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The Sutter Impact

Author: Karen Hart
July, 2014 Issue

Construction of the new Sutter Santa Rosa Regional Hospital has eased the employment stalemate in North Bay construction.

If you’ve driven past Highway 101 near Mark West Springs Road in Santa Rosa, you’ve probably seen the new Sutter Santa Rosa Regional Hospital under construction for the last four years. Crews arrive around 6 a.m. and work until late afternoon. On any given day, you’re likely to find 100 to 200 workers at the site. And in recent months, some crews come later in the day and work throughout the night on the 183,000-square-foot hospital that will officially open its doors for business on October 25.
The project is the result of California’s hospital seismic safety law, State Senate Bill 1953 (SB 1953), which passed in 1994. The law requires hospitals to meet new earthquake safety standards—a requirement with no government funding and therefore so massive it could threaten to bankrupt even the most financially sound hospital. (See “SB 1953 At-A-Glance,” below.) Currently, the estimated construction cost per hospital bed is about $2.4 million, according to Tom Minard, senior program manager of facility and property services at Sutter Health. “It’s a daunting task across the state,” says Minard, “and SB 1953 requires anyone who owns a hospital to comply.”
After the law passed requiring each hospital either be retrofitted or rebuilt to comply with the new earthquake standards, the county of Sonoma, which was operating the facility on Chanate Road, became responsible for ensuring seismic compliance. The county of Sonoma at that point sent out an RFP (request for proposal) to health care systems to lease out the Chanate Road facility. Sutter Health was selected, and the leasing agreement they made satisfied the county’s obligation to meet SB 1953 and ensure health care service needs were met in the community. This agreement between the county and Sutter Health is called the Health Care Access Agreement (HCAA).
Sutter Health explored the possibility of retrofitting the hospital on Chanate Road, according to Lisa Amador, strategy and business development executive for Sutter Health, but, “As it turned out, it would take many more years and be operationally challenging to retrofit, and cost almost as much as it would to build new,” she says.
Since it was more feasible to build a new hospital, Sutter Health began its search for land in 2000, a process that would take two-and-a-half years. “It was an exhaustive site search,” says Minard. Sutter Health needed 25 to 35 acres of land on a major highway corridor with a stable power grid, access to utilities and room for a helicopter-landing pad. Minard and a community advisory board assessed 42 sites before settling on the property on Mark West Springs Road, which was owned by the Wells Fargo Center for the Arts. The property was purchased in 2006.
The new hospital construction project would become a $284 million investment by Sutter Health, creating more than 1,500 jobs over a three-year timeframe. On the campus, Sutter Health also contracted with a developer to construct an 80,000-square-foot medical office building at an estimated cost of $16 million.

An economy in crisis

The project was on schedule and Sutter Health was in the midst of completing an Environmental Impact Report (EIR) in advance of construction when the financial crisis of 2007-2008 hit. (See “What’s an EIR?” page below.) Considered by many economists to be the worst financial crisis since the Great Depression of the 1930s, it threatened the total collapse of large financial institutions and forced the bailout of banks by national governments and downturns in stock markets around the world—and it impacted many businesses and employees in the North Bay.
“At that time, we were in the midst of the EIR process,” says Tom Jones, principal of Brelje & Race Engineers. “The day the market dropped and over the next six to nine months, there was a dramatic impact on the county. Over that period of time, development work came to a standstill, which had a significant impact on a number of development-related firms in the county.”

A silver lining

Though the market was collapsing, the silver lining happened to be Sutter Health’s commitment to the project.“We had a commitment to the community, money approved, and we were moving forward,” says Amador. “The size of the project and amount of work kept people employed in many trades throughout the county.”
“It was never an option not to build,” agrees Minard.
The hospital project would infuse a massive amount of revenue into a sluggish local economy; hundreds of jobs were created and maintained during the planning, design and construction of the new hospital. Some of the major local businesses that worked on the project include Blakeslee Electric, Petersen Mechanical, Brelje & Race Engineers and Ghilotti Construction.
“Even though the economy looked bleak, we were about to build a hospital,” says Jeff Blakeslee, president of Blakeslee Electric in Santa Rosa. “It was a morale booster: We would build a hospital that would be part of the community for a long time.”
“At the time, other businesses, such as those in hospitality or entertainment, weren’t building,” says Jason Tabacco, director of project management for Unger Construction Company. “Hospital work was a good place to be.”
The project also provided additional financial stimulus for hotels, restaurants and other goods and services in the Mark West Springs, Windsor and Santa Rosa communities as crews from throughout the North Bay and other areas started work at the site. Some stayed in the area for two weeks or more to complete their tasks. What’s more, even local food truck vendors benefited from the project, visiting the construction site each day to keep laborers fed.

