Petaluma Valley Hospital’s new manager Paladin Healthcare known for turnarounds but facility is healthy

Petaluma Valley Hospital’s next operator, El Segundo-based Paladin Healthcare, is known for turning around struggling hospitals. Its latest task likely will be different, growing a hospital that has a solid financial footing, according its owners.

If approved by the community in a vote in June, Paladin will take over when the hospital’s owner, the Petaluma Health Care District, ends its long-running agreement with St. Joseph Health in September.

PHCD chose Paladin over Pipeline Health, which manages Sonoma West Medical Center in Sebastopol, and The KPC Group.

“In evaluating the bids, Paladin provided a thoughtful and thorough proposal that addressed the criteria we identified as important for an operator, demonstrated its strengths as an organization, and articulated a strong vision for PVH. Further, the company presented a well-researched and solid understanding of Southern Sonoma County’s acute care needs, coupled with a proven track record for sustaining or improving community hospital operations and the patient care experience,” said Ramona Faith, PHCD CEO. “Paladin’s proposal includes keeping and restoring core services; ongoing financial investment in operations, service lines and physician services, and our facility; maintaining quality levels; a long-term agreement; and offering our community fair-market-value rent for the hospital facility.”

Paladin manages and also acquires hospitals. It has acquired and transformed four urban hospital facilities in South and East Los Angeles that were under performing, both financially and clinically, according to the company. Those include Memorial Hospital of Gardena, East Los Angeles Doctors Hospital, Community Hospital of Huntington Park, and Coast Plaza Hospital in Norwalk.

In 2014, Paladin took over management of financially struggling Howard University Hospital, in Washington, D.C., to help turn it around. In 2014 losses totaled $58 million, and in 2015 that number plummeted to $19 million, according to the Washington Business Journal.

In addition to health care management, Paladin’s financial arm, Paladin Healthcare Capital, has completed more than 175 transactions totaling more than $4 billion over the past 25 years, according to the company.

PVH generated $1.7 million in income from operations after the first six months of this fiscal year, according to Faith. PHCD also showed $11 million in its coffers in 2015 and does not receive funds from a parcel tax.

Although managing the financially healthy PVH will be a new venture from a company standpoint, Paladin’s executives are experts with years of experience in the California health care industry, said Gary Frazier, Paladin’s senior managing director of business development.

“As our first hospital in Northern California, it’s not about turnaround but sustaining and growing,” he said.

The company said it is committed to making capital investments for ongoing facility improvements at PVH, including medical equipment and technology upgrades, and will also invest in engaging in community partnerships, education efforts and local initiatives. Exactly what that looks like is still to be determined, Frazier said.

Paladin has also guaranteed employment for current PVH staff in good standing for at least six months, with no plans to make material changes to the composition of the staff, and has stated that it will honor all current union agreements.

PHCD is a community owned and operated agency. Negotiations between PHCD and St. Joseph ended last fall after the two parties could not reach an agreement on financial terms and preserving women’s reproductive health services. St. Joseph agreed to stay on through September or until a new operator could be identified.

“We are grateful for St. Joseph Health’s sound operation of PVH and our decades-long relationship that will continue,” Faith said. “Now, we will focus on educating the community on our recommended operator, finalizing various terms with Paladin, and facilitating a swift and smooth transition. We have been assured by St. Joseph Health and Paladin that they are prepared and committed to ensuring a smooth transition. That is the primary objective for all three parties at this time.”

PHCD will hold employee forums and public meetings over the next few weeks to discuss its recommendation. It is currently negotiating definitive agreements with Paladin and will begin facilitating the transition plans and terms between Paladin and St. Joseph Health. If all necessary agreements and processes can be resolved in a timely manner, the public will have the opportunity to vote on Paladin as PVH’s new operator on June 6, according to PHCD.

CORRECTION: Avanti Healthcare Holdings, LLC does not acquire hospitals for Paladin.

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