Hospital, Heal Thyself

In the fall of 1999, San Francisco voters approved a $299 million bond measure to replace Laguna Honda Hospital, a skilled nursing institution located on a woody hillside west of Twin Peaks. The bond's political sponsors promised, in a barrage of newspaper and television advertisements, that the new hospital would cost no more than $401 million. They swore that a team of architects would start designing the new facility the moment the bond measure passed. They said Laguna Honda's replacement would open for business in 2006 without losing a single bed.

Two years later, the project is a shambles. The design is still in preliminary stages. City planners have yet to decide how many buildings they want to build, what size the buildings should be, or how many beds each will hold. Due to planning delays and inflation, the cost of constructing the hospital has escalated by scores of millions of dollars. Adding to the project's woes, a lawsuit filed by Laguna Honda patients last year could significantly reduce the money available to operate the hospital in the future.

Laguna Honda Hospital has served the city's elderly and severely disabled indigent people for more than 70 years. Some of Laguna Honda's patients need round-the-clock nursing care; others are better able to fend for themselves, but they have nowhere else to live. One of the few problems with the basically well-run skilled nursing facility is that its floors are configured as 30-bed wards. Nursing home standards have changed since 1926, when the hospital was built. The Centers for Medicare and Medicaid Services, the federal agency that oversees nursing homes, has told the city -- repeatedly since the early 1980s -- that ward living is a violation of privacy rights and that the city needs to provide more private space to its charges, such as two-, three-, or four-bed rooms. The feds habitually granted the city an annual waiver from the privacy requirements, however, since it is prohibitively expensive to remodel the wards.

As the 1999 election season approached, the Independent newspaper made replacing Laguna Honda the focus of a fervent publicity campaign that harmonized with the paper's cheerleading for the re-election of Mayor Willie Brown. A "Save Laguna Honda" campaign committee was led by Brown's campaign manager, Jack Davis; Brown fund-raiser Joe O'Donoghue; Sal Roselli, chief of SEIU Local 250, a union that represents public health employees; and City Attorney Louise Renne. Despite previous engineering studies that showed the cost of replacing the 1,200- bed hospital would be close to $1 billion, the campaign committee proposed to complete the project for only half a billion dollars.

When property-tax-paying voters grumbled loudly about even that cut-rate price, the committee chopped the cost to $401 million by "developing a more efficient project schedule." It also proposed using San Francisco's $100 million windfall settlement with tobacco companies for construction expenses, which meant voters would have to approve only $299 million in bonds. Just about every politician (and media outlet) in the city jumped on the "Save Laguna Honda" votewagon. On Election Day, the measure passed with 73 percent of the vote.

It took the Department of Health, which owns Laguna Honda, a year to hire an architect for the job. The new hospital is now scheduled to be completed in 2009 -- three years later than originally promised by the bond's sponsors. The task of figuring out how to build a brand-new hospital on the cheap -- while the old hospital remains fully functional during years of construction -- has proved to be a Sisyphean endeavor for city planners.

One problem is that construction costs in the Bay Area are rising by 17 percent a year. Lost time translates into lost money. Michael Lane, the Laguna Honda project manager, says that, due to delay and the inflation of construction labor and material prices, the cost overrun is now calculated at $88 million. (That figure could drop if the rate of inflation decreases, Lane says.)

Those added costs mean the size and scope of the hospital design must be reduced. Figuring out how to reduce it takes up time, which costs ... money. There is no other source of funds that can be tapped for the $88 million overrun, Lane says. The bottom line, according to Lane, is that the hospital must be built for $401 million. That means the project must be cut back by $88 million worth of hospital. Reducing the number of beds is one of the belt-tightening options under consideration.

But even as the project shrinks in absolute size, more space than was anticipated is needed for nursing stations and rehabilitation areas, which adds another $10 million to $12 million to the construction budget. Newly strengthened seismic safety standards have tacked on extra engineering costs, too. It appears that when these factors are realistically figured into the design, either the project will have to far, far exceed its $401 million budget cap, or it will be a very, very small nursing facility.