SEBASTOPOL -- The Palm Drive Healthcare District today will decide if it should transfer operations of its medical clinic to the Prima Medical Foundation, a move that, if approved, could help the 37-bed hospital bolster its finances while perhaps recruiting new physicians and adding new services.

Transferring operations of the Palm Drive Medical Clinic, located across the street from the hospital,  has been a long-stated goal resulting from the hospital's alignment with Marin General Hospital, which has close ties to Novato-based Prima Medical Group. Last week, the hospital's governance committee was set to approve the transition and send the matter to the district board for a full vote today.

Thomas Harlan, Palm Drive Hospital's new chief executive officer, said the board was expected to approve the deal, which would permit Prima to lease both the building and its hard assets from the health care district starting Feb. 1. The agreement is expected to be finalized by Dec. 31.

"I think it's a big deal because we are now part of a regional program," Mr. Harlan said. "I think this is long awaited."

Leasing operations -- not ownership -- of the clinic has benefits for the cash-strapped hospital, which is still charting its course after exiting Chapter 9 bankruptcy in 2010. About a year ago, the hospital entered into an alliance with Marin General and Sonoma Valley hospitals -- both districts themselves -- in an effort to gain economies of scale and to reduce operation costs.

Under the proposed contract, Prima would lease the physical assets of the clinic for $2,000 a month, while the actual space would be sub-leased to Prima for roughly $7,900 per month.  The Palm Drive Healthcare District would foot the bill for operations for the first year at a cost of $424,000. After Prima takes over operations in February, the district would have no other financial obligations related to running the clinic except the initial first-year funding.

After the first year, Palm Drive expects Prima will turn the clinic into a profitable venture.

"The ultimate objective is to have it be self-sustaining, and that can happen through this mechanism," Mr. Harlan said.

Four physicians currently working in the clinic, which averages approximately 6,500 patient visits per year, will join the Prima Medical Group as a result of the transfer. Palm Drive hopes to increase patient visits with Prima running the clinic, but it's too soon to speculate by how much, Mr. Harlan said.

Another stated goal of the agreement with Prima -- and of the alignment with Marin General -- is to recruit and retain physicians in the region.

"The foundation will enhance the stability of our local medical community while retaining the autonomy of local physicians and allowing them to continue to put the patient first when making decisions," the proposed contract says, noting that a primary care physician shortage in Sonoma County is well documented and will likely persist.

The agreement would also create a "clinically integrated, referral and care system across the area to improve patient access and quality," according to the proposed contract.

For Prima, the Palm Drive clinic would be its second such agreement in Sonoma County. It first set up a primary care practice in the city of Sonoma after Sonoma Valley Hospital and Marin General agreed on an a similar affiliation.  It also operates 11 total practices in Novato, Terra Linda, Mill Vally, Greenbrae, Sausalito and Larkspur in Marin County and formed a foundation with Marin General two years ago.

"Prima Medical Group was put together to assist local medical communities address physician recruitment and retention needs in a professional, physician led organization that is complimentary to existing medical practice," Prima Medical CEO Joel Criste said.  "Prima brings systems, contracts and people to support quality medical care and support the practicing physicians. We are pleased to work be able to work with Palm Drive Hospital and local Sebastopol physicians.”   

The agreement, if approved, calls for shifting the clinic from a 1206(D) clinic to a 1206 (L), a classification that means it will no longer be considered a hospital department and instead more like a typical medical practice. The distinction is important, Mr. Harlan said, because it means billing will be simplified.

In addition to physician recruitment, Mr. Harlan said Prima, which has a wide range of primary care and specialty physicians, could help introduce new services that could help raise additional revenue.