SEBASTOPOL -- Palm Drive Hospital is expected to make a final decision within the next month on an electronic medical records system that could bring the 37-bed facility in line with its strategic partners while improving care.

The Palm Drive Healthcare District, which operates the hospital, has narrowed down the choice to a system made by McKesson that would cost $3.8 million over a five-year period. The price of implementation would include annual maintenance cost as well as the labor needed to operate it, said Rick Reid, the hospital's chief financial officer who is also serving as interim CEO.

Both Sonoma Valley and Marin General hospitals, which Palm Drive recently entered into an affiliation with, use a McKesson system for their electronic medical records. Getting Palm Drive in line with its two strategic partners would help strengthen that affiliation, said Mr. Reid, who is also CFO of Sonoma Valley Hospital and vice president of finance and controller for Marin General. Mr. Reid said a new EMR system could help usher in the sort of technological advances that could play a key role in helping the oft-financially struggling hospital become more stable.

"We think that by having a computer system, we're going to be able to provide better care because we'll have more real-time information across the continuum of care," he said.

Palm Drive's board was poised to vote on the matter at its last meeting, but delayed action to see if the McKesson system could work in conjunction with another system, HarminyMD, a medical system made by Dr. James Gude's OffSiteCare. Dr. Gude, a telemedicine specialist at Palm Drive, has proposed using the two systems, but the HarminyMD system doesn't have accounting and billing capabilities. The administration said it would ask McKesson if the two systems could augment one another and, if so, at what additional cost.

The hospitals hopes to have whichever system it decides on by July 2013, which would enable the hospital to obtain so-called "meaningful use" funds from the Center for Medicare and Medicaid Services totaling $3.7 million. The meaningful use funds were established as part of the American Recovering and Reinvestment Act of 2009 as a means of encouraging technological upgrades in health care. On the other hand, payments for those not participating in meaningful use face a reduction in reimbursements. 

"If you don't do it, Medicare starts to reduce payment for Medicare patients," Mr. Reid said.

Frank Mayhew, vice president of the Palm Drive board, said the hospital could ill-afford to wait much longer on a decision because of the Medicare penalties, which would have a significant impact on the already struggling hospital. 

"It's something we have to do, or literally shut the hospital down because we don't have Medicare patients," he said. "It's that critical."

Implementation of an electronic system has numerous other benefits, board member Chris Dawson said, agreeing with the notion that the hospital needs to act soon. 

"The IT stuff is really important," he said. "Once it's in, it has to allow us to do the more important things, which is clinical integration and getting more specialists and doctors here. Hopefully we get it, we approve it, and frankly move on to other equally important things."

A final decision is expected to made at the district board's next meeting.