The Office of Statewide Health Planning and Development (OSHPD) is the building department for hospitals and skilled-nursing facilities in the state. It’s in charge of hospital building safety, which includes extensive earthquake disaster preparation. And it’s a loan company, providing loan insurance for non-profit healthcare facilities. The office is in the state Health and Human Services Agency. 

Creation of the Office

The Office of Statewide Health Planning and Development (OSHPD) originated in the ’70s as a component of the State Department of Health. It was separated from the department during creation of the California Health and Welfare Agency shortly before the adoption of the 1980 State Health Plan. In 1985, the OSHPD absorbed the responsibilities of two other state agencies, the Advisory Health Council and the Health Facilities Commission.

Advisory Health Council – In 1966, Congress passed Public Law 89-749, the Comprehensive Health Planning and Public Health Services Amendments of 1966, which mandated that states coordinate their own statewide health plan as well as plans with the federal government. California then implemented Assembly Bill 1567 creating the Health Planning Council. This council was charged with coordinating statewide health care and federal standards.

In 1973, the Advisory Health Council emerged from Governor Reagan’s Government Reorganization Plan 1 of 1970. With Assembly Bill 437, the new council absorbed the duties of several other previous statewide health agencies, primarily the Health Planning Council.

The Health Facilities Commission – The commission’s forbearer, the Hospital Commission, was created in 1971 by the Hospital Disclosure Act, Senate Bill 283. It was intended to develop and administer implementation of regulations of regulations requiring a uniform system of accounting as well as financial and statistical reporting for every Californian hospital. Its name was later changed to Health Facilities Commission with Assembly Bill 4396.

Alfred E. Alquist Hospital Facilities Seismic Safety Act (HSSA)

In 1971, the Sylmar earthquake struck the San Fernando Valley with a magnitude of 6.6, causing the collapse of several hospitals, endangering the lives of patients and rendering the facilities incapable of providing emergency care to injured people. The most spectacular damage included the collapse of Olive View Hospital in Sylmar, which opened only a month prior, and the collapse of the Veterans Administration Hospital in San Fernando, where 45 people died.

As a result, in order to ensure that hospitals in California conform to high construction standards, the Legislature passed the Alfred E. Alquist Hospital Facilities Seismic Safety Act (HSSA) in 1973. The HSSA requires that hospitals be designed and constructed to withstand a major earthquake and remain operational immediately following the quake. It also required the state to review and inspect the structural systems of hospital buildings. In 1983, the HSSA was amended and preempted local building departments from all hospital construction plan review responsibility and transferred it to OSHPD and the Division of the State Architect, creating a building department within the OSHPD called Facilities Development Division (FDD).

In 1989, an earthquake survivability inventory of California’s hospitals was completed by OSHPD. The inventory indicated that more than 83% of the state’s hospital beds were in buildings that did not comply with the HSSA. These hospitals were issued permits prior to the effective date of the act. And 26% of the beds were in buildings—posing significant risks of collapse in major quakes and loss of function in smaller or distant quakes—that were built before modern earthquake codes.

In 1991, all accountability and authority for plan review and construction observation activities relating to hospitals was transferred to the OSHPD.

Senate Bill 1953 (SB 1953)

In 1994, the 6.7 magnitude Northridge earthquake hit a neighborhood in Los Angeles causing the collapse of 11 hospitals and damage to others. Hospitals built in accordance with HSSA standards resisted the quake with minimal structural damage, while other facilities built prior to the act experienced major structural damage and had to be evacuated. They were unable to serve their communities and had to transfer out their inpatient populations, which further burdened nearby operational hospitals. Even surviving hospitals suffered nonstructural damage.

The result was Senate Bill 1953, which was written to address issues of survivability of both structural and nonstructural components of hospitals after an earthquake, including retrofitting or replacement of outdated hospital structures. The regulations developed as a result became effective in 1998.

International Building Code (IBC)

In 2008, California adopted the 2006 International Building Code (IBC) set forth by the International Code Council. The IBS incorporates the higher standards set forth by the American Society of Civil Engineers (ASCE-7 2005). This change to the building code had a direct impact on previous OSHPS pre-approvals, as well as any future pre-approvals. Companies that received a pre-approval from OSHPD prior to 2008 must now seek a new pre-approval to meet the new building codes.

