Seton Medical Center is no stranger to catastrophe.
Walking on Golden eggshells
Some Calif. hospitals sweating seismic mandates
Just before its grand opening in 1906, Seton was destroyed by the infamous San Francisco earthquake and fires. Another earthquake damaged the San Francisco facility in 1957. Daughters of Charity relocated the hospital about 10 miles south of San Francisco to Daly City, Calif., reopening it in 1965.
Since that time, the not-for-profit, faith-based 263-bed hospital has cared for mostly poor people in the community. The vast majority of patients treated at Seton are covered by Medicaid or Medicare or are uninsured.
So when California mandated that all hospitals deemed at high risk for a seismic event either retrofit or rebuild by 2008 (a deadline later extended to 2013), Seton Medical Center was among those that balked at the cost. Daughters of Charity Health System, the six-hospital system based in Los Altos Hills, Calif., that owns Seton, estimates the rebuild at about $200 million.
In 2007, the state enacted a law giving hospitals that meet strict criteria a financial hardship extension, which allows them to replace older hospital buildings at high risk of collapse by 2020, instead of retrofitting in 2013.
By July 1, all hospitals that want the reprieve under the hardship law must submit their applications to the state. Some hospitals had to meet an application deadline of January.
Seton Medical Center is one of 21 hospitals that have been granted the hardship extension so far, while 18 others have been denied and two are pending.
The law illustrates the complexities California hospitals face in meeting the unfunded seismic mandates, and how the financial realities of hospitals two years ago helped some get the extension while others were turned away empty-handed. It also shows how some hospitals are using every avenue available to delay rebuilds and pursue financing to pay for them.
All public and county hospitals that want the 2020 extension can have it, but other applicantsfor-profit and not-for-profitmust meet the hardship test under this specific law. The hardship criteria include a high percentage of Medicaid and indigent patients, poor cash flow, high debt and importance to its community as a safety net facility.
They have to be pretty darn financially stressed to be approved, says Robert David, chief deputy director of the California Office of Statewide Health Planning and Development, which is overseeing the application process.
Seton Medical Center, for instance, was able to show, among other financial hardships, that it treated more than 30% of all Medicaid (called Medi-Cal in the state) or indigent patients that sought care in the county. Another Daughters of Charity hospital, 291-bed St. Vincent Medical Center, Los Angeles, also got the 2020 extension. St. Vincent proved to the state that, along with losing $10 million in 2007, it is located in a federally designated medically underserved area.
Rebuilding St. Vincent will also cost about $200 million, says Conway Collis, vice president of advocacy and chief government affairs officer for Daughters of Charity Health System. We intend to meet the timing requirements, Collis says. Were certainly working hard at it.
But the 2020 law excluded some hospitals that say they needed it.
Two public district hospitals in California330-bed Tri-City Medical Center in Oceanside and 235-bed Marin General Hospital in Greenbraeapplied for the 2020 hardship extension but were denied. Marin General, for one, is operated by Sacramento, Calif.-based not-for-profit Sutter Health until July 2010, when it will revert back to local district control. Because of this odd arrangement, the district couldnt prove financial hardship, even though it is ultimately responsible to rebuild the hospital after Sutter Health departs next year.
There, we basically had our hands tied, says Jonathan Teague, manager of the Healthcare Information Resource Center at Office of Statewide Health Planning and Development.
$300 million to rebuild
Lee Domanico, CEO of the Marin Healthcare District, says that the district asked the health planning office to take into consideration its unique circumstances. I felt it was unfortunate, he says, because the district doesnt have the money to rebuild until we get control of the hospital.
It will cost about $300 million to rebuild Marin General, and the district plans to borrow on a tax-exempt revenue bond and go to the public for other bond financing, but needs time to do this after next year, Domanico says.
Both Marin General and Tri-City Medical now are seeking extensions on the original 2013 seismic deadline under individual bills introduced into the Legislature. Both also failed to get reprieves using another available tactica risk assessment software program called HAZUS, short for Hazards U.S., that is re-classifying some inpatient facilities in the state to a lower seismic risk level (Oct. 29, 2007,
All these delays dont sit well with some care providers. The California Nurses Association has been actively fighting any attempts to put off the seismic mandates. This is not a short-notice requirement, says Bonnie Castillo, vice president of governmental relations for the California Nurses Association. While we understand some hospitals have financial problems, its a matter of acting responsibly to meet these requirements.
Castillo points out that the hospitals seeking extensions are also the ones at the greatest risk of damage or collapse, and those serving disproportionately poor people. At what point are you willing to gamble that we are not going to have a major earthquake? she asks.
Under the 2020 law, building safety is not a consideration of whether the extension is granted, state planning office officials said.
Both Collis and Domanico say that their hospitals are safe and would withstand an earthquake today.
Because the 2020 extension law looks at financial data from early 2007, certain for-profit hospitals under financial hardship at the time were able to qualify. Brotman Medical Center, a 399-bed facility in Culver City, Calif., was granted the 2020 reprieve in April, state planning office records show.
Tenet Healthcare sold the hospital to an investor holding company, Prospect Medical Holdings, in 2005 as part of its divestiture agreement. By 2007, Brotman showed a $24.4 million loss and $3.6 million in charity care and other bad debt, according to the state planning office. Brotman filed for bankruptcy protection that same year.
Today, Brotman is under conditional accreditation by the Joint Commission and was fined $25,000 last month by the state for patient-safety violations. Hospital quality was not a condition of the 2020 hardship extension. Officials at Brotman did not respond to repeated requests for comment.
Some hospitals that got the 2020 extension dont plan on using it. San Francisco General Hospital, a 521-bed county facility, is beginning work on an $887.4 million rebuild project, expected to be completed in 2015. The hospital is financing the reconstruction with a city bond measure approved last November. The 2020 extension gave the hospital some breathing room to complete the project instead of facing the more limited 2013 deadline, a spokeswoman said.
Even with the 2020 extension, the reality is that for most of these hospitals, the cost of rebuilding remains very high.
Today, several hospital systems are appealing to Gov. Arnold Schwarzenegger to extend the seismic deadlines, arguing that the states fiscal crisis and ongoing recession are making it difficult to raise financing.
Other hospitals are pursuing payment changes to improve their bottom lines in order to pay for the construction costs.
We do need Medi-Cal reimbursement rates to be at a reasonable level to pay for the construction, Collis says.
Daughters of Charity and other providers are pushing a bill that would impose a provider fee to all hospitals in the state, allowing California to draw down more federal Medicaid dollars, ultimately boosting reimbursement rates. Colorado and Oregon recently enacted similar measures (April 27, p. 17).
Under the scheme, Daughters of Charity would receive between $40 million and $50 million in additional Medicaid reimbursement annually, Collis says.
Any hospital that hasnt socked away a lot of cash, Domanico says, is going to have trouble rebuilding.
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