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Diverse stakeholders agree that the intent of SB 1953 continues to have merit, but it is appropriate to reassess whether SB 1953 remains the best policy for ensuring resilience and to consider potential alternatives

• As seismic compliance efforts are reoriented toward the 2030 deadline, hospitals and regulators are likely to learn rapidly about the costs of future compliance.
• Hospitals evaluate capital investments in seismic compliance in the larger context of individualized business planning, making it difficult to anticipate their actions and costs.
• SB 1953 requires hospitals to make capital investments they would not otherwise make or at a time they would not otherwise choose.
• The costs of future compliance with SB 1953 are large in aggregate but will vary significantly among hospital systems and individual buildings.
• The costs of implementing seismic compliance construction projects have increased in recent years at a rate faster than inflation.
• A number of factors influence the affordability of SB 1953, and affordability varies among hospitals.
• The lack of public funding to incentivize implementation of SB 1953 overlooks the public-good benefits of hospitals, generally, and seismically resilient hospitals, specifically.
• A range of alternative policy frameworks could be deployed to help achieve seismic resilience for California hospitals.

The 1994 Northridge earthquake led to legislation in California — Senate Bill (SB) 1953 — that requires upgrades to hospital buildings to enhance resilience to seismic events. Since the passage of SB 1953, hospitals have been implementing structural and nonstructural upgrades to comply with the standards. The potential costs of SB 1953 have raised significant concerns regarding both the financial burden on hospital systems and the opportunity costs associated with hospitals investing large pools of capital in implementing seismic upgrades.

This report updates previous RAND estimates of the costs to hospitals of future compliance with SB 1953, with a particular focus on the 2030 deadline. In addition to generating direct estimates of the costs of retrofitting or rebuilding noncompliant buildings, the authors assess the affordability of compliance based on recent hospital financial data. Given the challenges of cost and affordability, the authors also present a range of policy alternatives that could be implemented alone or in combination to ease the compliance challenge while building seismic resilience in California hospitals.

Results from quantitative and qualitative analyses indicate that, despite decades of investment in seismic compliance projects, California hospitals still face a financial obligation potentially totaling tens of billions of dollars by 2030. Many hospitals are already experiencing financial stress, and the burden of future compliance is likely to exacerbate this stress. There are options for providing regulatory relief or flexibility to hospitals: public subsidies to share the costs of compliance or reduce financing costs, additional flexibility in compliance deadlines, new standards for what it means for hospitals to remain operational postevent, and streamlined administrative processes. Regardless, addressing long-standing knowledge gaps associated with the benefits and costs of SB 1953 implementation can provide important information to decisionmakers regarding the merits of pursuing future changes in seismic requirements.

• Chapter One

  Introduction

• Chapter Two

  Study Background

• Chapter Three

  Approach to Analysis

• Chapter Four

  SB 1953: Making Decisions for the Next Decade

• Chapter Five

  Estimates of SB 1953 Compliance Costs

• Chapter Six

  Affordability of SB 1953 Compliance for California Hospitals

• Chapter Seven

  Learning from Approaches to Seismic Resilience in Other Sectors and Regions

• Chapter Eight

  Policy Alternatives for Seismic Resilience

• Chapter Nine

  Summary of Findings and Recommendations

• Appendix A

  Definitions of Hospitals

• Appendix B

  The Alfred E. Alquist Hospital Seismic Safety Act and Subsequent Policy Changes

• Appendix C

  History of California Earthquakes