Historical Reports (OSHPD website)

Biographical History (Social Archive)

Legislative Amendments to HSSA (OSHPD website)

Legislative Amendments to SB 1953 (OSHPD website)

OSHPD’s work is spread across five divisions:

Facilities Development Division (FDD) is the building department. It’s a regulatory entity that develops building standards for hospitals, skilled-nursing facilities, correctional treatment centers and licensed clinics, though it shares some jurisdiction with other state departments. The FDD is in charge of the Seismic Retrofit Program, which aims to make all hospitals strong enough to remain functional after an earthquake. It also does post-earthquake damage assessments. The division reviews all plans for hospital construction, conducts inspections and issues certificates of occupancy.  Its Hospital Building Safety Board is a group of recognized experts in health facility design, engineering and construction who advise the division in matters seismic safety.

Cal Mortgage Loan Insurance (Cal-Mortgage) administers the California Health Facility Construction Loan Insurance Program, providing credit to eligible health care facilities. Cal-Mortgage loans are insured by the “full faith and credit” of the State of California.

Healthcare Information Division collects data from licensed hospitals, long-term care facilities, home health agencies, hospices, and primary and specialty clinics. It makes  patient-level data available to qualified researchers at non-profit institutions conducting approved research.

Healthcare Workforce Development Division (HWDD) collects, analyzes and publishes data about California’s healthcare workforce and health professional training, identify areas of health professional shortage, and coordinate with other state departments in addressing the unique medical care issues facing rural areas. HWDD programs include:   Health Careers Training Program (HCTP), Healthcare Workforce Clearinghouse Program (Clearinghouse), Health Workforce Pilot Projects Program (HWPP), National Health Service Corps (NHSC) / California State Loan Repayment Program (CSLRP), Shortage Designation Program, Song-Brown Healthcare Workforce Training Programs and Research, Policy and Planning GIS/Data System.

The Division of Administrative Services handles procurement and contracts, does accounting and budgeting and provides human resource services for OSHPD.

OSHPD’s Health Professions Education Foundation provides scholarships and loans to students and health professionals who agree to practice in medically underserved areas. And the Rural Health Policy Council deals with a number of issues related to its primary mission of helping formulate and establish rural health policy for the state.

OSHPD is also supported through a number of board and commission programs:

·        Advisory Loan Insurance Committee

·        CA Health Policy & Data Advisory Commission

·        Clinical Advisory Panel

·        Committee for the Protection of Human Subjects

·        Healthcare Workforce Policy Commission

·        Hospital Building Safety Board

A little more than half of OSHPD’s $105.1 million budget is spent on development of medical facilities (including seismic work) and is paid for with money from the Housing Building Fund and reimbursements. Around 28% of the budget is spent on developing a healthcare workforce in underserved areas, promoting workforce diversity and cultural competency, and supporting the development of health training throughout the state. About 9% is spent on providing healthcare information,  6% on crunching numbers for public healthcare reports and 4.5% on the Cal-Mortgage loan program for health facilities.

About 90% of the office’s funding comes from state sources and the rest from the federal government.

According to OSHPD, the Top 10 contracts for services awarded by the department in 2012 were:

3-Year Budget (pdf)

Alleged Goldman Sachs Fraud

Long before Goldman Sachs and Co. was packaging “shitty deals” of low-quality mortgage securities and selling them to trusting clients in the run-up to the economic debacle of 2008, it was having its way with the state of California.

Nu-Med Inc., a Southern California health care services company, sold two acute care hospitals to Triad Healthcare for $135 million in 1991. Triad had been created by Nu-Med specifically to buy the two private hospitals, Sherman Oaks Community Hospital and Nu-Med Regional Medical Center – West Valley in Canoga Park. The purchase price included about $110 million in cash and $25 million in notes. Nu-Med had hired Goldman Sachs in August 1990 to help with the sale and Triad hired them one month later.

Shortly after buying the Canoga Park facility, Triad closed it and 250 people lost their jobs.

What made the deal a go was a large loan guarantee from the state’s Cal-Mortgage program, which was administered by the Office of Statewide Health Planning and Development. That put the state on the hook if there was a default, and that’s what happened when Nu-Med declared bankruptcy in July 1993. The Triad loan was the largest ever guaranteed by the 25-year-old Cal-Mortgage program and had the potential of costing the state $167 million.

In January 1994, the state filed a claim in bankruptcy court that alleged fraud and misrepresentation against Nu-Med, accusing Nu-Med and Triad of collusion to jack up the price. “These key management personnel, serving a dual role as high ranking officers of both Nu-Med and Triad, apparently caused Nu-Med to supply financial information and assumptions that were used by consultants engaged by such management personnel to support the apparently inflated value assigned to the assets,” the state asserted in court papers.

