A U.S. bankruptcy court judge Tuesday approved a $450,000 emergency loan to Palm Drive Hospital from Sonoma County that will help the failed hospital pay for operations and payroll until the final bankruptcy hearing on May 1.
The loan is secured through a lien on the Palm Drive Health Care District's parcel tax revenue, with the county's claim being second only to existing certificate holders from district bond offerings in 2005 and 2010.
The motion for the emergency loan was heard by Judge Alan Jaroslovsky, the head of the Santa Rosa division of the U.S. Bankruptcy Court's Northern California district.
"The judge recognized the urgent need for the cash infusion to help the district address its short-term cash crunch," said Michael Sweet, an attorney representing the district.
During the bankruptcy hearing, hospital representatives told Jaroslovsky they needed an initial disbursement of $600,000 to cover the cost of payroll for medical and other staff, plus goods and services over the next two weeks. Without the loan, the hospital will have only $3,318 cash on hand by the week ending April 26.
"The loan is to provide adequate liquidity for us to care for our patients and ensure patient safety as we wind down operations," said Tom Harlan, Palm Drive's CEO. "It will primarily be used for payroll, to compensate physicians and to pay vendors."
Jaroslovsky approved a lesser loan amount, saying the hospital needed to provide additional proof of its need for the larger sum of $600,000.
The Sebastopol hospital is slated for closure on April 28, even as the board considers options that would revamp services to create a more financially viable facility.
Earlier Tuesday, the Sonoma County Board of Supervisors voted unanimously to approve a loan of up to $1.8 million to the cash-strapped health care district — contingent on the bankruptcy judge's approval. The initial $450,000 loan would be the first payout from that overall financing pledge.
The Sebastopol hospital — slated to close as soon as April 28 — needs about $925,000 to meet payroll, $400,000 to pay vendors, $340,000 for employee health insurance, $280,000 for doctor payments and about $150,000 for clinic location rent and liability insurance, according to a county staff report to the supervisors.The report did not say how long the $1.8 million would support the hospital beyond its scheduled closure.