[CEUS-earthquake-hazards] The balance

Wed Jan 9 23:00:33 GMT 2008

Joe 

This isn't a new issue; the CA Seismic Safety Commission has had to deal
with these kinds of issues for years.  The figure I'd be suspicious of
is the $110 billion being suggested by the California Healthcare
Association, which is a trade organization that lobbies for favorable
legislation on behalf of hospital owners and operators - many of which
are wealthy corporations.  They consistently oppose legislation that
mandates increased government regulations or costs. They are the same
organization that fought against hospitals being required to have their
own onsite power generation back in the early 1960s, asserting that it
would be cost-prohibitive and never be utilized sufficiently to justify
the costs, etc. etc.   And they had numbers that "proved" their case,
because CA hadn't experienced a sizable earthquake near a metropolitan
area between 1906-71 (the utilization calculation would be very
different today, esp. with the summertime power brownouts).  These sorts
of organizations and lobbyists always throw out huge dollar values to
justify their cases - e.g. if you put that regulation on us, it will put
us out of business and it will costs billions and billions of dollars,
etc. etc.   There will be a cost, but what that actual cost will end up
being is usually inflated significantly by trade organizations when they
are opposing proposed legislation.  That's just the way the lobbying
game is played.

We've dealt with a similar, but smaller issues here in Missouri,
whenever legislation is proposed (almost every year) to require skilled
care and convalescent facilities to furnish onsite remote power
generation  -- they spend huge amounts of money to repress such
legislation, asserting that it will "bankrupt" them and that their
facilities are "barely scrapping by" because their patient fees are
controlled by Medicare, etc., etc., etc.  That's what the SAY anyway
..... but, when you see the slick lawyers doing their lobbying, you sort
of get the felling that SOMEBODY is making enough money in the skilled
care facility business to hire high-powered lobbyists....       

So, there's always two sides to every tale.  I would agree that, as
engineers or planners, we should always be examining the cost-benefit
ratios.  But, we should also realize that the actual dollar losses
incurred by a natural or man-caused disaster are far beyond the figures
predicted in FEMA models like HAZUS. Just look at the economic impact of
the 9/11 attacks; the two World Trade Center towers are only a tiny
fraction of the actual economic loss caused by their collapse.  

So, these issues should be debated out in the open, realizing that most
people come to the table with specific agendas.....In raising that
issue, your concern is valid.        

Dave Rogers

Missouri Seismic Safety Commission

J. David Rogers, Ph.D., P.E., R.G., C.E.G., C.H.G.
Karl F. Hasselmann Chair in Geological Engineering
Department of Geological Engineering
129 McNutt Hall, 1400 N. Bishop Avenue
Missouri University of Science & Technology
Rolla, MO 65409-0230
(573) 341-6198 voice
(573) 341-6935 fax
E-mail: rogersda at mst.edu
URL: www.mst.edu/~rogersda

Formerly the University of Missouri-Rolla

________________________________

From: ceus-earthquake-hazards-bounces at geohazards.cr.usgs.gov
[mailto:ceus-earthquake-hazards-bounces at geohazards.cr.usgs.gov] On
Behalf Of Joe Tomasello
Sent: Wednesday, January 09, 2008 1:51 PM
To: ceus-earthquake-hazards at geohazards.cr.usgs.gov
Cc: 'Seth Stein'
Subject: [CEUS-earthquake-hazards] The balance

Buddy:

I'd like to offer the following for your e-mail discussion group:

Natural disasters such as earthquakes create complex situations for
policy makers. The difficulty lies in the balance between the costs of
mitigation and the actual risk. Failing this, policy makers could find
themselves dealing with unintended consequences such as those
experienced by the hospital industry in California.  If it's worth the
expense in any one region it would be California; but looking at the
hospital industry in California we don't see it.

Earthquake risks in California are, to some degree, statistically
predictable; being a near certainty that a moderate to strong earthquake
will occur somewhere on the west coast during a single generation of the
built environment. California attempted to balance public safety with
mandated seismic mitigation in a knee jerk reaction to the 1994
Northridge earthquake California's Legislature passed Senate Bill 1953
(SB 1953). The bill was an unfunded mandate to retrofit, rebuild, or
close; a free lunch for California taxpayer. However, over the past
decade the consequences of the mandate caused a once sound hospital
system transform into one of the nation's foremost financial basket
cases.

As in California, policy makers in the New Madrid Seismic Zone are led
to believe that earthquake mitigation costs are small, having little
effect on the built environment. California's mitigation program entails
retrofitting all acute care hospitals or re-building nearly 70 million
square feet. The pace of construction is limited to approximately 1.5
million to 2 million square feet per year due in large part to the
ability of regulatory agencies to keep up. Furthermore it takes upward
of 10 years to design and build a new hospital.  "The lengthy process
for review and approval of hospital construction and retrofitting
projects is far too long. Economic growth is being thwarted; jobs are
being lost; and patient safety is being compromised."[i]  The result is
that it will take nearly 30 years to complete all the construction
required by SB 1953. [ii] The extended deadline is 2013.

