Last Wednesday's cover story, "Stanford's big plan," outlined Stanford University Medical Center's 2.5 million-square-foot proposed redevelopment project -- one of the largest and most complex in the university's history -- and the reasons behind it. This week, the Weekly examines the obstacles facing Stanford in reaching its ambitious goals.
Stanford Medical Center's billion-dollar plan to revamp its medical center -- including two hospitals, teaching and research facilities, physicians' offices and parking structures -- may be one of the most complex redevelopment projects for Palo Alto and for the university.
But it is only one of 435 hospital projects statewide simultaneously racing to meet California's seismic-safety mandate by 2013.
Nearby, El Camino Hospital in Mountain View began building its new, $480 million, 396-bed hospital last summer. Its completion is planned for July 2009.
In Burlingame, Mills-Peninsula Health Services broke ground last November on a $528 million, 243-bed hospital that is expected to open in 2010.
And further north, University of California, San Francisco, plans to carry out a $300 million seismic retrofit of its existing facilities while building a new, billion-dollar, 289-bed hospital.
The driving mandate went into effect after the 1994 Northridge earthquake, which resulted in $3 billion in damages to Southern California hospitals. Subsequent legislation requires all hospitals to be able to stay open and functional during an earthquake by 2030, with the retrofitting or rebuilding of high-risk buildings to be completed by 2013.
Hospitals that do not comply with the mandate could risk losing their licenses.
While serving as models for what Stanford can do, the concurrent projects statewide also create problems. First, they increase demand on the materials and labor required for hospital construction, which in turn creates inflated construction costs. Then, there's the potential logjam at the state agency that must approve all of the projects.
And not the least of the hurdles, Stanford must overcome some local challenges before shovels may touch the ground at Welch Road and Pasteur Drive: earning approvals from Palo Alto and finding more than $1 billion to pay for the massive project.
Undaunted, Stanford Medical Center is already working its way through the process, on its quest to build a brand new, 1.4 million-square-foot Stanford Hospital; add 425,000 square feet to Lucile Packard Children's Hospital; replace medical school facilities; and demolish more than 1 million square feet of existing buildings over the next eight years.
Cedars-Sinai Medical Center in Los Angeles is the first hospital in the state to comply with the new seismic laws.
"We did not want to delay this so we started right away," Vice President of Facilities Larry Colvin said. "We wanted to make sure our patients and our staff was safe."
The $700 million, 2 million-square-foot, 952-bed facility -- part of which was built in 1976 and therefore was able to be retrofitted rather than rebuilt -- was completed last December after seven years of construction, according to Colvin.
Cedars-Sinai's new Saperstein Critical Care Tower now stands tall, gleaming with 11 stories of green-tinted glass and earthquake-proof engineering, able to withstand a strong tremor. (The California Office of Statewide Health Planning and Development (OSHPD) defines a "moderately strong earthquake" as being between 6.0 and 6.9 on the Richter scale. The Bay Area is expected to experience a strong earthquake by 2032, according to OSHPD.)
A seismically safe hospital requires several important structural features to ensure that it can remain functional in the event of a disaster.
All buildings must have special bracing for all light fixtures, ducts and ceiling-mounted medical equipment, in addition to water supplies that can last 12 hours and 48-hour sewage holding tanks, Stanford Vice President of Planning, Design and Construction Mark Tortorich said.
"The hospital has to be able to be on its own for some time," he said.
The stricter seismic standards require hospital buildings to be taller to fit several-feet-thick steel beams between the ceiling of one story and the floor of the next.
The standards demand an incredible amount of steel and concrete. For example, the concrete used for University of California, Los Angeles's new Ronald Reagan Medical Center could pave 42 football fields at a depth of one foot.
UCLA is also using 26,000 tons of steel and 1.7 million pounds of ductwork, not to mention the 3 million pounds of marble shipped from Italy to complete famed architect I.M. Pei's vision. It is "the largest building project in the entire UC-system history," UCLA spokeswoman Roxanne Moster said and is built to withstand an 8.0-magnitude quake.
To add to the complexity, hospitals must continue to care for patients and handle emergencies amid all the bulldozing, welding and hammering.