Full steam ahead

Unger Construction Company of Northern California, an organization with expertise in building health care facilities (among other project types), was hired to spearhead the project, along with HGA in Sacramento, a company that specializes in health care architectural design. A site office was set up in an onsite trailer, and a room inside, dubbed the “Big Room,” became command central. The project brought work for designers and engineers of numerous trades, general contractors and subcontractors, planning consultants, information technology consultants, environmental consultants and more.
“Local businesses had to compete for the jobs, but if they were qualified and their rates were competitive, we hired local. A tenet by Sutter, and it was the right thing to do,” says Minard.
How did the new hospital construction project impact local businesses?
Brelje & Race Engineers helped Sutter Health with the preparation of the EIR, beginning in 2005, and assessed about 30 different potential sites for the hospital.
“Over the years, we averaged about three full-time employees on the job, which was helpful during the heart of the recession when most other development-type work had come to a halt,” says Jones. “We would’ve had to lay off several people without the Sutter project. The good news is, we were able to keep long-term employees working productively.”
Blakeslee Electric joined the project early on, mostly in a consulting capacity as the new hospital was being designed. “Our pre-construction services kept us employed for two years before we started the project in earnest. Several of our people were getting paid long before the first shovel went into the ground. This helped with overhead and let us retain our staff in anticipation of the project.” Blakeslee Electric’s crew began work in 2011, and the project has kept 15 to 20 full-time employees at the job site.
“At that time, work was scarce and this hospital project helped us out tremendously,” adds Brian Ongaro, vice president of operations at Ghilotti Construction Company. According to Ongaro, the project kept anywhere from 10 to 30 of the company’s employees working at the construction site. “We have an active workforce of about 230 field employees, and, at one time or another, the majority of them have placed their boots on the project—so it kept a lot of guys working, and it also helped us keep the light on and the company going.” Since the project began, Ghilotti Construction has clocked in about 9,500 man-days of labor, spread over about 1,000 days (equaling roughly 75,000 labor hours) of work.
According to Tabacco, about $57 million has so far been spent on the project, using local professionals and businesses, and may ultimately add up to as much as $64 million by the time the project completes.
When the project required going to companies based outside the county, such as for the installation of elevators, those workers stayed in the area to complete the job. The impact on hotels, restaurants, gas and entertainment generated more money into the economy for local businesses. Tabacco estimates each person spent about $1,000 per week.

A lean and complex project

Aside from meeting the requirements of SB 1953, building a hospital is a complex operation that requires a well-orchestrated team effort. “Other than a nuclear power plant, a hospital is one of the most complicated buildings you can construct¾everything has to work perfectly,” says Minard. “It necessitates a highly collaborative approach, because thousands of people are involved.”
Hospitals are considered an “essential service building” and are expensive to build, adds Tabacco. “A hospital is designed to keep running for three days as an island [in the event of a natural disaster],” he says. “They must have water, fuel, supplies and generator power. Other public structures, such as office buildings, theaters or restaurants are designed so people can exit to safety, but might not be serviceable after an earthquake.”
Sutter Health was also committed to building a hospital by using a lean construction project management approach to manage and improve construction processes with minimum cost and maximum value by considering the needs of patients and their families.
“Lean project management aligns the whole team [owner, designers and builders] to focus on the true value of the project as identified by the owner,” explains Tabacco. “Employing the ‘lean ideal’ of continuous improvement in our design and construction processes and in managing the use of our resources brings reliability to the project budget and schedule by improving productivity and the reliability of workflow. Lean management works on any type of project, but is especially beneficial on hospital projects that incorporate a higher standard of code requirements for design and construction.”
“We appreciated the professionalism of Sutter and the team it assembled,” adds Jones. “It’s one of the most collaborative teams I’ve ever worked with.”

