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Second Appeal Analysis
PA ID# 037-90621; Kaiser Foundation Health Plan, Inc.
DSR ID# 85445; Granada Hills Medical Office Building
Kaiser Foundation Health Plan, Inc. (Kaiser)(Subgrantee), a private non-profit organization, owned and operated the Granada Hills Medical Office Building (MOB)(Facility). The Facility was a five-story, 61,392 square-foot, reinforced concrete structure located at 10401 Balboa Boulevard, Granada Hills, approximately 6 miles from the epicenter of the Northridge Earthquake. The facility collapsed at the 2nd floor level and the ruins were eventually demolished with little opportunity for salvage of its contents. None of equipment and furniture could be retrieved from the ruined building. Consequently, all the equipment and furniture was destroyed when the building was demolished.
The Granada Hills MOB was a five-story building before the earthquake, and a four-story building after. The second story columns supporting the third floor level of the reinforced concrete structure failed causing that floor level to collapse onto the second floor. The other floor levels of the building remained upright, but the building was destroyed.
Since the building was in a state of partial collapse and was red tagged, none of the equipment and furnishings was retrieved. Consequently all of it was destroyed when the building was demolished. Only the medical records, which were accessible after the fa?ade was removed, were saved. They were retrieved onto a mobile platform on a crane from a room on what had been the third floor.
The Facility was inspected on March 29, 1994, and Damage Survey Report (DSR) 68921 was prepared for $3,250 for an Architectural and Engineering (A&E) evaluation. DSR 68921 was obligated on October 14, 1994, for $681 due to a $2,569 insurance recovery deduction. DSR 82431 obligated $457,440 on October 3, 1994, for the demolition of the Facility.
DSR 85445 was prepared to provide $8,104,989 for the construction of a replacement building, and $494,404 for Engineering and Design (E&D) services, for total of $8,599,393; however, the DSR was obligated for $0 on April 28, 1997, after a deduction for insurance recovery. Kaiser demolished the building, sold the property, and planned to build a replacement facility at another location (Palmdale). Based on the new location of the replacement building, FEMA considered it to be an alternate project. Thus, 90% of the amount determined to be eligible in DSR 85445 would be available for the replacement facility. Kaiser has raised no objection to these determinations.
However, the Subgrantee also requested that DSR 85445 include $3,667,465 to replace equipment and furnishings lost in the demolition, with the requested amount based on a list entitled "Typical equipment ordered to set up a new facility, GRANADA HILLS, Loss - January 17, 1994." The list was also used by the Subgrantee to settle a claim with its insurance company. Since the Subgrantee did not submit documentation specific to the equipment and furnishings actually in the building at the time of the earthquake, FEMA did not provide funding for its replacement in the scope of work for DSR 85445. Instead, the Subgrantee was directed to provide additional documentation to support its request. Documentation subsequently submitted by the Subgrantee was found to not adequately support the claimed costs.
Kaiser disagreed with the DSR in this respect and submitted a non-concurrence letter dated November 25, 1996, stating that they had provided a list of "typical equipment" as would be used in a MOB of this size and type. The Subgrantee's position was that "FEMA's position that Kaiser has failed to show actual loss and therefore the entire equipment and furniture claim is ineligible is not reasonable." In a letter dated July 31, 1996, Kaiser stated that an inventory of the furniture in the building does not exist.
Prior to preparation of DSR 85445, Kaiser submitted a letter dated June 17, 1996, to the Governor's Office of Emergency Services (OES) that included manufacturer's quotes for the major radiology and laboratory equipment. Kaiser also provided letters, internal memoranda and records as verification that the equipment listed in the attached spreadsheets was in the Facility at the time of the Northridge earthquake. An internal memorandum attached to the June 17, 1996, letter states that the laboratory equipment was in the Facility at the time of the earthquake. Attached to a letter dated 1/23/97, Kaiser provided a list of the major x-ray equipment, including the manufacturer and date-of-purchase. This also provides vendor quotes on replacement costs.
