The recent death of Palm Drive Hospital in Sebastopol has some wondering which of Sonoma County's three other district hospitals is next. Will it be Healdsburg to the north, Petaluma Valley to the south or Sonoma Valley to the southeast?
While the forces that caused Palm Drive's closure are affecting all hospitals, smaller district hospitals are particularly vulnerable and have fewer resources to offset today's financial pressures.
These forces include declining inpatient volumes, fewer reimbursement dollars from the government and health insurance companies, and Kaiser Permanente's dominance of the local commercial insurance market. What's more, federal health care reform has ushered in a new payment model that is changing how hospitals operate, essentially rewarding hospitals for keeping people out.
Local health care systems say the new paradigm is forcing them to change their business model in a way that de-emphasizes the role of hospitals in their health care networks.
That's easier to do if you're part of a larger health care system, such as St. Joseph Health, Kaiser Permanente or Sutter Health.
"It's not our intention that we be next," said Todd Salnas, president of St. Joseph Health in Sonoma County, which leases and operates Petaluma Valley Hospital for the Petaluma Valley Health Care District.
"We're very focused on making sure we'll be around and viable for the community," he said of the 80-bed Petaluma hospital.
Salnas said the health care landscape across Sonoma County is evolving from one where hospitals are paid handsomely for treating episodic care to one where they are part of larger systems that manage care.
At the 83-bed Sonoma Valley Hospital, president and CEO Kelly Mather is also shifting focus away from inpatient services and building on its specific geographic health care needs. One of its priorities is to expand its home health care program — an alternative to nursing home care — to communities beyond the district's boundaries.
"All hospitals are struggling right now," Mather said. "You have to be nimble. We're moving to provide services on a regional basis, looking beyond just the community."
Nancy Schmid, CEO of the 43-bed Healdsburg District Hospital, has reversed the financial relationship between inpatient and outpatient services. Traditionally, she said, hospital executives have viewed inpatient volumes as driving outpatient dollars, but today it's the other way around.
"I believe it's the reverse of that, you focus on outpatient services that feed your inpatient volume," said Schmid. "For every one dollar we earn on inpatient care, we can earn two dollars in outpatient services."
One example, she said, is Healdsburg's noted wound care program. The idea is to have patients use the outpatient service on a regular basis and develop a strong relationship with the hospital, so that if inpatient care is required, that patient will be admitted to the Healdsburg facility and not some other hospital.
The closure of Palm Drive was an undeniable wake-up call to district hospital officials, their nonprofit foundations and the local communities they serve. Many in the county quietly say Palm Drive's closure on April 28 was a long time coming, the product of declining inpatient volume, brutal competition from Kaiser insurance products and dwindling reimbursements from private insurers.
Its location in Sebastopol — which places it so close to the county's three largest hospitals in Santa Rosa — was reportedly one of the main reasons Palm Drive could not sustain itself financially. Though it serves many of the rural communities in the west county, it does not have a special "critical access" designation from the California Department of Health Services, a designation that would have meant higher government reimbursements.