The next phase

Construction on the new hospital will be wrapping up this month. Then the hospital will receive a certificate of occupancy from the state, letting staff begin the “staff-and-stock” phase of the project, which will continue through October. (This means the hospital will be stocked with supplies and all moveable patient-care equipment will be transferred to in the new facility. In addition, furnishings and artwork will be put into place.) The cost to move the hospital, including almost 1,500 pieces of equipment, from Chanate Road is estimated at $7.5 million.
The hospital estimates it will spend more than $30 million in medical and other facility equipment and furniture, which will create more jobs for the companies that manufacture these products and handle installation.
In addition, while the hospital doesn’t intend to hire new staff, all employees will need technical training at the new site. Overall, Sutter Health employees will complete about 54,000 hours of training on all building systems as well as the electronic medical record system before the new hospital opens.

A labor of love

The new hospital is designed to improve the quality of care, says Minard. It features 118 beds and private rooms with sofa beds for family members. In addition, it’s designed to provide more efficient care that’s centered on the needs of patients and their loved ones. “Patients will be moved around the hospital [for various services] less frequently,” says Amador.
As for the construction crew who brought it together, the project was a windfall during the heart of a recession—and became a labor of love in the process. “It was built by local people, and that hospital will be their hospital,” says Ongaro.
“There will be Unger employees who will bring their families to this new hospital,” agrees Tabacco. “It’s a satisfying project to be involved with because of what it provides to the community.”
“We all enjoyed being involved in the project and [working with] the people involved. It’s been a first-class operation from start to finish. Many of our employees are likely to make use of its facilities,” says Jones.
“I’ve been doing construction in Sonoma County for 30 years and know many of the people personally who work for the local companies,” says Minard. “To turn over a major project to them and know the money is supporting these people and their families is great. And these people care. This is their hospital, and we’re working on this project together.”

What’s an EIR?

An Environmental Impact Report (EIR) is required to comply with the California Environmental Quality Act (CEQA), a law passed in 1972, when there is substantial evidence that a construction or development project may have a significant effect on the environment.
Sutter Health was required to complete an EIR application with the county and was warranted to hire both environmental and legal teams to complete the application. Full EIR costs for the project totaled $7.5 million, according to Sutter Health’s Tom Minard, senior program manager. The process involved public hearings, planning commissions as well as public input to address issues on the new site location such as traffic, noise and air quality.

SB 1953 At a Glance

California’s hospital seismic safety law, SB 1953, was passed by the state legislature in 1994 following the Northridge earthquake, which occurred on January 17, 1994, caused 23 Southern California hospitals to suspend all or some of their services and resulted in more than $3 billion in hospital-related damages. “Northridge changed the dynamic for everyone and now there’s a different set of criteria,” says Jason Tabacco, project manager for Unger Construction Co.
SB 1953 requires hospitals to comply with three seismic safety deadlines:
• By 2002, major nonstructural systems, such as backup generators and exit lighting, were required to be braced;
• By 2008 (or January 1, 2013, if an extension was granted) all general acute care inpatient buildings at risk of collapsing during a strong earthquake were required to be rebuilt, retrofitted or closed; and
• By 2030, all hospital buildings in the state must be able to continue operating following a severe earthquake.
Currently, there are about 2,700 general acute care inpatient hospital buildings (and about 470 hospitals) that are working toward meeting the mandates of SB 1953.

The Cost of SB 1953

About 50 percent of California’s hospital buildings will be retrofitted, reconstructed or closed over the next 28 years to meet the requirements of SB 1953, according to a report by the California Healthcare Foundation.
During that same time period, approximately 75 percent of the buildings will undergo nonstructural renovations to improve operational capabilities following a major earthquake. Researchers estimate that the total expenditures by California hospitals may reach as much as $41.7 billion.



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