After a more than two year search for an operator for Petaluma Valley Hospital, the Petaluma Health Care District, which owns the facility, has finally inked a deal. It turns out that special someone was right in front of them the whole time.
In concluding the meandering process, the district arrived back at St. Joseph Health, its partner of more than 20 years. It’s actually an affiliate of St. Joseph that is set to take over the hospital, once a combination with Adventist Health is complete, giving the new entity more flexibility to provide everything the public wants in a hospital operator.
Let’s recap how we got to this point. St. Joseph took over operations at the publicly-owned hospital on a 20-year lease in 1997. A good steward of the facility, they were the first choice to continue operations when the lease expired in January 2017.
But a year-long negotiation between St. Joseph at the district to renew the lease collapsed in late 2016, leaving the district scrambling for a new operator. Those talks fell apart due to financial terms, a non-compete clause and the Catholic health care provider’s unwillingness to continue providing some female reproductive services.
After receiving only tepid interest from hospital operators responding to a new request for proposals, the district settled on Paladin Health, a Southern California for-profit hospital company. District officials soon realized that Paladin was not a good fit. To complicate matters, they lacked an expensive electronic medical records system, and they seemed reluctant to invest in the required technology.
Meanwhile, St. Joseph’s lease ran out, but they agreed to stay on running the hospital while continuing back-channel talks with the district. Around that time, in the ever-changing world of health care, St. Joseph began talks with Adventist about combining their Northern California operations.
As talks with Paladin stalled and then collapsed, the district continued to watch the evolving health care landscape with an eye on the new St. Joseph affiliate, with is to be known as ST Network, LLC. This month, the district and ST Network signed a letter of intent, which spells out a longterm lease agreement. A final agreement is pending regulatory approval of the new entity, which will likely come next year.
The deal appears to be a good one, and residents should take note since Petaluma voters will be asked to approve the deal in a future ballot measure.
The $800,000 annual lease is for 30 years, giving the hospital longterm stability. ST Network will invest $3.5 million in the facility each year, ensuring that Petaluma’s only hospital continues to thrive. All of the core services will remain, including female reproductive health services.
A couple of key points in the letter of intent remain vague, and we hope that, once the new company forms, leaders can articulate their longterm plans. For example, the new company has committed to keeping the family birthing unit for three years, but could decide to end this service. Does the new company plan on ending childbirths in Petaluma in three years?
Also, the deal includes an option to purchase the facility, meaning the public district could lose its biggest asset. Does the new company plan on exercising this option, and would a private sale be best for the hospital?
These are some of the questions that we hope are answered as the health care district explains this deal to the public in the run up to a referendum. For now, though, we are glad that the year is ending with a framework for a deal and a way forward for Petaluma Valley Hospital.