It's been the mantra of hospitals across the nation since before the Affordable Care Act became law: Obamacare means less money for hospitals.

Last Thursday, Petaluma felt the full weight of that concept when St. Joseph's Health — which has been saying it needs to cut $15 million from its annual budget since April — laid off 11 Petaluma Valley Hospital employees to help reduce costs. The not-for-profit healthcare provider also laid off 26 employees from Santa Rosa Memorial Hospital.

The cuts come at a pivotal time for St. Joseph's in Petaluma. The healthcare provider has been operating the hospital for the Petaluma Health Care District since the late 1990s, when it signed a 20-year lease. That expires in 2017. As the contract winds down, St. Joseph's has expressed a desire to continue running Petaluma Valley, despite losing money over the past several years.

Meanwhile, the Petaluma Health Care District has begun studying operations at the hospital, expecting to complete an analysis of St. Joseph's management of the facility within the next 12 months. At that point, the Health Care District will decide to either sign a new lease with St. Joseph's or put the hospital contract out to bid — putting St. Joseph's actions under closer scrutiny.

"The action we're taking to make Petaluma Valley a financially stable hospital is going to make the district's decision that much easier," said Petaluma Valley Hospital Vice President Jane Read. "It's always difficult when you're affecting people's lives, but we're doing it for the good of the community overall."

Petaluma Health Care District CEO Ramona Faith said that the district understands the financial difficulties hospitals are facing, but will be closely watching operations at the hospital to make sure the level of care remains the same.

"We want to continue to have a high-quality hospital serving this community, no matter what," said Faith. "That's the district's first priority."

Dr. Mike Johnson, medical director of the Petaluma Valley Hospital operating room, said that maintaining the same level of care with fewer people is very difficult.

"You can only cut so much before care is affected and I think we're there," he said.

Under the Affordable Care Act — a healthcare reform that pushes for more preventative care and less emergency and critical care services — hospitals nationwide will have their Medicare funding cut and receive lower insurance reimbursements. While clinics and facilities that offer healthcare specifically designed to keep patients out of hospitals, like the Petaluma Health Center, are seeing a rise in federal funding and insurance payments, hospitals say they are struggling.

St. Joseph leaders began implementing several cost-saving measures in the spring to cut $5 million from Petaluma Valley's budget and prepare for the effects of changes to healthcare. These measures included renegotiating contracts, consolidating management positions, reassessing staffing levels and reducing pharmacy costs. Finally, St. Joseph turned to layoffs.

Todd Salnas, president of St. Joseph's Health in Sonoma County, said that while every effort to preserve jobs was made, the organization had to cut positions in order to weather the Affordable Care Act. The healthcare provider employs 2,149 people in Sonoma County.

St. Joseph's refused to say what positions were being eliminated, citing the organization's respect for employee privacy. At Petaluma Valley Hospital, officials also refused to say how much money the 11 cut positions would save the hospital each year.

"Countywide, the cuts are saving us $3 million," annually, is all PVH Vice President Jane Read would say, declining to elaborate further.

Petaluma Valley Hospital recently signed labor contracts with its nursing staff, ending contentious negotiations that led to a scheduled one-day strike last year. Certain concessions the hospital had been seeking from nurses — like reductions in the pay nurses receive when they aren't actually working but remain on-call — were not agreed to. But Petaluma Valley said they received other compromises from the nurses that made the contracts workable. Read said that the layoffs had no connection to the newly signed nurses contracts.

"We have been looking at what we needed to do to address our financial situation at both PVH and Santa Rosa Memorial, long before we signed the contracts with the nurses," said Read. "The two are not connected."

Read said that affected employees would receive severance packages and assistance in applying for other open St. Joseph's positions. She and Salnas held meetings with the employees at Petaluma Valley Hospital on Friday.

(Contact Janelle Wetzstein at janelle.wetzstein@arguscourier.com)