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Officials with Sonoma West Medical Center say the Sebastopol hospital is facing an immediate financial crisis over debt payments that has led them to call for a discussion late this week over whether to begin drawing up plans to close the cash-strapped facility.

The move comes at the outset of a new campaign by hospital officials to raise funds to pay off some of the debt. Also, last month the hospital’s owner and financial supporter, the Palm Drive Health Care District, formally put out a notice seeking a buyer for the facility, which was re-opened in 2015 after being closed as a result of chronic financial problems.

District officials insist the medical center is working through its cash-flow problem.

But while improvements to billing and collecting are yielding positive results, hospital representatives said, monthly debt payments continue to overburden the facility.

“We have kind of a set amount of money we know we have to pay every month — that amount is what’s dragging us down,” said Barbara Vogelsang, Sonoma West Medical Center’s chief nursing officer and chief operating officer.

Vogelsang said the SWMC board is expected to meet Friday to discuss whether to “go to the district with a plan to close the hospital.” It’s a discussion, she said, that should be had as the hospital continues to struggle with debt payments.

Closure of Sonoma West Medical Center would leave western Sonoma County without a full-service hospital and emergency room services.

Vogelsang said it costs about $1.8 million to run the hospital each month, a figure that includes operations costs, payroll and current bills. In May, the hospital collected almost $1.9 million, she said.

But debt payments cripple the hospital’s ability to break even, Vogelsang and other hospital supporters said. Those payments totaled more than $632,000 in May and are expected to drop to $250,000 this month and in July before doubling this fall.

“It’s incredibly frustrating to be this close to being OK and having that old debt looming over our head,” Vogelsang said. “We’ve made changes to a lot of our staffing, eliminated a few positions and decreased our overtime cost by one half.”

Dennis Colthurst, president of the Palm Drive Health Care District, which owns the hospital and supports it financially, said the hospital is nearing financial stability.

“We’ve come so far, through all the negative press and negative comments, the hospital is very close to a cash flow, being in the black,” he said.

The former Palm Drive Hospital closed in spring 2014, when the related health care district filed for bankruptcy. It reopened under a new name in October 2015 but struggled through a series of management and leadership changes and was running monthly deficits of about $1 million until last spring, when it was rescued by a cash infusion from a Florida-based company that sought to profit from the hospital’s laboratory operations.

The toxicology program generated about $31 million between July 2017 and February 2018; the hospital’s share was $10 million, or about $1.25 million a month.

But that partnership was ended this year and is now at the center of a high-stakes court fight initiated by Anthem Blue Cross.

This week’s discussion of a possible closure comes just one month after the health insurance giant filed suit against the hospital, accusing it of conspiring with Reliance Laboratory Testing of Florida in a billing scheme that Anthem claims defrauded it and its members of $16 million.

The lawsuit alleges that the hospital knowingly allowed Aaron Durall, a Florida-based attorney who ran Reliance, to use Sonoma West as a drug testing front.

Hospital critics point to the toxicology scandal as just one of the reasons the hospital facility and assets should be sold off.

Even as hospital officials entertain possible closure, county officials are eyeing the struggling facility as a possible site for establishing a much-needed psychiatric health facility.

Sonoma County Supervisor Lynda Hopkins said last week that she and Barbie Robinson, head of the county Health Services Department, met with hospital and health care district officials to discuss the possibility of establishing an inpatient psychiatric facility at the site, located at 501 Petaluma Ave.

The lack of long-term inpatient psychiatric beds in Sonoma County and the surrounding region has resulted in prolonged stays at the county’s crisis stabilization unit, a short-term psychiatric emergency facility where patients are meant to stay no longer than 23 hours. The county does not get federal Medicaid reimbursement for stays longer than that.

County health services officials estimate the county loses about $700,000 a month as a result of loss in reimbursement because of the bottleneck at its crisis stabilization unit. Two weeks ago, within the county’s newly adopted $1.6 billion budget, the Board of Supervisors approved the use of $500,000 to help establish an inpatient psychiatric facility.

Hopkins said county officials have looked at other sites but none have “panned out” so far.

“Suitable locations are hard to find, partly because of the requirements and the codes that have to be met — that’s what makes a hospital so appealing,” Hopkins said. “Unfortunately we have nowhere for these residents to go.”

Jim Horn, a board member with the Palm Drive Health Care District, said Sonoma West Medical Center will have a “tough decision” to make at this week’s meeting. Horn, a vocal critic of the hospital’s current management team, said the hospital should be closed down while it still has enough money to pay employees and vendors some if not all of what they’re owed.

“The longer they stay open the more money they lose,” he said.

You can reach Staff Writer Martin Espinoza at 707-521-5213 or martin.espinoza@pressdemocrat.com.