CALIFORNIA HOSPITALS: Face Major Challenges Under Earthquake Law
"A state law designed to ensure hospital safety during earthquakes may shake the financial foundations of hospitals around the state," the Bakersfield Californian reports (Winner, 2/2). The Sacramento Business Journal reports that "California's acute-care hospitals must be made earthquake safe by 2008 -- a statewide effort expected to cost $11 billion." Duane Dauner, president of the California Healthcare Association, said, "Hospitals just don't have that kind of money." The Sacramento Business Journal notes that hospitals in the state are already "reeling from massive cuts in revenue in recent years," including cuts in HMO reimbursements, and will see cuts in Medicare reimbursements (Robertson, 2/2 issue). "There is a real crisis looming," said Roger Richter, senior vice president of the California Healthcare Association.
The Big One
Under the law, all hospitals are required to "have a seismic study done by 2001 to determine how well the building and equipment within would withstand a magnitude-7 earthquake." Buildings at significant risk of collapse "would have to be retrofitted or replaced by 2008." Those at lower risk would have until 2030. Richter said, "What we're finding out is that hospitals are in worse shape than we thought." More than half of hospitals could be considered to be at "significant risk of collapse," Bakersfield Californian reports. And the law "provided no way for hospitals to pay for retrofitting or rebuilding" (2/2). Richter said, "That raises questions about whether hospitals can access that much capital in a short period of time." He said, "If not, we may see downsizings and closings that could make it even tougher to meet peak demands for inpatient care" (Sacramento Business Journal, 2/2).
One possible source of funding is the Cal-Mortgage Program, "which guarantees loans for health care facility construction." However, according to Victor Biswell, president of the Association of California Healthcare Districts, the program "may not be of much help to smaller, rural hospitals." He said, "They are getting more and more interested in whether the hospital can pay off its loans." In addition, Cal-Mortgage generally requires the hospital's surrounding community to put up some of the money.
The Short List
"Tehachapi Hospital is one of those in trouble," reports Bakersfield Californian. The hospital would need major retrofitting in order to come up to code. According to hospital administrator David Jacobson, the "hospital has four options. It can close, retrofit, merge with other hospitals or rebuild using private or public funds." He added that "closing and retrofitting are not real options." The hospital is currently undergoing merger discussions. He said, "I'm not sure we know what would happen if a hospital closed in an isolated community. You can have an urgent care center, but that won't do what an emergency room will. I just don't see how you could not have a hospital in Tehachapi" (2/1). Sacramento Business Journal reports that "Kaiser Permanente's Morse Avenue hospital and Mercy American River Hospital are slated to close, at least in part due to the high cost of bringing these hospitals up to earthquake code." Sutter Hospital said in "1995 it would close Sutter Memorial Hospital due to the high cost of retrofitting." However, it "reversed the decision in November, citing revised cost estimates and growing patient volumes" (2/2 issue).