Orange County hospitals are wondering where they’ll come up with the millions needed to pay for meeting the state’s law requiring hospitals to be able to withstand a major earthquake.
All general acute-care inpatient buildings that are vulnerable to quakes must be retrofitted, rebuilt or closed by 2008. And by 2030, facilities will have to meet even tougher standards.
Some hospital officials are calling for assistance from government, citing estimates that compliance will cost $24 billion or more by 2030.
Enter state Sen. Joe Dunn, D-Garden Grove.
Dunn, after talking with officials of Orange-based St. Joseph Health System, introduced a bill to create a bond fund to provide up to one-third of the funding for seismic upgrading of eligible hospitals. If passed and signed by Gov. Gray Davis, the bill would place a general obligation bond on the primary election ballot in March.
“If the bond passes, it creates a source of funds that we can distribute to hospitals that have financial needs,” Dunn said. He stressed that the bill would not take money from the state’s general fund budget and that not all hospitals would be able to draw from the bond proceeds.
Meanwhile, St. Joseph officials met with Dunn several times to express their concerns about what the seismic law could do to their system.
“They never said to me they’ll have to close it,” the senator said. “(But) clearly, it will put St. Joseph-Orange and many other hospitals in a difficult economic bind if they’re forced to meet the deadline without assistance from the state.”
Ron DiLuigi, a St. Joseph regional vice president, said, “We went to him. Here in the district, we work with Joe. We raised the issue by educating him about the impact and significance” of the seismic law.
St. Joseph Health System will have to seek outside funding to bring its OC hospitals into seismic compliance, according to DiLuigi.
“St. Joseph-Orange and St. Jude will have the most significant costs,” he said.
Specifically, DiLuigi estimates that it will cost his system $122 million to bring St. Joseph Hospital-Orange into compliance and $113 million to bring Fullerton’s St. Jude Medical Center up to standards. St. Joseph’s third local facility, Mission Hospital Medical Center in Mission Viejo, will cost $50 million to $60 million to upgrade, he said.
“This is a mandate that we can’t afford to handle on our own,” DiLuigi said. But he said St. Joseph hasn’t yet decided what it will do to pay for the upgrades.
“That’s part of what has to be determined. We could consider going to the capital markets,” he said.
California’s hospital seismic law was passed in 1994, after the Northridge earthquake. It does not include any provision for state funding of the mandate on hospitals.
The California Hospital Association says legislators need to take another look at that because the business landscape has changed.
“Since 1994, hospitals’ financial stability has sharply declined,” said Jan Emerson, the association’s spokeswoman. “Sixty-four percent of California hospitals are losing money. That was not true in 1994.”
Factors that have hit hospitals’ bottom lines since 1994, according to Emerson, include the Health Insurance Portability and Accountability Act, a nurse shortage, and new medication error laws.
The Office of Statewide Health Planning and Development issued a report that showed 78% of the state’s hospitals had at least one building that could close if not rebuilt or retrofitted by 2008.
DiLuigi, who noted that the $24 billion estimated compliance cost didn’t take into account inflation, characterized it as “probably low. But even with that, it exceeds the current value of all hospitals in California.”
Some hospitals already have addressed the seismic issue. For instance, UCI Medical Center in Orange nabbed $235 million in state funding to build a new hospital. That facility’s officials opted to rebuild because of concerns about the cost and possible disruption of patient care associated with retrofitting.
Attempts also are being made at the federal level to address the seismic standards. Reps. Jerry Lewis, R-Redlands and Mike Thompson, D-Napa recently introduced legislation that would provide tax incentives and other federal support to California’s general acute-care inpatient hospitals to offset the costs of seismic upgrades. n
