BILL ANALYSIS
SENATE HEALTH
COMMITTEE ANALYSIS
Senator Elaine K. Alquist, Chair
BILL NO: AB 523
A
AUTHOR: Huffman
B
AMENDED: June 24, 2009
HEARING DATE: July 8, 2009
5
CONSULTANT:
2
Hansel/sh
3
SUBJECT
Hospitals: seismic safety
SUMMARY
Allows the Office of Statewide Health Planning and
Development (OSHPD) to grant 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 continues to lack, unrestricted access to the hospital
building for seismic planning purposes during the time of
the lease. Establishes interim deadlines and requirements
the hospital must meet in order to qualify for the
extension, as specified.
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:
Continued---
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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.
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.
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
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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.
This bill:
Allows OSHPD to grant an additional two-year extension of
the 2013 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, and the district has previously received an extension
of the January 1, 2008 deadline for the building.
Requires a health care district that is seeking this
extension to file a declaration with OSHPD that the
district has lacked, and continues to lack, unrestricted
access to the hospital building for seismic planning
purposes during the time of the lease, and that the
district will be under contract with the county to maintain
hospital services when the hospital returns to the control
of the district.
Allows OSHPD to grant the extension if following interim
deadlines are met:
The hospital building plans were submitted to OSHPD
by December 31, 2008;
The hospital received a building permit for the
construction by December 31, 2011 and submitted a
construction timeline by December 31, 2011 demonstrating
the hospital's intent and ability to meet the deadline of
December 31, 2014, as specified;
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;
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The hospital submits an additional report on the status
of the building in meeting the December 31, 2014 deadline
by June 30, 2013.
Provides that OSHPD may not grant the two-year extension if
an unaffiliated third party will operate the hospital
beyond December 31, 2010. Further provides that any
extension granted shall be applicable only to the health
care district that applies for the extension, and its
affiliated hospital, while the hospital is operated by the
district, or by an entity affiliated with the district.
States that the Legislature intends by this act to affirm
the existing hospital seismic deadlines, and intends for
the extension provided by the bill to be a one-time
extension that is intended to address the unique needs of
Marin General Hospital.
Contains an urgency clause, allowing it to take effect
immediately.
FISCAL IMPACT
According to the Assembly Appropriations Committee analysis
of SB 523, minor absorbable workload to OSHPD to oversee
the extension provided by this bill.
BACKGROUND AND DISCUSSION
According to the author, Marin General Hospital (MGH) is
currently operated under a lease by Sutter Health, and will
transition back to the control of the Marin Healthcare
District (District) early in 2010. However, under the
transfer agreement between Sutter Health and the District
that the parties completed in 2006, Sutter Health has not
been responsible for structural upgrades and retrofitting
of the hospital, including seismic upgrades and retrofits.
The transfer of the hospital back to the District in 2010
will leave the District with an extremely short timeframe
to undertake design and planning work, plan approval, and
construction needed to bring the facility into compliance
with the state's seismic requirements by 2013.
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The author notes that Marin General is the county's safety
net hospital, and serves the majority of indigent and
Medi-Cal patients in the county, and argues that the loss
of the hospital would result in loss of the county's only
trauma, obstetrics, and inpatient mental health 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. 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 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
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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.
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 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.
MGH has met the first interim deadline to qualify for the
two-year extension under SB 1661, by filing a preliminary
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plan with OSHPD by December 31, 2008. Earlier this year,
the District entered into a Memorandum of Understanding
(MOU) with OSHPD outlining a schedule for the phased review
of the construction plans. Under existing law, for the
hospital to be eligible for the two-year extension, it
would need to have a building permit by December 31, 2010,
and also submit a construction timetable by December 31,
2010 that demonstrates that it will meet the 2013 deadline.
AB 523 would shift those interim deadlines back one year,
to December 31, 2011. The hospital applied for, but did
not qualify for, an extension of their deadline to 2020
under SB 306.
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
building 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.
