Palm Drive Hospital is moving ahead with the purchase of a digital mammography machine that will allow the cash-strapped hospital to offer new medical services and generate revenue.
The Sebastopol hospital is also taking immediate steps to stem losses that are expected to amount to a $750,000 deficit when the fiscal year ends June 30.
"We will end the year with less cash than we began with," said Rick Reid, Palm Drive's interim chief executive officer who is also serving as chief financial officer. "It comes out of cash reserves, but half of that will be depreciation, which is a non-cash expense."
On Monday night, the hospital board approved the purchase of the digital mammography machine, which will cost $370,000. It is expected to be installed and operational in October.
The Palm Drive Health Care Foundation has indicated it will pay $150,000 toward the cost, Reid said.
"We think it will generate $120,000 a year in additional revenue," Reid said. "With the foundation's contribution, we will have a payback of two years."
The hospital, which has a $30.4 million budget, is supported by a parcel tax that brings in $4 million annually, a critical funding source that has been used in the past to offset operating losses.
A year ago, the hospital expected to have a $914,287 surplus at the end of February. Instead, the hospital posted a deficit of $814,158, even after factoring in the parcel tax funds, and had just 15 days of cash on hand.
Palm Drive officials said the projected surplus had been based on overly optimistic estimates for hospital and out-patient visits.
Reid said the hospital raised prices by 7 percent effective March 1, which is expected to generate $175,000 by the end of this fiscal year and $500,000 for the 2012-13 fiscal year.
Reid is also recommending the hospital upgrade its information and electronic medical record system, which over three years will bring in $3.7 million in federal funding.
The hospital budget for next year is now being formulated, which Reid said he believes will be a break-even budget.
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