Healdsburg District Hospital poised for sale to Providence St. Joseph Health affiliate

Officials overseeing Healdsburg District Hospital have approved a deal to sell the financially struggling 43-bed public facility to an affiliate of Providence St. Joseph Health under a plan that would assure emergency room services in Healdsburg for at least 20 years.

The agreement, years in the making according to board members of the North Sonoma County Healthcare District, was advanced Thursday by a 5-0 board vote to the November ballot, where voters in Healdsburg, Windsor, Geyserville, Cloverdale and surrounding areas will have the final say.

The move is the latest local example of consolidation in the landscape of health care providers, especially among small, public hospitals. In Sonoma County, two of three hospitals, Healdsburg and Petaluma Valley, were approved for takeovers in the past two weeks.

Erin Gore, board chair of the health care district, described the stakes for the hospital as a “live-or-die moment,” with looming seismic upgrades and other liabilities it could not handle on its own.

“This has been a very, very long journey,” Gore said during the virtual meeting Thursday evening. “We’re very proud to get where we’re at, with what we think is a very good — a very, very good — partnership for the community, for the hospital, for the longevity of care for the community.”

The buyer, NorCal HealthConnect, a secular affiliate of hospital giant Providence St. Joseph Health, would over the next decade pay $5 million in cash and at least $10 million in upgrades on the Healdsburg hospital, which dates back to 1972 at its University Avenue site, but this year celebrated its 115th anniversary.

While assuring inpatient emergency medical services for another two decades, the deal also would guarantee the site remains a Medicare-participating critical treatment facility for at least three decades, offering a clearer picture of the hospital’s future at a time when mounting financial challenges have forced many small hospitals to cut staff and services or close outright.

Healdsburg’s hospital faces some of the same obstacles, exacerbated of late by the coronavirus pandemic that has diminished income provided by elective procedures. Profits for the year through June are currently at just under $1 million, with projected operating losses through next June approaching $1 million a month, according to Gina Fabiano, the hospital’s spokeswoman.

Fabiano declined to address questions about the hospital’s debt. The district annually takes in about $3.5 million from its voter-approved $150 per parcel tax on properties within its boundaries — a charge that would continue indefinitely under the new agreement.

The hospital is in need of an estimated $20 million to $50 million in seismic retrofitting within the next 10 years to comply with state requirements, according to Gore, the district chair. Other costly health care technology upgrades are needed and can’t be supported by the current budget.

“I don’t know how the hospital would address the seismic issue without the partnership,” Gore said in an interview. “We’d have to fund it, or close the hospital.”

The deal represents the second prospective hospital acquisition this month in the county for Providence St. Joseph Health, which owns and operates at least four dozen hospitals across eight western states. Last week, district officials overseeing Petaluma Valley Hospital advanced a $52.6 million purchase agreement with NorCal HealthConnect for the 80-bed facility. That plan also is subject to approval in November by that health care district’s nearly 50,000 voters.

The pair of deals would consolidate two more hospitals under Providence St. Joseph Health, which also owns and operates Santa Rosa Memorial Hospital, the region’s primary trauma center. Both district hospitals have been affiliated since 2010 with St. Joseph, which merged with Providence in 2016. A prior plan to lease the Healdsburg hospital to Providence St. Joseph fell through, board members said Thursday during their meeting.

“We are excited that the parties have come to terms on the purchase of Healdsburg District Hospital,” Kevin Klockenga, regional chief executive for Providence St. Joseph Health, Northern California, said in the written statement. “This partnership would ensure that north Sonoma County continues to have access to a critical access hospital to serve its community members.”

Such takeovers of smaller independent hospitals by larger health care operators have become common — and often have proved necessary for the survival of rural facilities, said Jan Emerson-Shea, a spokeswoman for the California Hospital Association, a group that represents hospitals.

“It’s just very hard in today’s environment, particularly now with the pandemic, to be able to hold their own and stay open,” she said. “The other option may very well be hospitals being forced to close, and people in those communities having to travel for health care services.”

The deal’s implications for Healdsburg’s roughly 400-member hospital staff include assurances that all will be guaranteed their jobs for at least six months after the sale is completed. Gore said the spirit of the negotiations was built around retaining staff and existing services.

However, Sal Rosselli, president of the National Union of Healthcare Workers, which represents workers at Santa Rosa Memorial and Petaluma Valley hospitals, questioned Providence St. Joseph’s takeover plans.

"Consolidations often help hospitals boost profits at the expense of workers and patients," Rosselli said in a written statement. "Given that Providence is generating huge profits in Sonoma County and that its last attempt to expand in the North Bay was rejected by the state Attorney General as bad for community members, workers will be closely scrutinizing the company's latest consolidation plans."

Supervisor James Gore, who represents the area within the hospital district, said he supports the deal.

“The hospital has been in a limbo mode for many years. It’s a highly competitive market and tough for a local hospital to act autonomous when there’s such big health care business squeezing it from all sides,” said Gore, who was born at the hospital and lives in Healdsburg. “This allows Healdsburg hospital and emergency room, which are great community assets still, to thrive, and allows the district focus on health and wellness and prevention, like they’ve done.”

Gore is the brother-in-law of the health care district’s board chair.

Jim P. Schuessler, chief executive officer of Healdsburg District Hospital, applauded the proposed agreement.

The board’s points of emphasis “were around community service, around the longevity of inpatient and emergency room care in our community — not around how do we get the last 2 cents out of a piece of real estate. It has huge implications for our community going forward,” Schuessler said Thursday at the board meeting. The agreement represents “our mutual desire to put the hospital’s future in strong, capable hands so that we could guarantee the continuance of services into the future.”

Schuessler, who was hired in May, replacing Joseph Harrington, told the North Bay Business Journal in June that a priority was making a fiscal alliance.

"The district has been in on-again, off-again discussions for quite some time about the prospect of finding a senior partner that can help the district, the hospital and clinics meet some of their long-term objectives and capital needs."

The deal is set to close at the end of the year pending approval by a simple majority of the district’s approximately 35,000 voters.

“We would not have done this if we did not think it was the best thing possible for our patients,” said Erin Gore, the health care district board chair. “The board has worked very hard over the years to try to be transparent, use professionals in health care industries to make the best decisions for the community, and is really proud where we’ve gotten today.”

You can reach Staff Writer Kevin Fixler at 707-521-5336 or kevin.fixler@pressdemocrat.com. On Twitter @kfixler.