With the recent shutdown of Sebastopol's Palm Drive Hospital, Petalumans may wonder what the status is of their own Petaluma Valley Hospital. The facility's management contract with St. Joseph Health expires in January 2017 — and while that may seem like a ways off, the Petaluma Health Care District has only about six months to decide whether to renew it.
That's because any change to the agreement requires about two years notice for what could be a very complicated transition. A final decision by the district board of directors is expected early next year, although the district voters will have to give their stamp of approval on any new contract.
The district must choose between three options: putting the hospital contract out to bid, running the facility itself or signing a new lease with St. Joseph.
Currently, district CEO Ramona Faith and board president Jo Thornton appear to be leaning towards the third option, with both saying the current lease is satisfactory and that they enjoy working with St. Joseph Health. St. Joseph, in turn, has expressed a strong interest in continuing to run Petaluma Valley Hospital.
Faith also noted that the district lacks the level of financial independence required to run the hospital itself. Signing on with a new provider would also be tricky, since Petaluma Valley Hospital's electronic medical records and supportive infrastructure, is owned by St. Joseph.
Even so, members of the hospital district's board of directors say they will continue to do their due diligence over the next few months before making a final decision. If the district does decide on a new management partner, an announcement by early next year would give all parties involved enough time to handle the transition, Thornton said.
Leasing PVH
The Petaluma Health Care District managed Petaluma Valley Hospital before St. Joseph Health signed a 20-year operations contract in 1997.
A public agency run by a CEO and five elected board members, the district — which currently has 16 employees and 251 practicing physicians — serves 113,000 residents throughout southern Sonoma County. Faith said its top priority is to provide a community-based hospital with quality patient care.
The lease with St. Joseph initially provided a lump sum of cash, roughly $11 million, which the district has benefited from ever since. In addition, Thornton said, the health care provider has contributed much more than the mandatory half-million dollars each year for equipment and upgrades. Over the last three fiscal years alone, St. Joseph made capital investments totaling $15.5 million at Petaluma Valley Hospital, according to St. Joseph staff.
"For the past 17 years, St. Joseph has absorbed the financial risks for the hospital," Thornton said.
(Beyond the hospital lease, funding for the district comes from several other sources, such as $1.4 million in annual revenue from distributing Lifeline medical alert systems, income from American Heart Association training and AED sales, and four real estate investments that generate $515,000 in annual revenue.)
Both Faith and Thornton said St. Joseph has been a good partner for the district by showing a commitment to serve and invest in the community. While under St. Joseph management, Faith said, Petaluma Valley Hospital has achieved good outcomes and patient satisfaction.
Over time, the health care provider has created a regional medical network, including its management team, physicians groups and referral process, which allows for patients in need of special services such as neurology to be seamlessly transferred to Santa Rosa Memorial Hospital. As a regional entity, Faith said St. Joseph focuses on placing patients in facilities that can best serve their needs.
That integration also allows for patients to be sent to Petaluma more easily, Thornton said, which can lead to more local hospital business — for example, when patients from the recently closed Palm Drive Hospital began flooding Memorial Hospital, some of that overflow was transferred south to Petaluma.
A new partner?
Over the past six months, most of the Petaluma Health Care District's lease discussions have taken place in closed-session meetings with The Camden Group, a consulting firm that specializes in health care management. Notably, the firm managed Marin General Hospital's transition after it cut ties with Sutter Health.
Faith said the board has been collecting and reviewing information relating to St. Joseph Health's management of the hospital. The board is examining elements such as trends, financial stability, gaps in service and long-term viability.
If the district decides to choose a new health care provider, Thornton said preference would be given to nonprofit organizations, although all "good proposals" will be considered.
In general, the board is looking for partners who can help sustain the emergency room and acute care hospital, while also developing a viable and flexible plan for managing the myriad changes in the health care industry.
Leadership at Marin General Hospital, a provider with a regional strategy to connect district hospitals, has already shown interest in speaking with the board about managing the hospital.
"We'll certainly listen to what they have to say," Thornton said.
The final decision
After examining the hospital's management, the board will begin discussions with St. Joseph in the next few months, while reaching out to potential partners throughout the fall. At that point, the board will reach out to hospital staff, physicians and community members for input on the lease.
Unless the district elects to run the hospital itself — an unlikely outcome — the final lease decision will go to the public for a vote. The board will make a recommendation to the community, and a majority of district voters will decide the hospital's new management. If the community disagrees with their recommendation, the district will work with residents to find a solution.
In the past, money from St. Joseph's lease and other revenue streams has kept the district from having to tax the community, whereas many other health care districts in the North Bay have utilized parcel taxes to generate revenue. But greater financial struggle has led district board members to consider other sources of funding, such as partnering on the proposed Walgreens project or potentially developing some of the land the district owns around the hospital.
The board is hoping for a new lease that would again eliminate the need for taxes. However, Thornton said, if it comes down to the district's ability to provide a major service — for example, keeping a quality emergency room in Petaluma — board members would consider asking for financial help from the public in the future.
(Contact Allison Jarrell at allison.jarrell@arguscourier.com)
UPDATED: Please read and follow our commenting policy: