Palm Drive Hospital seeks help from state legislators

Palm Drive Hospital is seeking urgency legislation in Sacramento that would allow the financially strapped Sebastopol hospital to refinance bond debt at lower interest rates.

The 37-bed hospital, which two weeks ago announced layoffs and cuts affecting 40 employees, is getting assistance from Assemblyman Marc Levine, D-San Rafael, and his staff to craft the bill.

The proposal, still being drafted and without a formal bill number, would require a two-thirds vote of each house and a signature by Gov. Jerry Brown to take effect immediately. Simple majority approval would delay the plan's effective date to January 2015.

"This change in law will reduce the interest Palm Drive pays on debt," Levine said in a statement released by his office. "This will make more funds available for providing direct care to patients." He did not provide details.

Tom Harlan, Palm Drive Hospital's executive officer, was not available for comment. On Jan. 17, Harlan announced cuts and layoffs affecting 15 percent of the 267-worker staff. Through the end of the 2012-13 fiscal year, the hospital reported $4.2 million in losses, up about $1 million from the year before.

In part, the Palm Drive plan was inspired by 2011 legislation authored by Loni Hancock, D-Berkeley, which enabled the Doctor's Medical Center of West Contra Costa County to keep its doors open.

That 189-bed hospital had emerged from bankruptcy but then suffered fiscal setbacks, in part because of changes in funding through the California Medical Assistance Commission, which has since been eliminated.

The Hancock bill, AB 644, set up protections in statute -#8212; called a statutory lien -#8212; against parcel tax revenue that assured lenders their payback revenue would not be altered by a bankruptcy court. Absent that protection, lenders would not have provided funding. Since then, however, Doctor's Medical Center has faced continued difficulties, including a $16 million projected budget deficit this year.

In Palm Drive's case, the new proposal would enable the hospital to refinance debt -#8212; it has borrowed money through bonds called certificates of participation -#8212; at a lower rate than otherwise would be available to the facility because of its fiscal difficulties. It is intended to reassure lenders that they will be repaid.

Both the Senate and Assembly have supermajorities of Democrats, so theoretically the Palm Drive proposal could be approved without Republican support. In fact, the plan also is a "district bill" -#8212; a bill affecting only a lawmaker's immediate area -#8212; and those measures often get bipartisan backing in the Capitol.

The strategy is to amend Assembly legislation already being heard in the Senate, put it to a vote there and then send it to the Assembly for final action. Assuming the bill doesn't get amended there, the bill could be sent immediately to the governor.

That action could come as early as the middle of February.