In a letter dated July 30, 1996, Kaiser once again listed the major medical equipment and provided the following attachments:
- An internal memorandum dated July 18, 1996, that listed the x-ray equipment in the Facility, including the five items above;
- A copy of four 1993 survey reports submitted to verify the radiology equipment listed above; and,
- Copies of computer inventory records to verify the laboratory equipment listed above.
In a letter dated January 23, 1997, to OES, Kaiser submitted a cost summary table for the radiology and laboratory equipment that totaled $1,617,206. Apparently the difference of $16,495 between the amount requested via the June 1996 letter and the January 23, 1997 request is due to the film processor. In the January 23, 1997 letter, the film processor was included in the $264,995 price for the chest x- ray equipment. The list of Typical Equipment used by Kaiser for its insurance settlement is the only documentation submitted to support this claim. This list is included as backup to DSR 85445.
Request for a Supplemental DSR: In a letter dated August 22, 1997, OES submitted three letters from Kaiser to FEMA that provided information concerning the medical equipment. OES requested a supplemental DSR be prepared. FEMA responded via a letter dated October 21, 1997, stating that adequate information had not been submitted, and that, therefore, the request for additional funding could not be approved.
FIRST APPEAL (DSR 85445)
In a letter dated February 19, 1998, the Subgrantee submitted to OES another request for a supplement to DSR 85445. Since the issue had been previously addressed, FEMA treated the request as the Subgrantee's first appeal. A review of the available information was again found to not adequately support the Subgrantee's claims regarding the price, type, condition and quantity of equipment and furnishings in the Facility at the time of the earthquake. Based on the lack of adequate supporting documentation, Kaiser's appeal of DSR 85445 was denied on July 12, 1999.
SECOND APPEAL REQUEST
In an October 20, 1999, letter to the OES, the Subgrantee submitted a second appeal of the DSR 85445. The second appeal was forwarded to the Northridge Long-Term Recovery Area Office (NLTRAO) by OES on December 8, 1999.
In the second appeal of DSR 85445, the Subgrantee does not offer a materially different argument in support of its claim, nor has it submitted new documentation. The appeal reiterates the Subgrantee's previous position, i.e., demolition of the Facility precludes provision of the detailed documentation that FEMA continues to state is necessary. The Subgrantee also writes that the documentation that has been submitted to FEMA "provides reasonable certainty regarding the types and numbers of equipment and furniture" and that "there is nothing in the federal regulations which requires an eligible applicant to provide the exact purchase amount and the purchase date of each item in a claim." Kaiser also states in its appeal letter that recognizing the equipment and furniture was "s either OES nor the applicant could locate the July 6th letter, however FEMA contacted OES and the applicant to get a copy of the said letter and Kaiser faxed a copy of a letter dated July 31, 1996, wherein they proposed a settlement of 80% of the replacement value of the furniture.
OES, in its transmittal letter, supports the Subgrantee's appeal, citing "extenuating circumstances beyond the Hospital's control due to inaccessibility of the damaged facility to retrieve records and perform an inventory." Additionally, OES argues that FEMA established the precedent of accepting "typical inventory lists" by allowing certain school districts in DR-1008 to be reimbursed based on the types of books and equipment normally found in classrooms and libraries, as opposed to an actual inventory.
This appeal presents several issues. First we must determine whether the documentation submitted by Kaiser is sufficient to enable FEMA to determine which contents were in the MOB at the time of the earthquake and the value of the contents. Assuming that the documentation is sufficient to form this conclusion we next must determine the cost of comparable replacement contents in accordance with FEMA regulations. Since Kaiser maintained insurance on the contents of the MOB we must determine how much of the value of comparable replacement contents is eligible for reimbursement consistent with statutory and regulatory bars on the duplication of benefits. It is noted again that Kaiser elected not to rebuild the MOB but instead proposed an alternate project. For this reason, any reimbursement due to Kaiser for loss of contents must be further reduced by ten (10) percent.
- Has Kaiser Submitted Sufficient Documentation to Support its Loss?
The primary issue in this appeal is the adequacy of the submitted documentation to establish the type of equipment and furniture in the building at the time of the earthquake and the basis for its estimated replacement cost. 44 CFR