"The most difficult thing was having to do this work in a fully operating facility," Colvin said of the Cedars-Sinai project. "We worked weekends and nights, trying to have the least impact."
Building hospitals also requires fulltime inspection to ensure perfect execution of drawings.
"The process of inspection and scrutiny of how things are built is much greater in a hospital building than it is in any other type of building that isn't so heavily regulated," El Camino Hospital Vice President of Facilities Ken King said.
But before work may begin toward the 2013 deadline, medical centers must receive OSHPD's approval. There's an incentive -- a two-year extension of the deadline to 2015 -- for hospitals that submit drawings to the state by January 2009.
Thee length of OSHPD approval time for hospitals has ranged from 18 months to two years.
Stanford hopes to break ground in 2010, Tortorich said.
Financing the more-than-$1 billion project will likely be tougher for Stanford Medical Center than for other hospitals in the state.
Unlike Cedars-Sinai and UCLA -- which will open its new, $829 million, 1 million-square-foot, 520-bed medical center next spring -- Stanford will not receive money from the federal or state governments to assist with construction costs.
The Federal Emergency Management Agency (FEMA) gave $432 million to UCLA's medical center for damages sustained from the Northridge earthquake; the state provided an additional $44 million.
Nor will Stanford seek public bonds like El Camino Hospital, which is a district hospital. Voters approved a $148 million bond measure for El Camino in 2003, allowing the Mountain View hospital to break ground last June.
Instead, Stanford will rely on its own revenues, raise money from donors and borrow the rest.
Stanford Hospital Interim Chief Financial Officer Mike Buhl estimated that about two thirds of the money would come from operations, while a third would become debt.
Only 5 to 7 percent of the money needed for Stanford Hospital would come from philanthropy, Buhl said.
At Children's Hospital, however, CEO Christopher Dawes hopes donors will chip in 20 to 30 percent of the funding for that facility's upgrades.
Even with federal and state contributions, UCLA took on $400 million in debt to finance the $829-million project, according to Dr. Gerald Levey, vice chancellor and dean of the David Geffen School of Medicine.
Stanford Hospital currently operates with $850 million in debt and an annual income of $100 million, Buhl said.
The good news is that income is up significantly from six years ago, when the hospital was losing $40 million annually following a failed merger with University of California, San Francisco.
Hospital administrators attribute the turn-around to recruiting more physicians and patients, reducing staff and expanding higher-revenue-generating services such as surgeries, cancer care and neuroscience.
But the hospital also took on more debt to fund equipment replacement and the construction of outpatient facilities in Redwood City, Buhl added.
He said the hospital must be careful not to acquire too much debt or it would affect the hospital's ability to sell its bonds.
"There are thresholds we don't want to cross, otherwise your bond rating dips down," Buhl said.
Funding the rebuild will pose a challenge, but compounding that will be escalating costs due to increased demand for materials and highly specialized labor, experts say.
El Camino Hospital's budget jumped more than $100 million -- from $339 to $480 million -- when construction bids for its 396-bed hospital project came back far higher than expected.
"We did not anticipate that kind of escalation," King said.
He added that the hospital had predicted only a "modest 8 percent inflation" in construction costs, not the 67 percent that actually occurred between 2003 and 2006.
"Even though material costs in some cases doubled, the cost of labor has been a greater factor," King said.
The cost of hospital construction is expected to continue to escalate by about 12 percent each year, according to a study by construction consulting firm Davis Langdon.
"I don't think anybody anticipated the worldwide impact of construction," Stanford Hospital CEO Martha Marsh said.
Stanford expects the hospital replacement and expansion to cost "well over a billion dollars," Marsh added.
The California Hospital Association, which represents health-care facilities throughout the state, is sounding an alarm over the seismic-safety requirements and the financial problems it will cause.
"This is the most expensive unfunded state mandate in the history of California," said Jan Emerson, spokeswoman for the association, citing a study by the Rand Corporation that found the mandate will cost California hospitals a total of $110 billion.
The association is lobbying lawmakers for a "deal with the worst first" approach: California should prioritize its requirements, focusing initially on the most out-of-date facilities instead of requiring every building to be up to code by 2013.
The association is also pushing for financial assistance so that hospitals can continue to provide health care without going deep into debt.
