PD Editorial: Sebastopol's hospital stuck on the critical list

It’s been touch and go for Sonoma West Medical Center since it reopened in 2015 with a new name, new management and high hopes.

After three years of nonstop financial woes, the Sebastopol hospital is for sale.

And, if a buyer emerges, there’s no assurance that Sonoma West will remain an acute-care hospital with a round-the-clock emergency room.

That is, no doubt, a bitter pill for the core group of west county residents who have struggled for years to ensure that their community kept its local hospital.

They deserve thanks for their dedication. But the decision to sell was inevitable, given the hospital’s desperate financial circumstances and eroding public support for the Palm Drive Health Care District.

The hospital remains a health care hub for the west county despite its financial troubles, with a cluster of medical offices and ancillary services nearby. And it provided invaluable help in October when the Tubbs fire closed two of Santa Rosa’s three hospitals.

We hope the district finds a buyer who will provide urgent care and outpatient care in Sebastopol if a full-service hospital isn’t a viable option.

It hasn’t been viable for the district, a public agency governed by five elected officials. It was formed in 1998 to assume ownership of Palm Drive Hospital after local benefactors bought it to stave off closure by a Nashville-based corporation.

In 2014, after the district’s second bankruptcy filing, the hospital closed. It reopened 19 months later, but it never found its financial footing under a succession of private managers who have tried to attract more physicians, more patients and more money from Medicare and private insurers.

The most lucrative funding mechanism — a partnership with a Florida drug-testing company that sent samples to Sonoma West’s lab, which as a rural hospital could bill insurers at a much higher rate — followed talk last year of selling the hospital. But it resulted in an Anthem Blue Cross lawsuit accusing the Palm Drive Health Care District of fraudulent billing and seeking reimbursements totaling $13.5 million.

The district denies any wrongdoing. Yet it canceled the contract, which was generating $1.25 million a month toward the hospital’s monthly expenses of $2 million. Without the lab revenue, Sonoma West reported operating losses of $1.4 million in March and $800,000 in April, and this past week the district announced plans to sell the hospital.

Paying for daily operations isn’t the only financial problem. Because of its shift to private management, the Palm Drive Health Care district is faced with refinancing outstanding tax-exempt bonds as taxable at an added interest expense of $5.7 million.

Meanwhile, former employees and other creditors owed about $9 million are pressing for payment in federal bankruptcy court. A hearing is scheduled in June.

And some residents of Forestville, Guerneville and Monte Rio are seeking permission to withdraw from the district, following another group of Russian River-area residents who withdrew last year.

The district doesn’t have many options remaining. It has asked potential buyers to submit proposals by June 15. If there are no takers, Palm Drive board member Jim Horn said the next step could be selling the property for something other than a health care facility. That would be the worst outcome of all.