San Diego Business Journal Bringing Hospitals Up to Seismic Standards Takes Its Toll

A state law requiring hospitals to conform to stringent seismic standards by 2008 and 2030 has local hospital operators struggling to raise funding.

Sharp HealthCare, UCSD, Scripps Health, Palomar Pomerado Health System, Children's Hospital and Health Center and Kaiser Permanente anticipate nearly $1 billion in total spending to improve and replace existing buildings to meet seismic standards by 2008.

It's beginning to take on the proportions of a crisis, considering most hospitals in California operate in the red. Hospital operators say insufficient reimbursements for Medicare and Medi-Cal patients have led to fiscal decay. And not to forget the severe nursing shortage which has sent wages for registered nurses soaring.

Hospital experts say without a major cash infusion or help from the state, many hospitals will not be able to meet seismic safety deadlines, or worse, be forced to shut down.

Two local hospitals, Mission Bay Hospital and Scripps Memorial Hospital East County, already blamed their closure in part on the high costs of retrofitting.

- More Hospitals May Have To Close

Steven Escoboza, president and CEO of the Healthcare Association of San Diego and Imperial Counties, is afraid if hospitals don't get help more closures will follow.

"Unless there is some access to capital or (legislation) to move back the implementation schedule (and) make it more feasible (for hospitals to comply with seismic safety codes), there will be closure of hospitals," Escoboza said. "This will bring a slew of problems."

Problems that include longer waits in already overcrowded local emergency rooms, subsequent lesser access to health care and loss of jobs, he said.

Local hospital administrators share these concerns. By January 2002, they will be required to file reports with the Office of Statewide Health Planning and Development detailing how and when they will comply with the safety standards.

Many hospitals have already filed a "seismic evaluation" outlining deficiencies, said Chris Tokas, manager for the seismic project at the Office of Statewide Health Planning and Development in Sacramento.

The Hospital Facility Seismic Act approved by the state Legislature in 1994 after the Northridge earthquake and 1971 Sylmar quake aims to ensure that hospitals do not jeopardize lives after a violent earthquake by 2008 and adhere to the highest safety levels by 2030.

A law approved last year allows a delay to 2013 if the buildings are expected to be in use 30 years from now.

- Local Administrators Face Financial Burden

o Sharp , Michael Murphy, Sharp HealthCare chief executive, has a five-year plan in place to raise the anticipated $214 million needed to retrofit and replace Sharp's buildings , the majority of which were built between the 1950s and 1970s when there were no special seismic safety standards for hospitals.

The plan calls for a philanthropic fund-raising effort between $35 million and $50 million by 2006 and continued successful operations.

Sharp already received $80 million in government bonds to pay for seismic upgrades.

But that still leaves millions of dollars outstanding to meet the often tricky upgrades.

Tough decisions lie ahead. Cost likely will determine what to rebuild, move around, or tear down.

Sharp estimated it would cost $137.6 million to upgrade four buildings, which are part of the 290-bed Sharp Memorial Hospital in Kearny Mesa and build a new seven-story, 272-bed facility in front of the existing building.

Once the new building stands, inpatient care will no longer be offered at the 146-bed South Tower, said Eileen Cornish, a Sharp spokeswoman.

Instead, the South Tower will be converted into administrative and storage areas.

No inpatient beds will be compromised due to retrofitting, she said.

o Scripps Health , Chris Van Gorder, president and CEO of Scripps Health, wants to raise the estimated $125 million for seismic upgrades through operating margins, fund-raising and loans.

Scripps has 22 buildings requiring seismic upgrades because they were built before 1973. But some retrofitting is also needed on 24 buildings constructed after 1973.

Scripps has not arranged for bond financing for this purpose, Van Gorder said.

"I can't speculate if we will buy bonds," he said. "We haven't decided yet how we will move forward."

o Palomar Pomerado , Palomar Pomerado is also faced with substantial costs of about $122 million, not counting inflation costs, according to spokeswoman Tamara Hemmerly.

Palomar Hospital will be hit especially hard because its two core buildings , the Adams Wing, which opened in 1959, and the McLeod Tower, which opened in 1970 , do not meet the required standards and retrofitting wouldn't be a sound long-term solution, Hemmerly said. That leaves replacement as the only viable solution.

As with everybody else, the health system is considering various funding options. However, Palomar Pomerado is already shouldering a major financial burden trying to keep its costly trauma center open, among other problems.

o Children's Hospital and Health Center , Children's Hospital and Health Center is also looking at replacement vs. retrofitting as a long-term solution, said Larry Nuffer, a Children's spokesman.

"If you took the current regulations, the way they are stated right now, we project to spend $106 million by 2030," Nuffer said. "We are probably not going down the path of shoring up old buildings, but instead are replacing some of them."

o UCSD , UCSD appears to be in better seismic shape. The UCSD Medical Center in Hillcrest was built in the 1960s, but has already undergone major retrofitting, said James Cleaton, UCSD manager of health care design and construction. He estimated an additional $48 million is needed to meet 2008 seismic standards.

"The main hospital needs anchorage and bracing of lines," he explained. "The problem is where do you find that kind of money (to finance the undertaking)?"

The answer to that question will shed light on which buildings to reconstruct and which ones to replace.

o Kaiser , Kaiser is perhaps in the best seismic shape countywide. The hospital will spend about $1 million this year to get its hospital up to seismic standards.

"We just need to perform nonstructural anchoring of the exterior siding," said Jim McBride, Kaiser spokesman for San Diego.

Statewide, however, it's another story.

McBride said Kaiser estimates between $3 billion and $4 billion in costs to meet seismic requirements for all Kaiser hospitals.

Most hospital executives are hoping for relief from the state. Four state bills have been introduced to help ease the financial burden.

Sen. Joe Dunn, D-Santa Ana, introduced a bill that would provide bond money to hospitals to pick up one-third of the cost of retrofitting.

Sen. Jackie Speier, D-San Francisco, introduced a bill that would extend the deadline for hospitals to comply with seismic standards.

By 2030, the unfunded mandate is expected to exceed $24 billion. Hospital operators agree in the long run the upgrades will leave hospitals stronger.