[caption id="attachment_46174" align="alignright" width="313" caption="Palm Drive Hospital is now affiliated with a network that includes Marin General Hospital, Sonoma Valley Hospital and Prima Medical Foundation."][/caption]

SEBASTOPOL -- The Palm Drive Healthcare District on Monday night unanimously approved an affiliation agreement with Marin General Hospital, a move that district officials hope will help Palm Drive Hospital achieve long-term financial stability.

The district board's 5-0 action is aimed at firming up finances by aligning Palm Drive with an expanding network of district hospitals, all benefiting from shared and consolidated services, the officials said.

To allow the Marin General negotiations to move forward, the Palm Drive board also unanimously approved an agreement to let HealthTech, the current operator of the hospital, transition away from the 37-bed facility.

Starting Jan. 1, HealthTech will assist in the four-month shift to Marin General, with the current top executive and financial officers consulting on an as-needed basis. CEO Rich Polheber will receive four months of severance pay and benefits, and CFO David Glassburn, one month.

The HealthTech contract was set to expire in November 2012, but the new agreement accelerates that.

Tennessee-based HealthTech assisted the hospital in identifying a long-term affiliation. Greenbrae-based Marin General, a much larger district hospital, emerged in recent months as the preferred partner.

The Marin hospital was preferred for a number of reasons. Chief among them was a similar affiliation agreement with Sonoma Valley Hospital earlier this year.

"Marin General has a managed services agreement with Sonoma Valley Hospital," said Palm Drive board President Nancy Dobbs. "Our agreement makes it a three-district hospital network. The strength between the three of us is really an attractive element of this proposal."

For $15,000 a month, Marin General, itself a district hospital, will oversee potentially consolidated services that include the finance department, information technology systems, patient accounting, purchasing, human resources management, clinical departments such as lab, pharmacy and radiology. Marin General would also provide Palm Drive's chief financial officer.

The affiliation agreement will aim to implement "mutually beneficial" projects for the three hospitals. Among them is physician integration  and development, which includes a plan to introduce the Prima Medical Foundation into the Sebastopol market.  Sonoma Valley has cited the inclusion of Prima as a positive development in retaining physicians, and each hospital has cited increased negotiating power with insurers as a potential benefit of the expanded network.

Palm Drive sought affiliation proposals from numerous health systems and Marin General, acknowledging that stand-alone district hospitals are at a disadvantage amidst a backdrop of health care giants such as Kaiser Permanente and Sutter Health.

But Marin General officials are quick to point out that the alignment of the three hospitals does not necessarily replicate such large systems. Rather, it provides for some of the advantages of as system without ceding ownership or outright merging operations, they said.

Under the affiliation agreement, each hospital district will remain autonomous from one another and have the power to appoints its own top executive.

"It certainly is a network," Ms Dobbs said. "It's not a system in that they (Marin General) are the boss. Each hospital maintains accountability. A network carries a lot of advantages of a system."

Initially, Adventist Health had pursued an affiliation, but backed out of talks around with Palm Drive this fall.In 2007, Palm Drive sought Chapter 9 bankruptcy protection after hemorrhaging nearly  $7 million in operating losses. It emerged from Chapter 9 in May 2010 after selling off $11 million in bonds.