SEBASTOPOL and SACRAMENTO -- Palm Drive Hospital is seeking special legislation that would allow it to refinance bond debts, which in turn would help the financially struggling hospital remain afloat.

Assemblymember Marc Levine, D-San Rafael, is crafting legislation "that would improve Palm Drive Hospital's ability to pay for patient care as opposed to paying interest," according to Mr. Levine's office.

The legislation, which is still being drafted, is modeled on a similar bill passed for 139-bed Doctors Medical Center in San Pablo in Contra Costa County, which enlisted the help of Loni Hancock, D-Berkeley, as it emerged from bankruptcy in 2011.

According to Capital Weekly, that bill, AB 644, enabled Doctors Medical Center to establish protections that ensured parcel tax revenue promised lenders would not change in bankruptcy proceedings. Without such protection, lenders may have balked at providing funding. The hospital has continued to struggle, posting a $16 million projected deficit this year.

Palm Drive likewise emerged from Chapter 9 bankruptcy, but has since struggled to maintain viable patient volumes and revenues.

According to an audited report for the fiscal year ended last June, 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, as well as a shifting reimbursement landscape under the Affordable Care Act that the hospital said is challenging for smaller providers. Healdsburg District Hospital similarly cut 30 positions at the 43-bed hospital, citing similar pressures under health care reform.

Earlier this year, Palm CEO Tom Harlan announced the hospital would reduce the workforce at Palm Drive by 15 percent. Part of that plan involves reducing the number of beds from 37 to 14, which would require less staffing.

The legislation for Palm Drive would need a two-thirds majority in each house and a signature from Gov. Jerry Brown.  Palm Drive has borrowed cash by way of bonds at a lower-than-normal rate given its history of financial uncertainty.

In 2007, Palm Drive filed for bankruptcy protection after posting losses of  nearly $7 million a year in operating revenue. It emerged from Chapter 9 in 2010 after selling off $11 million in bonds.

The legislation being drafted by Mr. Levine's office is considered a "district bill," meaning it only affects the assemblyman's immediate area. Such bills often receive bipartisan backing in Sacramento.

In 2011, the Palm Drive Healthcare District aligned the hospital with Marin General Hospital, a much larger district hospital in Greenbrae that also struck an affiliation with Sonoma Valley Hospital. The move with Marin General was seen as an ideal fit for Palm Drive, and the three hospitals -- all overseen by districts -- would seek cost-saving measures.