards developed by OSHPD.
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This bill:
Allows specified county and UC hospitals to receive
supplemental reimbursement from the CRRP, in addition to
the rate of payment provided for in the CMAC contract, if
the hospital:
a) Contracts with CMAC to provide services to Medi-Cal
patients in the fee-for-service Medi-Cal program; and,
b) Has or would have satisfied the criteria to be a
DSH hospital for the three most recent years prior to
submitting final plans for an eligible project (DSH
hospitals serve a large number of uninsured and
Medi-Cal patients).
Requires a hospital that elects to receive reimbursement
under this bill to submit documentation to the Department
of Health Care Services (DHCS) regarding its debt service
on general obligation or revenue bonds used for financing
the construction, renovation, or replacement of hospital
facilities, including buildings and fixed equipment.
Establishes as eligible projects those new capital projects
funded by new debt for which final plans have been
submitted to the Office of Statewide Health Planning and
Development (OSHPD) after January 1, 2007, and prior to
December 31, 2011. Limits supplemental reimbursement under
this bill to projects related to meeting seismic safety
deadlines.
Requires a hospital qualifying for supplemental
reimbursement to remain open for the life of the
supplemental reimbursements provided under this bill.
Prohibits expenditures from the General Fund from being
made for the nonfederal share of the supplemental
reimbursement provided for in this bill. Requires DHCS, to
the extent that insufficient state funds are appropriated
for the nonfederal share of the supplemental reimbursement
provided for in this bill, to claim federal expenditures
through other funding mechanisms, including the use of
certified public expenditures (CPEs) or intergovernmental
transfers (IGTs).
Requires DHCS to promptly seek any necessary federal
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approvals for the implementation of this bill, and makes
implementation of this bill contingent on federal approval
and federal financial participation being available.
FISCAL IMPACT
According to the Assembly Appropriations Committee
analysis, annual costs in the range of $40 million to $60
million (50 percent federal, 50 from designated public
hospitals either through IGTs or CPEs) to provide
supplemental reimbursement on debt service to 15 hospitals.
Actual costs depend on how many hospitals pursue the
supplemental funding established by this bill.
BACKGROUND AND DISCUSSION
The author argues that a solution is needed to increase
compliance with seismic safety requirements for hospitals.
The author also notes that California hospital
infrastructure remains vulnerable to a seismic event. The
author points to a RAND Corporation study which verifies
that the pace of compliance with required seismic upgrades
has been slow and large numbers of hospitals appear likely
to miss deadlines in 2013 and 2030. The author notes that
since 2001 hospital construction costs have doubled, driven
by a number of economic factors, which have complicated the
task of reaching compliance. The author argues that this
bill will help increase compliance because it will allow
use of local funds in place of state funding to qualify for
the federal reimbursement project for new capital projects
to meet state seismic safety deadlines.
Background
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. 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
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also be capable of continued operation and provision of
acute care medical services, or else be changed to
non-acute care use.
OSHPD has classified 948 (35 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 231 buildings (roughly 9 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 1,536
buildings (56 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
performance categories.
In addition to the five-year extension, the Legislature has
passed two additional bills allowing hospitals to extend
the deadlines for seismic deadline. 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.
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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. Requests for this two-year extension have been
approved for 75 hospital buildings.
SB 306 (Ducheny) of 2007-2008 permits 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 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.
Eighteen hospitals have qualified for extensions to 2020
under this authority.
Reclassification of some 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 437 SPC-1
buildings, and 163 buildings have been reclassified to
SPC-2 status. OSHPD staff informally estimate that 500
SPC-1 buildings will not qualify for reclassification under
HAZUS and will not qualify for the extension of the
deadline to 2020 provided by SB 306.
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
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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
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.
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.
The Construction and Renovation Reimbursement Program
(CRRP)
CRRP is also referred to as the SB 1732 program, due to the
program's authorizing legislation, SB 1732 (Presley),
Chapter 1635, Statutes of 1988. The CRRP provides
supplemental Medi-Cal reimbursement for a portion of the
debt service incurred on revenue bonds issued for the
construction, renovation, or replacement of hospital
facilities including buildings and fixed equipment. To be
eligible for reimbursements under CRRP, a hospital must:
a) Be a CMAC-contracting hospital or a hospital
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contracting with a Medi-Cal county organized health
system;
b) Be a DSH hospital; and,
c) Have a plan for a new capital project funded by new
debt submitted to OSHPD after September 1, 1988 and
prior to June 30, 1994, although specific hospitals
(such as the Alameda County Medical Center, Los
Angeles County-USC Medical Center and Contra Costa
Regional Medical Center) have a later date to submit
revised plans to OSHPD and still receive CRRP
supplemental payments.
A hospital's supplemental Medi-Cal reimbursement is
calculated based on the amount of debt service on revenue
bonds issued to finance the eligible hospital's project.
These supplemental reimbursements pay for a portion of the
eligible debt service, based on the ratio of the hospital's
total paid Medi-Cal days to total patient days. SB 1732
expenditures were $132.9 million in 2006-07 for 16
hospitals, and $97.9 million in 2007-08 for 20 hospitals.
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Prior legislation
AB 1149 (Beall) of 2007 would have authorized DSH hospitals
designated as Level 1 trauma centers that are located in
Seismic Zone 4 as eligible to receive supplemental payments
from the CRRP for debt service on new capital projects for
which final plans have been submitted. AB 1149 was held on
the Assembly Appropriations suspense file.
Arguments in support
The Santa Clara County Board of Supervisors, the sponsor of
the bill, state that this bill would allow public hospitals
to access federal supplemental reimbursements for debt
service related to seismic retrofitting. They argue that
the importance of this legislation to the county's public
hospital and its patients cannot be overestimated. They
report that the hospital faces growing demands for its
services, but the number of available beds limits the
hospital's ability to meet this growing need for hospital
care. They point out that this need for increased beds
comes at a time when compliance with the seismic standards
presents the risk of having to close facilities, which
would reduce the number of available beds. The Board notes
that half of the beds at Santa Clara Valley Medical Center
must be replaced or retrofitted to meet seismic standards.
Other supporters argue that this bill will addresses a
major seismic compliance obstacle for hospitals that serve
our state's most underserved populations and whose trauma
centers are often the source of primary care for uninsured
individuals.
PRIOR ACTIONS
Assembly Floor: 78-0
Assembly Appropriations:17-0
Assembly Health: 18-0
POSITIONS
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Support: Santa Clara County Board of Supervisors
(sponsor)
Service Employees International Union
State Building Trades Council
Oppose: None received
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