SEBASTOPOL -- The Palm Drive Health Care District will create a new foundation that would raise money for Palm Drive Hospital, reversing a previous decision to fold the existing foundation into the district's purview and creating an entirely new one instead.

In September 2013, the district board voted to adopt a recommendation from a consultant's report that urged the integration between The Palm Drive Heath Care Foundation and the district, which oversees operations at the 37-bed hospital.

However, the Palm Drive Health Care Foundation, an independent nonprofit, was not willing to be folded into the district, so in response, the district is following the advice of the initial report in establishing its own foundation, officials said.

“I see this as a necessary step for the community and the hospital,” said Chris Dawson, president of the district board, referring to the recent board vote. “We understand clearly that our success and stability moving forward depends in large part on our ability to engage the community and solicit philanthropic gifts to fund operations and capital investments. We need a foundation that is tightly aligned with the strategic goals of the hospital, and following ‘best practices.’”

The consultant's report, while urging the integration of the existing Health Care Foundation, had also recommended the district create its own foundation if the existing foundation was unwilling to merge itself into the district.

“A highly successful fundraising program, fully dedicated to the hospital, is essential to Palm Drive Hospital’s survival amid the financial uncertainties inherent in healthcare today,” the report said.

But, given that the existing foundation resisted integration, district board members cited another key point in the report, which said "the district must create its own separate foundation following these guidelines."

The next step will be to file the legal papers necessary to create a 501(c)(3) nonprofit organization.  The new foundation will operate under its own bylaws with a board of directors comprised of community members appointed by the hospital board.  Once formed, the district said the new foundation will launch a major fundraising effort, expected to begin the latter part of this year.

Executives at Palm Drive estimate that at least $20 million will be needed over the next few years for multiple upgrade projects, including the renovation and expansion of its emergency department and intensive care unit, replacing a CT scanner and updating mechanical, electrical and plumbing systems at the facility built in 1941 and last seriously renovated in 1991.

According to the report cited by the district board, the original foundation is not equipped for that level of fundraising in its current form,

Since 2001, the foundation has raised just shy of $1 million through 2011.

Once the new foundation, the Palm Drive Hospital Foundation, is established, the board said contributions previously donated to the hospital through the old Palm Drive Health Care Foundation may now be given directly to the hospital or to the Palm Drive Hospital Foundation.

Officials at Palm Drive said district hospitals "are increasingly relying on in-hospital foundations in order to achieve better coordination in communications, goals and fundraising."

 “A significantly improved and more collaborative fund development program will be essential to meet future operational and capital needs of Palm Drive Hospital,” CEO Tom Harlan said. “Philanthropy has become a basic necessity for any successful health care organization to be able to offer top-level patient care, incorporating modern facilities and up-to-date information and medical technology.”

The hospital is not without its fiscal challenges. It is currently considering a plan that would downsize the number of staffed beds from 37 to 14 in response to financial struggles. 

According to an audited report for the fiscal year ended in June last year, the hospital posted an operating loss of more than $4.2 million, an increase from about $3.3 million the prior year. The loss is attributed to declining patient volumes and revenue. Layoffs could also occur as the hospital seeks to shore up its finances.