California hospitals scramble on earthquake retrofits as state limits extensions

KFF Health NewsOct 15 2024

More than half of the 410 hospitals in California have at least one building that likely wouldn’t be able to operate after a major earthquake hit their region, and with many institutions claiming they don’t have the money to meet a 2030 legal deadline for earthquake retrofits, the state is now granting relief to some while ramping up pressure on others to get the work done.

Gov. Gavin Newsom in September vetoed legislation championed by the California Hospital Association that would have allowed all hospitals to apply for an extension of the deadline for up to five years. Instead, the Democratic governor signed a more narrowly tailored bill that allows small, rural, or “distressed” hospitals to get an extension of up to three years.

“It’s an expensive thing and a complicated thing for hospitals — independent hospitals in particular,” said Elizabeth Mahler, an associate chief medical officer for Alameda Health System, which serves Northern California’s East Bay and is undertaking a $25 million retrofit of its hospital in Alameda, on an island beside Oakland.

The debate over how seismically safe California hospitals should be dates to the 1971 Sylmar quake near Los Angeles, which prompted a law requiring new hospitals to be built to withstand an earthquake and continue operating. In 1994, after the magnitude 6.7 Northridge quake killed at least 57 people, lawmakers required existing facilities to be upgraded.

The two laws have left California hospitals with two sets of standards to meet. The first — which originally had a deadline of 2008 but was pushed to 2020 — required hospital buildings to stay standing after an earthquake. About 20 facilities have yet to meet that requirement for at least one of their buildings, although some have received extensions from the state.

Many more — 674 buildings, spread across 251 licensed hospitals — do not meet the second set of standards, which require hospital facilities to remain functional in the event of a major earthquake. That work is supposed to be done by 2030.

“The importance of it is hard to argue with,” said Jonathan Stewart, a professor at UCLA’s Samueli School of Engineering, citing a 2023 earthquake in Turkey that damaged or destroyed multiple hospitals. “There were a number of hospitals that were intact but not usable. That’s better than a collapsed structure. But still not what you need at a time of emergency like that.”

The influential hospital industry has unsuccessfully lobbied lawmakers for years to extend the 2030 deadline, though the state has granted various extensions to specific facilities. Newsom’s signature on one of the three bills addressing the issue this year represents a partial victory for the industry.

Hospital administrators have long complained about the steep cost of seismic retrofits.

“While hospitals are working to meet these requirements, many will simply not make the 2030 deadline and be forced by state law to close,” wrote Carmela Coyle, president and CEO of the California Hospital Association, in a letter to Newsom before he vetoed the CHA bill. A 2019 Rand Corp. study paid for by the CHA pinned the price of meeting the 2030 standards at between $34 billion and $143 billion statewide.

Labor unions representing nurses and other medical workers, however, say the hospitals have had plenty of time to get their buildings into compliance, and that most have the money to do so.

“They’ve had 30 years to do this,” Cathy Kennedy, a nurse in Roseville and one of the presidents of the California Nurses Association, said in an interview prior to the governor’s action. “We are kicking the can down the road year after year, and unfortunately, lives are going to be lost.”

In his veto message on the CHA bill, Newsom wrote that a blanket five-year extension wasn’t justified, and that any extension “should be limited in scope, granted only on a case-by-case basis to hospitals with demonstrated need and a clear path to compliance, and in combination with strong accountability and enforcement mechanisms.”

He also vetoed a bill directed specifically at helping several hospitals operated by Providence, a Catholic hospital chain.

But he signed a third bill, which allows small, rural, and “critical access” hospitals, and some others, to apply for a three-year extension, and directs the Department of Health Care Access and Information to offer them “technical assistance” in meeting the deadline.

The state designates 37 hospitals as providing “critical access,” while 56 are considered “small,” meaning they have fewer than 50 beds, 59 are considered “rural,” and 32 are “district” hospitals, meaning they are funded by special government entities called “health care districts.” They can seek a three-year extension as long as they submit a seismic compliance plan and identify milestones for implementing it.

Debi Stebbins, executive director of the Alameda Health Care District, which owns the Alameda Hospital buildings, said small hospitals face a big challenge. Even though Alameda is very close to San Francisco and Oakland, the tunnels, bridges, and ferries that connect it to the mainland could easily be shut in an emergency, making the island’s hospital a lifeline.

“It’s an unfunded mandate,” Stebbins said of the state’s 2030 deadline.

The Rand study estimated the average cost of a retrofit at more than $92 million per building, but the amount could vary greatly depending on whether it’s a building that houses hospital beds.

Small and rural hospitals can get some aid from the state via grants financed by the California Electronic Cigarette Excise Tax, but HCAI spokesperson Andrew DiLuccia said it would yield just $2-3 million total annually. He added that the Small and Rural Hospital Relief Program has also received a one-time infusion of $50 million from a tax on health insurers to help with the seismic work.

Labor unions and critics of the extensions often point to the large profits that some hospitals reap: A California Health Care Foundation report published in August found that California’s hospitals made $3.2 billion in profit during the first quarter of 2024. The study notes that there “continues to be wide variation in financial performance among hospitals, with the bottom quartile showing a net income margin of -5%, compared to +13% for the top quartile.”

Stebbins has had to help her district figure out a plan.

After Newsom vetoed a bill in 2022 that would have granted an extension on the seismic retrofit deadline specifically for Alameda Hospital, the hospital system and its partner health care district used parcel tax money to help back a loan.

The cost to retrofit will be about $25 million, and the system is also investing millions more into other projects, such as a new skilled nursing facility. The construction work is set to be completed in 2027.

“No one wants things crashing in an earthquake or anything else, but at the same time, it’s a burden,” Mahler, the Alameda Health System associate chief medical officer, said. “How do we make sure that they get what they need to stay open?”

This article was produced by KFF Health News, which publishes California Healthline, an editorially independent service of the California Health Care Foundation.