After years hemorrhaging millions of dollars, even closing for a year and a half, Sonoma West Medical Center in Sebastopol remains stuck in a financial ICU.
In October 2015 “when we reopened the hospital — this is my own mistake — the assumption was that we were reopening and doing business,” said Gail Thomas, treasurer of the district board and former president and board member of the Sonoma West Medical Foundation for a decade. “That was wrong,” she said. “We were reopening a startup” as if it were a new hospital. “All startups have financial challenges initially.”
In January, 25-bed Sonoma West lost $200,000, but in recent months bled at rates of nearly half a million dollars. In a letter of intent dated Feb. 15, Sonoma West opened the door to selling itself to a Florida-based investment startup that changed its name to Americore Health in September after initial creation as White Diamond Holdings nine months earlier.
Weeks later in early March, the hospital’s five-member board shifted its position from selling the hospital toward an operating period under lease before further consideration of sale. That new proposal under study was presented to the community in a special meeting March 9.
“In this new model with Americore,” Thomas said, a management contract could move toward a lease, “We frankly don’t want to do the sale until we see success.”
Sonoma West Medical Center is owned by Palm Drive Health Care District. Eight months ago, the district turned over management of the hospital to another outside firm — Pipeline Health, based in Los Angeles. Under the Pipeline deal, it continued losing money. Now, transition from Pipeline could occur within the next month or so, Thomas said.
One “reason for the Sonoma West financial crisis is that it no longer receives public compensation for charity care,” Thomas said. “That amounts to about $1 million a year,” Thomas said.
She talked with leaders of small hospitals throughout the U.S. and found that most face monthly deficits from $200,000 to $600,000. One rural hospital near Pittsburg lost $500,000 a month; another in Kentucky, $400,000.
Sonoma West seeks new, creative ways to stay afloat, Thomas said. “We are vastly under-reimbursed,” she said. Small hospitals have scant leverage in negotiating reimbursement from insurance companies, she said. “We don’t get reimbursement at the same rate as larger hospitals. You can’t do that very long without having a problem. Is there another paradigm?”
Sonoma County has just over 800 beds in all its hospitals combined, including Memorial, Sutter and Kaiser, plus four smaller hospitals. That amounts to 1.6 beds per 1,000 residents, compared to 2.6 beds per 1,000 residents in the Bay Area. “We are significantly under-bedded,” Thomas said, and Sonoma West’s 25 beds are “absolutely essential. We relieve pressure” on larger hospitals. “It is in the interest of the county to make sure all four small, rural hospitals are alive and well,” she said.
Sonoma West has more laboratory facilities than it uses, Thomas said, and Americore could expand the facility’s lab business to draw new revenue. “We have one of the best chemical-analyzer machines north of the Golden Gate Bridge. We are looking at marketing our laboratory services” as well as radiology imaging services, she said, while maintaining high-quality acute care in the hospital.
“What different things can we do to bring in income streams to support the hospital,” she said. “It’s an entrepreneurial concept.”