The size and scope of most of these projects are very large and
expensive.  Compliance could cost California hospitals as much as $110
billion dollars.  The original estimate assumed that the number of
patients and the number of beds would generally remain the same.
However, modern design standards are most effective with facilities 35%
to 60% larger[iii]. Thus, the scope of each construction project will
increase as will the overall cost; perhaps as much as 20%.  [iv] In
California construction costs are rising at an annual rate of more than
14 percent above the Consumer Price Index resulting in construction
costs more than 40 percent higher for comparable facilities in other
states.[v] In my view this increase is likely to continue do to
regulatory oversight, the limited number of qualified contractors, as
well as the annual inflation of material costs. In California, a fully
furnished and equipped acute care facility (labor and materials) costs
$1,000 per square foot.  Since the SB 1953 mandates affect for-profit,
non-profit and publicly owned organizations most all projects will be
financed.  Depending on the terms of the loan the cost in current
dollars for an acute care facility the square foot cost can exceed
$2,800; comparatively normal office construction in Tennessee is roughly
a third the cost per square foot. 

Looking at FEMA's annualized earthquake losses[vi] we find the
relationship of Cost vs. Benefit even more lopsided. FEMA reports that
California will experience a loss of approximately $3,167.5/$Million of
infrastructure each year as a result of earthquakes. Looking at the same
50 year period, California can expect to lose approximately 15.8% of the
present value of hospitals. Thus, California's acute care
infrastructure, worth approximately $48 Billion [my estimate - C. Duane
Dauner, President and Chief Executive Officer, California Healthcare
Association, Statement "Heath Care Scene in California," May 10, 2001,
suggested 24 Billion.], should expect a loss of approximately $7.6
Billion due to earthquake. We find that California is spending $110
Billion to offset a loss of $7.6 Billion; a cost benefit relationship
greater than 14.  Over the past 10 years, we've asked FEMA for a Cost
vs. Benefit analysis for the New Madrid Seismic Zone.  So far we haven't
seen anything that would come close to suggesting that the public would
benefit spending limited resources. 

There are a more subtle negative consequences resulting from forcing
acute care facilities to close because they don't meet mandated
requirements.  California is experiencing a critical closure of
hospitals with the closure of over 50 hospitals in the 10 year period
between 1995 and 2005. More than 3,000 acute care beds have been removed
from service between 2001 and 2005. In the five year period prior (1995
to 1999) 23 hospitals closed. Unfunded mandated seismic requirements are
creating a stampede for funding, usually in the form of bonds.  The
median credit ratio of California hospitals had nosed dived to the
junk-bond status.  The money needed to retro fit California hospitals is
drying up. [vii] "Nobody can bear the burden [of SB 1953 unfunded
mandate]"[viii]  Here in the New Madrid Seismic Zone we're told that the
cost is minimal. 

"Seismic upgrades are important. But mandating them during the worst
economic time in the history of California hospitals is like ordering a
homeowner to fix a dilapidated porch on a house that's on fire. Right
idea. Wrong time."[ix] How many doctors and nurses could have been hired
in lieu of spending the money on hospital infrastructure? Just how many
lives will be saved? How many lives will be lost because of the loss of
acute care facilities? Who pays, the bottomless pocket of the taxpayer?
Each of the 35 million people in California will need to pay $3,143 (per
capita state and local taxes were roughly $1,600 in 1996).  Are the
people of California going to be willing to forfeit three times their
current tax burden? 

If the benefits (reduction of earthquake related economic loss or lives
lost) don't outweigh the costs in California, how can they be justified
in the New Madrid Seismic Zone? 

Joseph Tomasello, PE

5880 Ridge Bend Rd.

Memphis, TN 38120

Phone:

(901) 761-2016 office

(901) 821-4968 direct

(901) 412-8217 mobile

________________________________

________________________________

________________________________

________________________________

[i] California Heathcare Association Statement on the Hospital
Construction Plan Review and Area Compliance Process before the
California Performance Review Commission, U.C. Riverside, August 13,
2004.

[ii] Ibid., 4

[iii] Ibid., 41

[iv] Ibid., 8

[v] Ibid., 30

[vi]  FEMA 366  Hazus 99 Estimated Annualized Earthquake Losses for the
United States, February 2001, 16

[vii] California HealthCare Foundation, The Financial Health of
California Hospitals, June 2007, 2-13

[viii] Ibid., (interviews with key unnamed health care leaders), B-6

[ix] The Press Democrat, Another hospital falls, what killed Sutter
Medical Center - and what will it mean to families like mine, January
14, 2007

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