Sonoma West Medical Center loses $1.4 million in March

Sonoma West Medical Center in Sebastopol reported financial losses of nearly $1.4 million for the month of March, the first full month of operation since hospital officials halted a controversial - though lucrative - drug-testing program.

John Peleuses, the medical center’s CEO, said that figure does not reflect the most recent revenue from surgeries that began sometime around ?mid-month. Peleuses said there were three two-week payroll cycles in March, each costing about $500,000.

He said it was too early to tell whether the financial losses for March will be repeated going forward.

Jim Horn, a member of the board of directors of the Palm Drive Health Care District, said most months have two payroll cycles, so a loss of $900,000 - reflecting one less payroll - is more indicative of the first month of decline after the hospital’s loss of toxicology revenue. The district owns the hospital and supports it financially.

Horn said the hospital was losing about $700,000 a month in February, March, April and May of last year and was on the verge of closing before hospital officials formed a partnership with Florida-based attorney Aaron Durall.

Durall, who ran a medical laboratory company called Reliance Laboratory Testing that did drug testing for rehab or detox centers, loaned the hospital?$2 million to keep it going and buy lab equipment. The drug-testing partnership generated about $31 million between July 2017 and February 2018; the hospital’s share was $10 million, or about $1.25 million a month.

But that flow of money ended after insurance giant Anthem Blue Cross in early February accused the hospital and health care district of participating in a business fraud scheme resulting in more than $13.5 million of improper payments to the medical center. Anthem has threatened legal action and demanded the money be repaid.

Horn said the hospital’s latest financial statement is more evidence the medical center cannot support itself. He plans to recommend the board consider ending its management services and staffing agreement with Sonoma West Medical Center Inc.

Doing so, he said, would remove “IRS defects” in the district’s current tax-exempt bonds that are forcing the district to refinance its bonds as taxable, a move that will increase interest payments by $5.7 million over the life of the bonds.

“If we refinance the bonds as taxable, we’re committing taxpayers to millions in additional interest payments to save a hospital that’s likely to close anyway,” he said.

Hospital officials insist the hospital remains viable, even without out Durall’s drug-testing revenue.

“We’re not getting surgery revenue because we just reinstated it,” Peleuses said.

You can reach Staff Writer Martin Espinoza at 707-521-5213 or martin.espinoza@pressdemocrat.com. On Twitter @renofish.