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Petaluma Health Care District plans new hospital process


The public district that owns Petaluma’s only acute-care hospital is charting a new course after negotiations collapsed with a leading organization to run the facility, setting a new target of June 2017 for a public vote to approve an eventual new operator and contract.

The new timeline gives interested hospital companies until Jan. 31 to submit a final bid, and gives the Petaluma Health Care District, which owns the hospital, until March to chose their front-runner, said Ramona Faith, district CEO. Five operators had signed non-disclosure agreements in order to access in-depth data on the hospital as of Tuesday, an early sign of interest in a possible bid, Faith said.

“What it tells us is that we have five interested parties,” Faith said, adding that it was still “no guarantee” that each of the bidders will submit an offer by the end of January.

The reopened process follows the end of negotiations last month involving 20-year operator St. Joseph Health, six months after the district revealed it was focusing its talks on the incumbent. The district announced last October that four organizations, including St. Joseph, had submitted bids to operate the 80-bed, acute-care hospital after the end of the current lease in January.

With the lease set to expire, St. Joseph has agreed to continue to operate Petaluma Valley on an interim basis until Sept. 1. Spokeswoman Vanessa deGier confirmed that her organization would not be returning to the table to negotiate over a future lease.

“We realized after nine months of negotiating that we were still apart on several terms, and additional negotiations weren’t going to change that,” deGier said.

The impasse reportedly centered on three main issues: financial terms, a non-compete clause and the ongoing providing of a female sterilization procedure called tubal ligation that was against the Catholic-based St. Joseph’s latest ethical and religious guidelines. Faith said it was St. Joseph that moved to end the negotiations.

The CEO noted that the relaunched process to secure a new hospital operator would be significantly shorter than the previous round, which included months of closed-door talks and at least one request for an updated bid from each of the four interested parties.

“The process took much longer because we were working on a deal with St. Joseph, who we have a 20-year history with,” she said.

An initial request for proposals went out in May 2015, approximately one-and-a-half years before the end of negotiations with St. Joseph. Sutter Health, Prime Healthcare Services and Strategic Global Management also responded to the RFP, and Prime joined St. Joseph in submitting a follow-up bid.

Faith declined to share the names of the hospital companies that have signed the new non-disclosure agreement, citing the ability of the public entity to keep those details confidential to avoid undermining the competitive process. Yet she spoke generally that the level of interest boded well for Petaluma Valley, acknowledging that public speculation had swirled as to who, if anyone, might step up to the plate after St. Joseph.

“We are going to continue to have a quality, community-based hospital. The only thing I can’t say is who the operator will be,” she said, noting that the district is seeking an offer to lease, not buy, the hospital.

Speculation over the future has extended to hospital employees, including whether their jobs will be secure under a new organization. The National Union of Healthcare Workers asked the district’s board of directors to ensure the hiring of employees it represents as a condition of any bid, and representatives of the California Nurses Association were on hand at a recent meeting to voice their own concerns.

“There hasn’t been a lot of transparency,” said Lynda Buskey-Berg, a CNA organizer who said her union represents 181 nurses at Petaluma Valley. Other concerns from nurses have included staffing, services and a desire for the hospital to be operated by a not-for-profit entity.

Faith said maintaining staff will weigh highly in the evaluation of bids, but cautioned that it is not a guarantee.

“The goal is to keep the employees as whole as possible,” she said. “That doesn’t mean there won’t be changes.”

St. Joseph itself is working on a retention strategy for employees at Petaluma Valley, and expects the details of those efforts to be determined by the end of November, deGier said. There are more than 400 people working for St. Joseph at the hospital, including 275 full-time employees, she said.

Approximately 263 physicians have admitting privileges at the hospital, she said. While not direct employees, some are members of a St. Joseph-affiliated doctor’s group, which has 12 practices in Petaluma.

While it is unknown how a future hospital operator might view the physicians and specializations currently represented at the hospital, the presence of St. Joseph Medical Group-affiliated physicians in Petaluma will remain significant, she said. St. Joseph opened a new after-hours primary care clinic off East Washington Street earlier this year.

“Nothing has changed there. We’re still continuing to recruit physicians to the area,” she said.

Faith said the district is forming a committee of physicians to represent their interests to potential operators, an eight-member group with representatives from the St. Joseph doctor’s group.

“We want physician input into the process,” she said.

The CEO said the district is providing updates on the bidding process through an email newsletter, available at phcd.org.

Contact Eric Gneckow at eric.gneckow@arguscourier.com. On Twitter @Eric_Reports.