"Almost half of the hospitals in California are already operating in the red," Emerson said. "Nobody wants to see hospital buildings being shut down because of an arbitrary deadline."
Not a factor to be overlooked, the medical center must first earn approval from Palo Alto's City Council, which has jurisdiction over the land.
The process is already off to a rocky start.
Since Stanford announced its intentions last November, the potential negative side effects -- on traffic, the visual horizon and the demand for housing and other city services -- have been at the forefront of discussions between the city, university and hospitals.
At the same time, the university also proposes to expand Stanford Shopping Center -- which is in Palo Alto's limits -- by 240,000 square feet of shops and a hotel, bringing additional workers, shoppers and drivers to the city.
"The issues are so large. There are so many of them," Palo Alto Senior Planner Steven Turner said at a "community roundtable" discussion on June 21, during which 30 residents were encouraged to voice their reservations about both of Stanford's proposals.
The 115- and 85-foot-tall towers planned as part of the adult and children's hospitals, respectively, have drawn the most mixed opinions so far.
"We're very concerned about the impact of those large towers on the horizon," Norm Beamer, a Crescent Park neighborhood resident, said.
"I'd rather see a smaller footprint and forget the height limits," disagreed Bruce Baker, a Palo Alto resident.
City leaders are taking a rigorous approach to finding ways Stanford could contribute to the city's housing stock, open space and walking and biking access in exchange for the 1.3 million new square feet of development.
"I think it's only fair to let Stanford know these are some of the things we're thinking about," said Councilman Peter Drekmeier, who is a noted local environmentalist.
He advocates the permanent protection of open space in the foothills as a trade for allowing the medical center to grow.
He and other city officials also think Stanford should provide housing for the 2,500 new employees the medical center expansion is estimated to require.
"Stanford's a great university, but it's also the biggest developer in Santa Clara County," Drekmeier said.
Through a series of Planning and Transportation Commission meetings and City Council study sessions -- which began last fall and included Monday night's discussion -- Palo Alto officials aim to determine how Stanford can make up for bringing more cars, employees and tall buildings to the area.
Stanford officials have protested Palo Alto's procedures, arguing that these discussions are premature before the joint environmental impact report (EIR) on the medical and shopping centers is completed next fall.
"It concerns me when there's a lot of speculation about things we don't really know until the EIR is completed," Dawes said, adding, "We will stand by the EIR."
But when it comes to asking Stanford to provide housing and bike and walking paths from the medical center and shopping center to the Caltrain station, Assistant Planning Director Curtis Williams said there's no question about what Palo Alto will seek.
"We don't need an EIR to tell us that that's what we want to do," Williams said.
Complicating approval from Palo Alto is the fact that the nine-member council will have four new members when the Stanford vote takes place next year.
Four of the five remaining council members -- Mayor Yoriko Kishimoto and Council members Drekmeier, John Barton and Jack Morton -- have already expressed concerns about impacts the new hospital construction would have on Palo Alto. (Vice Mayor Larry Klein recuses himself from university-related discussions because his wife works at Stanford.)
Major city decisions, such as ordinances and budget changes, require approval by five members of the council.
Stanford will lose one of its most vocal supporters due to term limits, Councilwoman Judy Kleinberg, who in May had declared herself "a cheerleader for this project."
So far, Stanford officials successfully staved off a Palo Alto City Council decision in March that would require hospitals to pay a development fee to fund affordable housing in the city.
The Palo Alto Medical Foundation paid the city $750,000 in housing fees in 1999 when it built its new campus on El Camino Real, according to City Manager Frank Benest.
Some residents wholeheartedly agree with Palo Alto's meticulous approach, including Bob Moss, who called Stanford's proposal "the biggest, most complex project in Palo Alto ever" and insisted, "It's far more important to get it done right than to get it done fast."
But others think Palo Alto should give Stanford the go-ahead for developing the medical center modernization project, citing positive -- and sometimes life-saving -- events that have secured their loyalty to both hospitals.
"I really think the city should encourage having the facility built," said Palo Altan Tom Jaworowski, whose grandchild was born at Packard Children's Hospital. "The idea that they're treated the same way as a supermarket or a condo -- come on, this is a hospital!"