Meanwhile, attention began to focus on a possible conflict of interest in OSHPD itself. Vincent Forte, a member of Cal-Mortgage's advisory loan committee and vice president of the investment banking firm Goldman Sachs, abstained from the vote on the loan and acted as Triad’s broker in the deal. Cal-Mortgage had no policy prohibiting loan committee members from representing applicants. 

While the bankruptcy case unfolded the state Assembly Health Committee began hearings. “The Triad default raises very troubling questions about the Cal-Mortgage loan process,” according to a spokesman for Democratic committee Chairman Burt Margolin. “It's a financial disaster that the state can ill-afford. The focus of this investigation will be how this loan guarantee ever won state approval given the apparent conflict of interest that existed.”

Triad did, indeed, default on its obligations and the state was forced to pay debt service. Information obtained through the bankruptcy proceeding and the legislative hearings led to the state suing Goldman Sachs in November 1995 for $586 million for damages resulting from it failing to disclose that it represented both Triad and Nu-Med in the deal. The lawsuit accused Goldman Sachs of breach of fiduciary duty and violating the state's Fair Political Practice Act. It also alleged that Goldman Sachs earned $4.5 million on the deal.

The bankruptcy trustee valued the two hospitals, originally sold by Nu-Med for $135 million, at just over $40 million. Forte, who served on the Cal-Mortgage committee from 1984-1993, was laid off by Goldman Sachs in November 1994.

OSPHD settled with Goldman Sachs in August 1997 but it was challenged by former Triad Healthcare President Stuart Marylander. The state Supreme Court upheld the settlement in January 1999 and the state was paid $35 million.

Nu-Med Sells 2 Hospitals to Triad Healthcare (Los Angeles Times)

State of California and Goldman Sachs (Public Bonds)

Fraud Is Alleged in Troubled Sale of 2 Valley Hospitals (by Irene Wielawski, Los Angeles Times)

State Sues Brokerage Over Hospital Sale Role (by Jack Cheevers, Los Angeles Times)

State Collects Multi-Million Dollar Settlement for Ill-Fated Hospital Purchases by Triad Healthcare (Office of the California Attorney General)

Nor-for-Profit Hospitals

Historically, not-for-profit (NFP) hospitals have been exempt from paying taxes because they are organized and operated exclusively for charitable, scientific or educational purposes, and their net earnings do not benefit any private shareholder or individual.

The tax-exempt status of NFP hospitals became a subject of debate in California when Democratic Assemblyman Johan Klehs began expressing concern about the number of uninsured patients being treated by some NFP hospitals in the early 1990s. Without any legislatively-established requirements, grassroots efforts by the NFP hospitals opened the discussion on charity care.

Senate Bill 697 became a two-year bill in 1993 and outlined the need for NFP hospitals to reaffirm their mission statements, conduct needs assessments every three years, develop and implement community benefit plans, and annually submit a copy of the plan to OSHPD. OSHPD would then send a report to the Legislature. In the end, a premise of the hospital community benefit statute is that NFP hospitals provide substantial contributions to their communities in addition to charity care, but they have not been required, in the past, to document these community benefit activities.

California’s Hospital Community Benefits Law (OSHPD website) (pdf)

Freeze? What Freeze?

Governor Jerry Brown instituted a hiring freeze for state government in February 2011, but three months later indicated that OSHPD should be exempt from it for the foreseeable future. He gave the office an exemption in May to hire 26 workers for its facilities development division and rehire two retired structural engineers. The expanded workforce is expected to improve the office’s ability to review hospital construction projects, as many hospitals scramble to comply with state seismic safety mandates.

Brown Allows Hiring at OSHPD to Speed Review of Hospital Construction (California Healthline)

Retrofitting Hospitals

Among its various roles, the Office of Statewide Health Planning and Development is the state’s “building department” for hospitals. It employs hundreds of engineers, architects and construction experts to review building plans while others monitor hospital construction. It reviews more than 1,000 hospital projects a year.

As part of that job it is in charge of seismic safety for hospitals, overseeing risk assessments of potential earthquake damage and retrofitting activities. It is an enormous task that the state has given a high priority to for 40 years. So how’s it going?

