How tough choices are positioning Sonoma Valley Hospital to thrive in modern health care

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Sonoma Valley Hospital is starting to see the payoff after several cost-cutting moves it made in fiscal 2018, which ended June 30.

After closing its obstetrics unit and transferring ownership of its home health care service to UCSF-affiliate Hospice by the Bay, the hospital in June officially turned over operational management of its on-site skilled nursing facility to the Ensign Group.

In March 2018, the hospital and UCSF Health entered into an affiliation agreement to improve health care in the Sonoma community by combining the expertise and resources of UCSF Health. UCSF also will be using the hospital’s future outpatient diagnostic center, expected to open at the end of 2020.

The Business Journal recently caught up with CEO Kelly Mather to find out how the hospital is performing these days, and what lays ahead.

Are there any misnomers about Sonoma Valley Hospital, or community hospitals in general, that you would want to address and/or clarify?

It is truly amazing that community hospitals such as SVH, (which) serve a smaller community, do not qualify for critical access hospital status due to geography and have the majority of its commercial patients using Kaiser Permanente, (yet we) continue to survive. But, we not only survived in fiscal year 2019, we made the hard decisions and very difficult changes that led to our hospital having the best year in decades.

It has taken nine years, but I believe SVH has truly turned a corner.

We exceeded budget by 50%. It has taken nine years, but I believe SVH has truly turned a corner. With the UCSF affiliation and a strong vision, we are optimistic about our future.

(Editor’s note: The critical access hospital designation is given to eligible rural hospitals by the Centers for Medicare and Medicaid Services. One of the eligibility requirements is the hospital must be located more than 35 miles from another hospital.)

How did the hospital fare in its 2019 fiscal year?

Total operating revenue for fiscal year 2019 was $58.8 million, versus $56.2 million in fiscal 2018. (Earnings before depreciation and amortization) was $3.59 million, and cash on hand exceeded goal for the first time in years.

The reason for so many changes in fiscal 2019 was because EBDA was $217,390 in fiscal 2018, which was very concerning.

I understand the hospital has reduced its debt by about 20% since 2016. How does the debt load look going forward?

SVH raises most of the money through philanthropy and has made a conscious choice not to add debt in recent years. We’ve paid off the electronic (health) records (system) and decreased the line of credit to $6 million. Total debt is now under $8 million and will continue to decrease over the next few years.

Is SVH investing in new equipment? If so, what type and why?

Since 2010, we have invested in almost all new equipment due to the age of the equipment upon my arrival. The latest equipment we are investing in is the most expensive: a new CT (scanner) and a (3 Tesla) MRI (imaging machine).

There have been some rumblings in the community about staff salaries, as well as your own. What are the actual facts?

Staff salaries, including mine, are all at the midpoint for hospitals in the market. We have a strong team and culture and paying staff at midpoint is the right thing to do. My salary is reviewed each year and is based on our size and revenues, even though I have 30 years’ experience in hospital administration.

We use industry benchmarking tools to determine salaries. Staff salaries typically increase between 2% and 3%, but my salary has not increased in over 18 months. Hospital personnel are highly skilled, and their salaries reflect the skills required to do the job.

(Mather said her annual compensation is $357,000.)

What is the status of the outpatient diagnostic center?

We will break ground on the first project — a new CT, waiting room and refurbishment of the old department — in December this year. We have raised $18 million toward the goal of $21 million for the project. Once we raise the final $3 million, we will move forward with the MRI project. (We) expect it to be completed in late 2020.

(More information about donations can be found at svhfoundation.com)

Is there anything you would like to add?

Now in my 10th year, I’m so proud of what we have all accomplished together to create a high quality, safe hospital that provides excellent patient care. We do over 10,000 emergency visits each year and save lives each day. I’m incredibly grateful and honored to serve as the leader of Sonoma Valley Hospital as it truly takes a village!

Staff Writer Cheryl Sarfaty covers tourism, hospitality, health care and education. Reach her at cheryl.sarfaty@busjrnl.com or 707-521-4259.

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