[CEUS-earthquake-hazards] The balance

[Seth Stein]

I have no doubt that hospitals do the numbers that make
their case best (as do FEMA, etc) but I also have no doubt there's a real 
issue.

For example, a friend of mine who was interviewing for a hospital CEO
job in the Central Valley was told that one of his tasks would be to
find the money for a seismic retrofit since that equalled their annual 
budget and they had no idea where to find it. Just anecdotal but 
ilustrates the challenge.

Seth Stein
William Deering Professor 
Department of Earth and Planetary Sciences
1850 Campus Drive
Northwestern University, Evanston, IL 60208
(847) 491-5265 FAX: (847) 491-8060 E-MAIL: seth at earth.northwestern.edu
http://www.earth.northwestern.edu/people/seth

On Wed, 9 Jan 2008, Rogers, David wrote:

> 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
>
>