Other storiesPalm Drive files for bankruptcy, plans to suspend services
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April 1, 2014
SEBASTOPOL -- With the decision to suspend all core services, including emergency care, at Palm Drive Hospital by the end of this month following its second bankruptcy filing in seven years, health officials are now scrambling to come up with a viable health care model for west Sonoma County.
But before any new model or new ownership structure can occur, hospital administrators and the district board that oversees the facility are similarly dealing with more immediate issues, such as restructured interest rates to bond holders and mountings losses.
North Bay Assemblyman Marc Levine, D-San Rafael, is currently crafting legislation that would permit Palm Drive to renegotiate its interest rates. Palm Drive Healthcare District is also working with the county on a possible bridge loan that would help it service the bondholders directly through tax rolls, according to Tom Harlan, CEO of the hospital.
The district board is set to meet Friday afternoon to consider issuance of county tax- and revenue-anticipation notes totaling up to $1.8 million, according to the agenda circulated Thursday.
Accounts payable for Palm Drive increased to nearly $6.5 million at the end of February 2014 from about $5.8 million in June 2013, according Mr. Harlan, citing an October audit of the hospital prepared by Moss Adams for the 2012-2013 fiscal years. Accounts payable increased by nearly 75 percent since 2012.
Total liabilities were $9.6 million, up 54.8 percent from fiscal year 2012 and even more in the first months of fiscal year 2014, hospital officials said.
While total operating revenues of $29 million had increased 3.4 percent year-over-year, Palm Drive was still $4.2 million short of covering its operating expenses as of June 30. The hospital ended the year with an ongoing $7.9 million deficit, a net position that had worsened by $1.4 million since the end of fiscal year 2012.
“We’ve just run out of money, and we’re at a point where to keep the doors open, even for another few weeks, it was just too much,” said Chris Dawson, president of the Palm Drive district board. “That was really the only solution at this point, to close and suspend the license. Based on where our money was, it was inevitable -- this was the correct thing to do.”
Inpatient volume has dropped precipitously over the year, from about 12 a day at one point to seven a day in February and to as little as five a day so far in April, according to the health care district.
“The current operation is certainly relevant,” Mr. Harlan said, noting that Palm Drive was recently ranked fifth in the nation in patient safety from Consumer Reports -- no small achievement for the small hospital. “But it’s not sustainable financially. We just don’t have adequate inpatient volume.”
By April 28, the hospital’s license will likely be suspended, not revoked, with hopes of eventually devising a new, more sustainable health care delivery model, Mr. Harlan said.
Other factors are driving the impending closure, including two-thirds of its patients being on Medicare or Medi-Cal, which both pay substantially lower rates than private insurance. Competition with and proximity to Santa Rosa’s big system hospitals -- Kaiser Permanente, Sutter Medical Center and Santa Rosa Memorial -- and a broader, national trend to outpatient services away from the inpatient acute-care setting are also key factors. Kaiser, already with a dominant share of insured West County residents, is also in the planning stages of a medical office building on the western edge of southwest Santa Rosa near Corporate Center Parkway -- under 5.5 miles from Palm Drive.
The proximity to Santa Rosa means Palm Drive has been unable to capitalize on a common rural hospital benefit, known as Critical Access designation from Medicare that includes higher reimbursement rates. Similarly sized Healdsburg District Hospital -- which has similarly faced financial challenges -- achieved the designation, but various boards at the Palm Drive district tried unsuccessfully over the last decade or so, board president Mr. Dawson said.
“Palm Drive tried for years to get that because that is a different reimbursement structure,” he said.
Hospital staff, physicians associated with Palm Drive and residents of West County have all expressed a strong desire for a new plan to quickly emerge, likely including around-the-clock urgent care and outpatient services. Residents, who pay a $195 per year parcel tax to support Palm Drive, have repeatedly cited concerns that without some level of emergency care, the region is more vulnerable if it has to rely solely on Santa Rosa’s three hospitals.
