Without it, hospital would have only $3,318 in cash by late April
SEBASTOPOL and SANTA ROSA — Palm Drive Hospital earlier this week was granted a $450,000 emergency loan — less than what it was seeking — from a U.S. bankruptcy court judge, which will help the cash-strapped hospital make payroll and meet operating expenses through bankruptcy proceedings.
The loan is being secured by a $150 per-parcel tax that funds the Palm Drive Healthcare District, which owns and oversees the financially beleaguered hospital, according to Michael Sweet, an attorney working on behalf of the district.
The loan approval, by judge Alan Jaroslovsky, is the latest development in the often-tense, ongoing proceedings for the hospital. Physicians and residents have vowed to keep the struggling facility open, but the district earlier this month voted to enter Chapter 9 proceedings and to close all services at the hospital by April 28.
A final bankruptcy hearing is scheduled for May 1.
The board this week was set to receive and review information from a request for proposals, issued the week prior, to see what, if any, possibilities might emerge for either survival or for a new model following Chapter 9 proceedings.
At least one proposal has been well-publicized, that of Palm Drive affiliated physicians James Gude and Michael Bollinger, in conjunction with the Palm Drive Health Care Foundation and former district board President Dan Smith.
The group distributed its proposal this week, calling for round-the-clock emergency room services to be maintained while significantly scaling back the bed count at the hospital’s inpatient care department. The proposal would also shift a good deal of services to more lucrative outpatient services and surgeries, including orthopedic, sports and corrective, spine, urology and arthroscopic.
It also includes imaging and diagnostics, an ICU and medical surge ward, inpatient and outpatient labs, a pharmacy and physical therapy. Telemedicine would also be prominently featured. The hospital would be overseen by the Foundation instead of the district starting April 29.
Whether that proposal passes muster is not yet clear, and the district and hospital CEO Tom Harlan have cited licensing concerns with the state. In order to operate an emergency room, all hospitals must have adequate inpatient services, along the labs, radiology, an ICU, and acute inpatient care and outpatient services are all tied to the same license.
Attorneys and representatives for the district had initially sought $600,000 to help pay for operations, but the judge approved $450,000. The loan will be secured through a lien on the district’s parcel tax revenue.
Earlier this week, the Sonoma County Board of Supervisors unanimously approved a bridge loan of $1.8 million to Palm Drive to help fund the impending closure of the hospital. The county’s claim will be second to existing bond holders from previous sales in 2005 and 2010. In 2010, the hospital emerged from Chapter 9 protection.
According to a staff report prepared for county supervisors, the institution needs about $925,000 to meet payroll, $400,000 to pay vendors, $340,000 for employee health insurance, $280,000 for physician payments and about $150,000 for clinic location rent and liability insurance.
Over the year, finances at Palm Drive have deteriorated. Accounts payable for Palm Drive increased to nearly $6.5 million at the end of February from about $5.8 million in June 2013, according to Mr. Harlan. He cited 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.
The hospital also owes vendors another $6 million, according to the Chapter 9 filing. Major creditors include Utah-based Innovasis, a developer of spine implant devices that is owed more than $1.6 million; San Francisco-based McKesson Technologies, which is owed just shy of $1 million; and PG&E, which is owed about $334,000.
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.
Without the recent bankruptcy loan, the hospital said it would have had only $3,318 cash on hand by the week ending April 26.
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