The California Senate has unanimously passed SB 1432, a bill introduced by Sen. Anna Caballero (D-Merced) to provide a transparent and accountable pathway for hospitals to meet stiffer earthquake codes and stay open in their communities.

The bill passed on a 37-0 vote (3 no votes). It addresses the financial distress facing California hospitals, which threatens healthcare access across the state. Under the Alfred E. Alquist Hospital Seismic Safety Act, all hospital buildings must be able to provide patient services following an earthquake by Jan. 1, 2030.

Non-compliant hospitals will be forced to close, posing a significant challenge, particularly for financially struggling institutions.

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What Would SB 1432 Do?

SB 1432 proposes extending the 2030 deadline. Hospitals could receive an extension to Jan. 1, 2033, if they meet specific criteria and submit required documentation.

Furthermore, hospitals may propose a final compliance date up to Jan. 1, 2038, and the department could grant extensions of up to five years if certain conditions are met.

The department must perform additional actions before granting extensions beyond 2033.

Kaweah Health CEO Gary Herbst, said “The time extensions available under SB 1432 would allow hospitals additional time to shore up their seismic compliance plans as well as their efforts to improve their financial condition.”

Seismic Upgrades Could Bankrupt 40% of California Hospitals

A 2019 RAND Institute study estimates that upgrading California hospitals to meet the 2030 seismic standards could cost between $34 billion and $140 billion. These expenses could push 40% of the state’s hospitals into severe financial distress, risking bankruptcy. Community and public hospitals, which serve many Medi-Cal and Medicare patients, are especially vulnerable.

“Residents in my district suffered devastating impacts with the closure of the only hospital within a 30-mile radius,” said Sen. Caballero, referring to Madera Community Hospital. “Keeping hospitals open across our state has become a top priority for me, and SB 1432 is critical to that goal.

“My bill establishes a framework that recognizes regional healthcare challenges, enhances transparency, demands accountability, and creates a viable pathway for our hospitals to meet seismic compliance standards according to each unique circumstance.”

Local Hospitals Benefit from SB 1432

Local hospitals, like Community Medical Centers and Kaweah Health, say they will benefit by this bill.

“Community has met California’s 2020 seismic requirements, so our facilities are structurally sound and safe for our employees and patients.” said Craig Wagoner, executive vice president and COO of Community Health System. “SB 1432 would afford us additional time to assess, plan and finance a path toward meeting the 2030 seismic requirements for our flagship hospital, Community Regional Medical Center located in downtown Fresno. Without SB 1432, 617 of our 685 patient beds on this campus are at risk of closing.”

Herbst said that the “passing of Senate Bill 1432 would significantly help the California hospital industry, and it would positively impact Kaweah Health. SB 1432 could potentially give hospitals an eight-year extension of the current bill (SB 1953).”

He continued, “Additionally, SB 1432 would require the Department of Health Care Access and Information and the State to make a comprehensive assessment of what the seismic mandate would actually cost California hospitals to come into full compliance.”

Herbst also noted the financial difficulty hospitals are facing: “There’s zero funding to help hospitals comply with this mandate and now more than 50% of California hospitals are operating in the red and have seen their cash reserves and debt capacity severely depleted. As a hospital industry, we are in a much worse position now than we were just four years ago to be able to fund this seismic compliance.”

With hospitals in the Central Valley closing, such as Madera Community Hospital in January 2023, other local hospitals are facing increased patient loads. The extended timeline will help hospitals ensure they meet the 2030 seismic requirements.

Madera Community received a $57 million state loan and has a new operator. Plans call for it to reopen by late summer of early fall with an emergency department and supporting health services.