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North Bay Business Journal

Monday, October 10, 2011, 6:45 am

Palm Drive weighing affiliation proposals from five suitors

Adventist, Marin district, St. Joseph Health, Catholic Healthcare West, HealthTech

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    SEBASTOPOL — The Palm Drive Healthcare District has received proposals from five health care organizations for possible affiliation, as the 37-bed hospital overseen by the district seeks a larger entity to assist in providing long-term financial stability.

    Adventist Health, the Marin Healthcare District, St. Joseph Health System–Sonoma County, Catholic Healthcare West and HealthTech, the current operator of the hospital, all submitted proposals to Palm Drive  after the hospital in August solicited offers on potential partnerships.

    That there were multiple proposals  bodes well for Palm Drive, according to Nancy Dobbs, board president. Palm Drive had initially sought proposals from seven  health care organizations, the other two being Sutter Health and the University of California, San Francisco.

    The board at Palm Drive, which just last year emerged from bankruptcy protection, has concluded that a stand-alone hospital would be too difficult to operate, a point that has been echoed by district hospitals across the county and the country. 

    Earlier this spring, Palm Drive and Adventist Health entered into discussions on possible affiliation. The Roseville-based group’s Northern California network, which includes five hospitals from Vallejo to Mendocino County, now proposes that Palm Drive affiliate with its St. Helena Region, which includes  St. Helena Hospital Napa Valley and St. Helena Hospital Clear Lake, formerly a once-troubled district hospital itself.

    The proposal, by far the most specific,  includes a line of credit of $6 million over the next three years for improvements, marketing, physician recruitment and renovations. Palm Drive would be obligated to repay only interest at a rate of 5 percent on a monthly basis, the proposal says.  It also proposes a five-year term, for which the Palm Drive board would pay a fixed annual fee of $1.7 million to Adventist Health for all services, plus certain incentive fees.

    Palm Drive would also be granted permission to use the words “St. Helena Region Member” as part of a re-branding strategy. It also suggests a name change to possibly Palm Sonoma Hospital, which would indicate a wider regional reach, according to the proposal.  Other aspects include additional physician recruitment, practice management, service line support, patient care support and expanded services and contracting services.

    Palm Drive currently pays its current operator, HealthTech, about $700,000 a year, which includes the CEO’s  and CFO’s monthly salaries and the monthly service fee,  according to the hospital.

    Marin General Hospital, the largest district hospital in the North Bay,  suggested an affiliation similar to one it reached with Sonoma Valley Hospital earlier this year, which includes shared services for finance, planning, human resources and strategy, among others.  As a larger district, Marin General has said it intended to seek smaller districts to the north to create economies of scale.

    Marin General, with annual revenues of $300 million, proposes to provide Palm Drive with executive leadership, governance support and management support. The CEO of Palm Drive would become a member of Marin General’s management team in  a dual relationship but would still report to the Palm Drive board. Marin General also proposes to provide the Sebastopol hospital access to the Prima Medical Foundation, which would in turn help with physician recruitment and retention, according to Marin General.

    Other elements of Marin General’s proposal include service consolidation, IT support, clinical alignments, group purchasing, capital finance, human resources  and additional strategic alliances. Marin General’s CEO, Lee Domanico, would be able to advise the Palm Drive board on a range of issues. Marin General and Sonoma Valley are also founders of the Prima Medical Foundation, and Palm Drive could benefit from that with increased specialists and physician recruitment capabilities, according to the proposal.

    St. Joseph’s, which owns Santa Rosa Memorial Hospital, cites its experience in working with two health care districts already in Sonoma County — Petaluma Valley Hospital, which is operated by St. Joseph’s, and Healdsburg District Hospital, with which it entered into an alliance late last year. It also currently partners with UCSF in providing neonatal intensive care at Memorial, which draws patients from throughout Sonoma, Mendocino and Lake counties, according to St. Joseph’s.

    Investment in primary and specialty care, development of clinical alignments, potential collaboration with other area providers in an insurance product  and exploring additional strategic partnerships are all listed as potential benefits offered by St. Joseph’s. Palm Drive could benefit from the health system’s three urgent care centers — in Windsor, Santa Rosa and Rohnert Park — as well as its Health Information Exchange.

    St. Joseph’s estimates Palm Drive treats about 600 inpatients per month, and that about 80 percent of West Sonoma County residents requiring hospital-based care are traveling elsewhere for services. St Joseph’s believes it could help lessen that number by providing more options for residents in Sebastopol, Forestville, Guerneville, Occidental, Monte Rio, Bodega Bay, Rio Nido, Jenner and Duncans Mills.

    San Francisco-based Catholic Healthcare West, currently the nation’s fifth largest health system with more than 10,000 physicians in its network across three states, also expressed interest in Palm Drive. Specifically, CHW said it was prepared to offer: clinical alignment and integration, expansion of services, medical foundation infrastructure, physician recruitment and retention, strategic planning and financial management. 

    CHW notes that it is not offering an economic integration or risk-sharing arraignment, but would be open to such an idea in the future.

    HealthTech, the current operator of Palm Drive, has said it would both continue to operate the hospital, if asked to do so by the board, as well as help it identify prospective partnerships. In its most recent proposal, Tennesee-based HealhTech says its desire is to assist the board in managing the affiliation process.  That would include strategic planning, compliance guidance, cash management, executive leadership and with operations. 

    The board is expected to make some form of decision by November.

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