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"We're still not operating in the black, but I'm confident that we'll get there, We're being as diligent as we can in managing our expenses," said Kevin Klockenga, president and CEO of St. Joseph Health System-Sonoma County, which operates the hospital.

The hospital earned $79.4 million in 2008-2009, but had $82.8 million in expenses. However, 1.47 million was withheld from the hospital in Medi-Cal cuts that were restored at the beginning of this fiscal year, thanks to legislation introduced by Assemblymember Jared Huffman, D-San Rafael.

Given the additional $1.47 million, this fiscal year through February, PVH is $1.3 million in the black.

But even if the 1.47 million that was withheld is subtracted, PVH still suffered a net loss of $2.13 million last year, and in trying to address this problem, administrators are taking a close look at the services provided at the hospital.

"We're looking at a multitude of things," said Jane Read, the hospital's vice president of operations. "We are looking at our services, and determining what amounts of time are reasonable for providing them. Is it five or seven days per week? Is eight hours per day appropriate? We're also looking at whether or not it makes sense to have some staff in-house or be on-call.

"We're wanting to hold one another accountable, and reduce premium pay and overtime."

Klockenga says that no layoffs are being planned at this time, adding that several major factors have contributed to the hospital's financial losses.

"We've had a slight drop in revenue because some people are postponing elective procedures," Klockenga said. "Also, we've had a change in the payer mix, and now a smaller portion of our patients are paying for services."

PVH admissions dropped from 3,494 in the 2007-2008 fiscal year to 3,125 in 2008-2009. Through the first eight months of the 2009-2010 fiscal year, there have been 2,052 admissions. The number of total surgeries (consisting of elective, urgent and emergent surgeries) fell from 2,378 in 2007-2008 to 2,281 in 2008-2009, with elective surgeries declining from 1,677 in 2007-2008 to 1,639 in 2008-2009.

The hospital has treated an increasingly higher portion of Medicare and Medi-Cal patients, and they now make up over half of the total number served.

Also, Klockenga noted that last year, the financial crisis impacted the hospital's capital and access to capital.

"Our ability to raise capital dollars was very strained, but today the situation is much better, so I'm less concerned about it," Klockenga said.

Yet, as the hospital addresses its financial crunch, it still continues to forge ahead on several fronts, largely due to the support of St. Joseph, the Petaluma Valley Hospital Foundation and individual donors. PVH received $2.1 million in contributions during the last fiscal year.

St. Joseph will be investing $4.5 million in information technology during the next 18 months.

"We're investing in a new, state-of-the-art medical records system and new medical equipment, are in the process of updating all patient rooms and are working on improving patient flow in the emergency room, even though it's now pretty close to where we want it to be," Klockenga said.

The hospital also might be implementing new, state-of-the art diagnostic services, he added.

One of the main new additions, acquired totally through community donations, is a hana operating table, which makes hip replacements and some spinal procedures much easier on patients.

Daymon Doss, CEO of the Petaluma Health Care District, says St. Joseph has exceeded the capital expenditures it agreed to when it signed a lease with the PHCD to operate the hospital in 1997.

"The lease required St. Joseph to spend $14 million over a 20-year period, and it has spent $25 million through the end of last year, plus about $2 million this year. St. Joseph has done everything it promised and contracted to do, and exceeded its obligations," he said.

And generally, people seem to be very pleased with the way the hospital is running. PVH won its sixth Avatar award for patient satisfaction in 2009, received McKesson honors for operating room efficiency and ranked in the top 10 percent of Northern California hospitals for patient, staff and physician satisfaction in PacificCare's Best Practices ratings.

"Every single quality indicator we've tracked has rated our patient satisfaction as extremely high, and it was even better during the past year. I've been surprised at how strong the hospital has been —?among its peer-group hospitals, it's one of the best," Klockenga said.

"The quality indicators that we measure on a regular basis have been very good," Read said. "But we have made a concerted effort to go even further by doing weekly audits of patient-satisfaction scores.

"Also, we've instituted pro-cesses that engage staff in-volved with our departments. We are seeking to do this in such a way that we improve quality of care and increase safety."

Klockenga, Read and Doss all emphasized the need for local health-care providers to continue to work collaboratively to recruit and retain physicians, whether they desire to have a solo practice or be part of a group practice.

"It's necessary to have multiple ways for physicians here to sustain themselves. Many young physicians are interested in just practicing medicine (rather than dealing with all the other demands of running a solo practice)," Read said.

"I believe that when the new (and vastly expanded) Petaluma Health Center opens this year, it will help to address the need for more primary-care physicians," Doss added.

So, are St. Joseph and the Petaluma Health Care District likely to renew their lease, which expires in 2017?

"There's nothing new to report — the decision is still six to seven years off, so we're not actively dealing with the matter," Klockenga said.

"The board that the health-care district has in the 2015-2016 period will be making that decision, and I know one of the things that it will take into consideration will be the strength of the relationship that exists," Doss said.

"At this point, as far as a relationship with a partner, things are excellent," he added. "With Kevin, Jane and Todd Salnas (the chief operating officer of St. Joseph Health System-Sonoma County), St. Joseph has the strongest and most collaborative team that they've had since the lease began.

"They understand the value of Petaluma Valley Hospital to the region, and its contributions to the St. Joseph Health System."

(Contact Dan Johnson at dan.johnson@arguscourier.com)