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How California earthquake rules affect hospitals

Jun 05, 2019

Hospital construction costs have nearly doubled in California since 2001, rising at a rate of 14% per year above the Consumer Price Index.

That makes compliance with California’s hospital earthquake preparedness law, Senate Bill 1953 (SB1953), problematic for providers with older infrastructure. Per SB1953, all hospital structures must meet seismic standards — or be demolished, replaced or changed to non-acute care use — by 2030.

The cost of compliance

The cost to retrofit the most vulnerable buildings is comparable to the cost of new construction. Researchers at the RAND Institute placed the costs somewhere between $45 and $100 billion. They said more vulnerable buildings could cost another 20%.

Plus, retrofitting disrupts operations and makes it more difficult for patients to access care. The costs are difficult for hospitals to absorb, and risk being passed on to private and public payers.

And retrofitting is only a stop-gap solution. Most buildings will have to be rebuilt eventually, making retrofitting a nonstarter. As a result, many hospitals are building new facilities or moving acute care services into compliant buildings.

Seismic regulations also factor into the debt markets. Lenders have not placed additional restrictions on the debt offered to California hospitals, and most have relied on the normal credit underwriting process to establish debt terms. But seismic compliance is another credit attribute to evaluate since it factors into a hospital’s ability to repay debt and fund future capital expenditures.

An overview of seismic regulations for hospitals

California seismic regulations are set by state regulators and only apply to buildings that provide acute care services (excluding VA hospitals). The Alfred E. Alquist Hospital Seismic Safety Act was the first seismic regulation to focus on hospitals. It was enacted in 1973, inspired by a 6.6 earthquake in Sylmar in 1971 that severely damaged four major hospitals.

The Alquist Act only focused on buildings built before 1973, assuming new construction would gradually replace older buildings. However, a study released in 1990 showed that more than 83% of the state’s hospital beds were not deemed safe by the 1973 standard.

Lawmakers were drafting revised legislation when a 6.7 magnitude earthquake hit Northridge in 1994, crippling hospitals. Consequently, SB1953 expanded regulations. Under SB1953, hospital buildings with acute care operations (including urgent care facilities) must be constructed to survive earthquakes without collapse by Jan. 1, 2008.

SB1953 also mandated that all existing hospitals be seismically evaluated and, if needed, retrofitted by 2030.

Evaluating seismic risk

Per SB1953, the Office of Statewide Health Planning and Development (OSHPD) and the hospital safety board developed performance categories to measure and rank seismic risk. The ranking also assigned the following compliance measures and deadlines:

  • SPC-1 buildings pose the most significant risk of collapse and would be dangerous to the public after a strong earthquake. These buildings must be retrofitted, replaced or removed from acute service by Jan. 1, 2008. (This was later amended, allowing SPC-1 hospitals to request more time.)
  • SPC-2 buildings are compliant with pre-1973 California building code but not the structural provisions in the Alquist Act. They may not be repairable or functional following an earthquake. If they are not brought into compliance by January 1, 2030, they must be removed from acute care service.
  • SPC-3 buildings are compliant with the Alquist Act but may not be repairable or functional after an earthquake. They may be used to 2030 and beyond.
  • SPC-4 buildings are compliant with the Alquist Act yet may experience some structural damage in an earthquake. They may be used to 2030 and beyond.
  • SPC-5 buildings are least likely to collapse. They are compliant with the Alquist Act and are reasonably capable of providing services following an earthquake. They may be used without restriction to 2030 and beyond.

In 2016, a new category, SPC-4D, was added to ease the financial burden on hospitals and provide environmentally and economically sustainable solutions. SPC-1 and SPC-2 buildings that are retrofit to the SPC-4D level by 2030 can function indefinitely.

How likely is noncompliance?

Meeting seismic compliance regulations is daunting but not insurmountable. The costs are significant, but it seems unlikely any hospitals will be forced to close in 2030 for noncompliance.

Throughout history, legislators have been willing to amend the laws to allow more time for hospitals to meet requirements and avoid a shutdown. Closing hospitals would put communities at greater risk and potentially increase healthcare costs. Most hospitals are finding creative and feasible solutions, such as moving acute care services into compliant spaces.

How Wipfli can help

With Wipfli, you get a partner that understands healthcare, construction, compliance, finance and more. We can help you plan for seismic compliance, whether that means drafting the perfect facility plan or a sound financing structure. With our experience, you can meet regulatory deadlines and ensure your facility has a lasting, positive impact in the community. Contact us today.

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Wipfli Editorial Team