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Health officials propose selling Petaluma Valley Hospital

The Petaluma Health Care District is moving forward with a proposal to sell Petaluma Valley Hospital after several failed attempts to find an operator to lease the 80-bed facility.

The proposal, which must be approved by the district board and Petaluma-area voters, would sell the hospital to Providence St. Joseph Health affiliate NorCal HealthConnect for $52.6 million, according to an email from Ramona Faith, CEO of the district.

The district has been working to secure a long-term operator for Petaluma’s only acute care hospital for more than five years, an effort that hit several hurdles, Faith said.

“It has been a complex, and, at times, a challenging process,” she said. “We had focused on securing a long-term lease, but this option didn’t secure the best terms for our hospital or our residents.”

Christina Harris, a spokesperson for St. Joseph Health, confirmed that the company’s affiliate is in negotiations with the district to purchase the hospital.

“We are excited that we have come to tentative terms on the purchase of Petaluma Valley Hospital,” she said in an emailed statement. “As always, our goal has been to ensure the Petaluma community continues to have access to the high quality healthcare services they have today. We are committed to ensuring Petaluma continues to have a local acute care hospital with a 24/7 emergency department to serve its community members.”

Providence St. Joseph Health also owns and operates Santa Rosa Memorial Hospital, the region’s main trauma center.

The company has operated the Petaluma hospital on an interim basis since its 20-year lease expired in 2017. The district entered talks with St. Joseph to extend the lease, but negotiations ended over financial terms, a non-compete clause and an unwillingness by the Catholic healthcare operator to provide some female reproductive services. St. Joseph Health merged with Washington-based hospital giant Providence Health in 2016.

The district selected Paladin Healthcare to lease the hospital in 2018, but that transaction ended when the Southern California company was unable to invest in an expensive electronic medical record system. Providence St. Joseph and Adventist Health attempted to form a joint operating company that was in talks to take over the hospital, but state Attorney General Xavier Becerra denied the move.

Faith said the sale to NorCal HealthConnect, a secular branch of Providence St. Joseph Health, would preserve all current services at Petaluma Valley Hospital at a time when smaller public hospitals have struggled.

“Community hospitals right around us and around the country have been struggling to remain full-service hospitals and some have closed service lines, been acquired, or closed all together,” she said. “Regardless, we have been steadfast on finding a solid future for our hospital.”

As part of the agreement, NorCal HealthConnect would commit to operating the hospital as an acute care facility with an emergency room for at least 20 years, Faith said. NorCal HealthConnect would continue to offer all current hospital services, with the exception of The Family Birthing Center, which would continue for a minimum of five years. The hospital does not and will not provide elective abortions.

All hospital staff would be retained as part of the deal, and their salaries and benefits would remain the same.

Faith said the district would use the proceeds of the sale to invest in healthcare programs in southern Sonoma County, including homeless, mental health and senior wellness services.

“The district plans to undertake an in-depth process to develop a community involved strategic plan for investing in services and programs to improve health in southern Sonoma County,” she said. “We will do our work in collaboration with our nonprofits, health, business and community leaders, and with input from our residents.”

The district board plans to discuss the proposal at its July 30 meeting, and will decide whether to place the measure on the November ballot at its Aug. 4 meeting. District voters would have to approve the sale in the Nov. 3 election. More information on the proposal is at phcd.org/duediligence.php.

The proposal comes as Petaluma Valley Hospital is dealing with the COVID-19 pandemic. The hospital was caring for 12 patients diagnosed with the virus as of Monday, according to a state database.

(Contact Matt Brown at matt.brown@arguscourier.com.)

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