In a move that affects more than 60% of the state’s 400 health care complexes, Gov. Gavin Newsom recently vetoed an extension for California hospitals to complete seismic safety standard updates. As many health care stakeholders expected the proposed extensions to go through, the veto means these facilities are now scrambling to either bring their existing acute care inpatient buildings up to code or convert them to non-acute use by January 1, 2030.

Hospitals that do not or cannot comply with this mandate in the next five years risk the sudden closure of the facilities. The governor did leave a small opening for hospitals to seek an extension on a case-by-case basis – and signed a more targeted bill to give small, rural and distressed hospitals three additional years to meet the requirements – but the state has yet to address the underlying problem with bringing buildings into compliance: in many cases, there simply isn’t enough money to do the work.

California’s hospitals are struggling, with one in five at risk of closing due to unsustainable financial positions marked by growing operating losses, declining cash balances and debt loads, according to a 2023 report commissioned by the California Hospital Association (CHA). While the Covid-19 pandemic exacerbated these financial woes, inflation, underfunding by government payers and increased costs have continued to erode hospitals’ financial footing.

The cost of implementing seismic upgrades is also substantial. A 2019 study estimated the total cost to be $143 billion, but that does not account for inflation and the rising cost of materials and labor post-pandemic. With seismic work mandated to happen over a condensed five-year period, costs will also climb as the spike creates a shortage of skilled tradespeople and materials for all hospital-related development work, not just seismic safety work.

Mandates ignore realities

Even in a perfect scenario where the seismic safety projects pencil out, the mandates ignore the reality of retrofitting hospitals. These projects can take patient beds offline for years and distract from the day-to-day operations of the health care environment. 

They also are likely to replace projects that would improve patient experience and outcomes, which are happening at a record pace in other parts of the country. Converting semi-private rooms to private rooms, shoring up infrastructure to support new equipment and technology, and creating larger operating rooms and emergency exam spaces to comply with Facility Guidelines Institute’s regulatory codes simply can’t happen with the looming seismic safety deadlines.

One alternative to the current extremes of costly upgrades or taking buildings offline is converting them to nonacute uses, bucking a national trend of nonacute services moving out of the hospital environment and into retail and other nontraditional settings. Investing in upgrades to existing facilities without having to account for seismic safety could reposition hospitals as a place for preventative – not just emergency – care. But it does little to support patients in need of life-saving emergency services in the hours and days after a seismic event. 

Of course, the goal of keeping patients, providers and hospital staff safe from seismic activity is necessary, but the state must recognize that a growing number of hospitals simply can’t make the upgrades that are required of them – at least not without ignoring other core parts of their mission. While hospital owners are on their own in terms of gaining a deadline extension, hospitals must take a more thoughtful and holistic approach to seismic safety that improves the long-term viability of their facilities, patient outcomes, and their bottom line. 

Otherwise, the state may find itself with far fewer hospitals to provide necessary medical care, whether there’s a seismic event or not. 

While the state has been slow to provide supportive options to hospital owners by way of alternative financing, regional requirements or streamlining approvals, the reality is that we can’t afford to have hospital systems close due to unfunded building mandates. 

We believe there is still time for negotiation with the state, especially for those hospitals that are armed with a strategic plan to drive growth and add revenue streams over the coming years and decades. By making aggressive long-term plans that go beyond California’s requirements, these hospitals can unlock greater value and perhaps persuade the state to extend its deadline as part of a more comprehensive approach to hospital safety. The task now is to get started – and quickly – as the original deadline looms.

David Williams is a senior project manager and structural engineer working in PMA’s Los Angeles office and a member of ULI Los Angeles advisory board.