Smaller hospitals innovate to avoid Palm Drive fate

[caption id="attachment_35455" align="alignnone" width="448"] Palm Drive Hospital in Sebastopol is set to close Monday after running out of cash and amassing nearly $7 million in debt.[/caption]

With the closure of long-struggling Palm Drive Hospital in Sebastopol all but assured, hospital executives and health care experts are pointing to the failed facility as perhaps the most vivid example of the myriad challenges facing the hospital industry as a whole.

Despite countless last-ditch efforts to save 37-bed Palm Drive, the district board that oversees Sonoma County's smallest hospital last week voted to go ahead with a planned closure of all operations, including emergency care, on Monday, shortly after declaring Chapter 9 bankrupting for the second time in seven years.

Although the issues leading to Palm Drive's closure were multifaceted, in some cases specific to geographical challenges, the small but beloved hospital is far from alone in the ongoing evolution of the Affordable Care Act world of health care reform, experts said.

"Unfortunately, Palm Drive is not an isolated case," said Jan Emerson-Shea, a spokeswoman for the California Hospital Association, echoing a sentiment  repeated throughout Palm Drive's process to shutter operations and cited by scores of hospital administrators across the North Bay. "There are hospitals across the state that are really struggling to remain open and operating."

At least eight hospitals -- including Palm Drive -- across the country have either filed for bankruptcy or closed just in 2014, according to Carr Consultants, a national health care adviser. In the greater Bay Area, oft-financially strapped district hospital Doctors Medical Center in San Pablo is similarly teetering on the edge of its second bankruptcy since 2008. The same adviser for Palm Drive, Chicago-based Huron Consulting Group, is counseling Doctors in San Pablo, a safety-net hospital for western Contra Costa County.

No hospital is immune to the issues, which include reduced Medicare and Medi-Cal rates, a move away from costly inpatient care to the outpatient setting and a multitude of regulations unique to the state that make California particularly challenging, Ms. Emerson-Shea said.

To that end, hospitals across California are facing $23 billion in payment cuts between now and 2023, she said. Of that, $17 billion is related to the Affordable Care Act, which places a high value on prevention versus hospitalization. That's likely a positive development for patients, but it spells a tough road ahead for hospitals both large and small. Districts at a disadvantage

Yet smaller, publicly run hospitals like Palm Drive can be particularly vulnerable, often lacking the organizational structure and size to cope with the fast-moving landscape, health experts said.

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