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Sonoma West Medical Center cuts staff 16%, sees breakeven soon

Three weeks after Sonoma West Medical Center brought in an outside manager for daily operations, the Sebastopol hospital announced it has laid off 16 percent of its administrative staff.

The move, affecting 25 jobs, is an effort to streamline operations and stem nine months of mounting debt after re-opening in October. It is expected to save the hospital about $200,000 a month.

No clinical or nursing staff are included in the layoffs, and no further major staff reductions are planned, officials said. In fact, the hospital plans to hire 15–20 nurses.

“The ship is definitely turning around,” said Jane Rogan, hospital spokesperson. “With Pipeline’s experience turning around struggling hospitals and expertise in billing and revenue capture, SWMC is in very good hands.”

Luke Tharasri, Pipeline Health’s chief operating officer, has stepped in as the hospital’s interim CEO since the management contract was approved July 8. While overstaffing was one area Pipeline initially saw needed fixing, the most glaring issue is the revenue cycle, he said.

In June the hospital operated at an $800,000 loss, but the average burn rate is much more, according to Robert Heinemeier, chief financial officer for Pipeline and the hospital at the moment. Average monthly operating expenses are $2.5 million, while the operating loss averages $1.2 million, excluding donations and contributions from Palm Drive Health Care District, which owns the hospital.

The 25-bed facility reopened as Sonoma West Medical Center on Oct. 30, 2015. The predecessor, Palm Drive Hospital, closed April 28, 2014, amid two bankruptcies over seven years, declines in overnight patients, reduced payments from insurance companies and competition from nearby hospitals.

REFINED COLLECTIONS

Under Pipeline’s management, the hospital is now fine-tuning collections at every step of the way, from collecting insurance information from patients at check-in, to improving coding for billing. to getting important documentation out in a timely fashion.

The hospital outsources the management of the revenue cycle to a company in Alabama and found a number of issues hanging up insurance payments. Tharasri said Pipeline is using its leverage to hold the company accountable for more rigorous performance. That has resulted in an uptick in collections.

“About $400,000 a month was left on the table that we are actively petitioning,” he said. “The processing of insurance claims was not as well-oiled as it could have been,” he said. “We (Pipeline) are well-positioned to fix unbilled accounts and unchecked claims.”

Pipeline is a management company that owns and operates hospitals and health care organizations, including four in Southern California and Howard University College of Medicine in Washington, D.C. The company also partners with Los Angeles-based SRC Management, advising health care organizations on financial operations, revenue cycle, supply chain and capital strategy.

Sonoma West is paying Pipeline $125,000 a month for the first six months then $150,000 a month for the second six months, with a 5 percent yearly increase after that. The engagement is saving the hospital approximately $25,000 a month on consultant fees.

BACK IN BLACK

In the past, Pipeline turned around a hospital in Norwalk, Calif., from negative revenue to positive within four weeks. Another academic medical facility took 18 months.

The company does not take on hospitals it doesn’t think it can turn around, Tharasri said. He forecast that the Sebastopol hospital could be operating in the black in about 120 days.

The hospital also sees a “huge opportunity” for rebates from vendor overcharges, and savings of about $200,000 a year, from hiring a new radiology group Aug. 1.

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