Hospital letter on seismic deadlines
In June of this year, nine hospital systems sent a letter
to Governor Schwarzenegger, stating that the current
economic recession has created significant challenges in
meeting the state's hospital seismic deadlines, and
requesting to open a dialogue on extending the deadlines.
The letter states that Californians will have reduced
access to care if any hospitals are taken out of service
due to their inability to meet the existing deadlines.
According the letter, the demand for capital to meet
seismic deadlines comes at a time when hospitals are
experiencing declining reimbursements, rising numbers of
uninsured, declining numbers of elective surgeries, and
increasing needs for funds for health information
technology.
Cost of seismic compliance
A 2002 RAND study estimated that California hospitals would
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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
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.
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
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care service. In Assembly Health Committee.
AB 303 (Beall) allows specified county and University of
California (UC) 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.
Pending in Senate Health Committee.
AB 411 (Garrick) requires a health care district that has
been denied an extension of the seismic retrofit and
replacement deadlines to make a specified report to the
office. Currently in Senate Rules Committee.
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. Pending in
Senate Health Committee.
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
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of the January 1, 2008 deadline to submit a report to OSHPD
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
According to the District and the Marin County Board of
Supervisors, the District is in a unique situation, and
faces the challenge of meeting a 2013 seismic deadline in a
shortened timeframe, once the hospital is transferred back
to the District in 2010.
The Association of Healthcare Districts states that
healthcare districts in California have provided quality
health care throughout California and states that the best
interests of patients would be served by providing District
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the extension provided by AB 523.
PRIOR ACTIONS
Assembly Floor: 78-0
Assembly Appropriations:16-0
Assembly Health: 17-0
COMMENTS
1. Bill establishes a new precedent.
Hospitals have argued that they need more time to meet
the seismic compliance deadlines contained in SB 1953,
and the Legislature has responded by enacting several
extensions of the 2008 and 2013 deadlines, including
extensions for hospitals whose capacity will not be
picked up by other hospitals if they close, hospitals
making reasonable progress toward meeting the deadlines,
but who face construction delays beyond their control,
and financially distressed hospitals. All of these
extensions have been aimed at categories of hospitals
which faced mitigating circumstances that made timely
compliance with the deadlines difficult. AB 523, by
contrast, applies to one particular hospital based on
circumstances unique to it. The committee may wish to
consider whether establishing hospital-specific
extensions to the seismic deadlines may encourage other
hospitals that are having difficulties meeting the
deadlines to request similar hospital-specific
extensions.
2. Effect of bill is to shift interim deadlines and
construction timeline.
The two-year extension provided by SB 1661 (Cox) of 2006,
requires hospitals to meet several interim deadlines,
including submission of building plans by December 31,
2008, receipt of a building permit by December 31, 2010,
and submission to OSHPD of a construction timeline by
December 31, 2010 which is sufficient to achieve
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compliance by January 1, 2013. The two-year extension is
only granted to hospitals that are under construction and
on track to meet the January 1, 2013 deadline, but that
encounter factors beyond their control. AB 523 would
allow a similar two-year extension, but would shift the
interim deadlines for the permit and submission of a
construction timeline back one year, to December 31,
2011. The bill would allow the hospital to be on tract
to meet a December 31, 2014 compliance deadline, rather
than a January 1, 2013 deadline, at the time the request
for the extension is made. These modifications of the SB
1661 interim deadlines and process are designed to
account for the fact that the District is not assuming
control of MGH until some time in 2010.
3. Suggested technical amendment:
On page 6, lines 33 - 36, amend as follows:
Any extension granted pursuant to paragraph (3) shall be
applicable only to the health care district applicant and
its affiliated hospital while the hospital is operated by
the district or an entity affiliated with under the
control of the district.
POSITIONS
Support: Association of California Healthcare Districts
Marin County Board of Supervisors
Marin Healthcare District Board of Directors
Teamsters Local 856
Oppose: None received
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