Not Too Well

In May 2011, OSHPAD Director Dr. David Carlisle said 665 hospital buildings in California, one out of every five, are at risk of collapse in a major earthquake.  He warned, “In the event of a Northridge-level or Loma Prieta earthquake, they all represent a potential for collapse.” That assessment came 40 years after the 1971 Sylmar earthquake in Southern California battered the Olive View Medical Center, killing three patients.

When the Northridge quake just up the road knocked people out of their beds and buildings off their foundations in 1994, lawmakers responded. They passed legislation that year and in 2006 which essentially divided hospitals into two groups: the really vulnerable hospitals had until 2008 (later revised to 2013) to fix their buildings or face closure and the rest had until 2030 to meet new standards. The 2013 deadline was extended to 2020 for hospitals under financial hardship. But a 2007 study by the Rand Corporation found that almost half of California’s “collapse-hazard” hospitals will not meet state deadlines by 2013. And the Rand report said many of those won’t make the 2030 deadline either. The U.S. Geological Survey estimates an 80% probability that an earthquake of 7.0 magnitude will hit Los Angeles by 2030. San Francisco checks in at 62%.

The 2015 standard only demands that buildings not collapse, so people can escape safely. Facilities don't have to be capable of providing medical care after the quake. It’s not until 2030 that hospitals not only have to have eliminated all their collapse hazard buildings, they have to be functional after a major earthquake.

The Rand report noted that OSHPD had limited data on how retrofitting and replacement projects were going and projections of success were muddled by the shakiness of anticipated funding. But one thing everybody knows is that hospitals cost more than ever to build and most everyone in the state has less money than usual to spend. Since 2001, hospital construction costs in the state have almost doubled, driven by a number of factors. David O’Neill, senior officer at the California HealthCare Foundation, stated the obvious: “Many hospitals are operating below or very close to break even. For them, it will be difficult, if not impossible, to finance new construction with revenue from health care operations.”

We’re Getting There

OSHPD began using a state-of-the-art risk assessment tool in 2007 called Hazus-MH that is designed to measure the earthquake risk of hospital buildings. Hazus contains models for estimating potential losses from earthquakes, floods, and hurricanes. Any hospital can get an assessment for a small fee but the program is voluntary. Buildings that successfully meet the assessment criteria aren’t subject to 2013 seismic safety deadlines, but would be required to meet the 2030 seismic safety standards. Those buildings that fail the HAZUS evaluation remain subject to the 2013 deadlines and must either retrofit, replace or remove all acute care services from those buildings by January 1, 2013.

The 2007 Rand report acknowledged that projections of progress are difficult to make because HAZUS could result in reclassification of a number of buildings to a lower-risk category. FEMA predicted that use of the tool would result in many buildings being deemed safe that had not fared well in original testing, saving billions of dollars. And, in fact, OSHPD reported better compliance numbers three years after Rand predicted half the hospitals wouldn’t make the 2013 deadline. OSHPD said 80% of hospitals are on schedule to be retrofitted by 2015 and the remaining 20% plan to be done by 2020.

Report Finds Nearly Half of California Hospitals Unprepared to Meet Deadlines for Seismic Safety (Rand Corporation)

OSHPD Partners with Hospitals on Seismic Safety (OSHPD website) (pdf)

250 Hospital Buildings Apply for Reevaluation Under Ongoing HAZUS Program (OSHPD website) (pdf)

State Doing Little to Track Hospitals with Severe Earthquake Safety Risks (by Christina Jewett, California Watch)

Hospital Seismic Safety Law: History, Implementation and Progress (OSHPD website) (pdf)

California Hospital Seismic Retrofitting Projects Overcome Obstacles (by Corey McKenna, Emergency Management)

Will California’s Hospitals be Ready for the Next Big Quake? (California HealthCare Foundation) (pdf)

California Uses HAZUS-MH to Reassess Safety of Hospitals (FEMA)

Hospitals Scramble to Meet 2015 Retrofit Mandates (John Muir Health)

Stephanie Clendenin, 2011-2012 (Acting)

Dr. David M. Carlisle, 2000-2011. Dr. Carlisle stepped down on June 1 to become president of the beleaguered Charles R. Drew University of Medicine and Science in Los Angeles. Drew, established a year after the Watts riots, was put on two-year probation in 2009 by the Western Assn. of Schools and Colleges.

Dr. David Werdegar, 1991-2000

Larry Meeks, 1983-1991, was involved in a trial between Triad Healthcare Inc. and OSHPD