Voters approve deal that paves way for sale of Sebastopol hospital

Voters in western Sonoma County approved a plan Tuesday that allows the financially strained health care district overseeing the former Palm Drive hospital in Sebastopol to lease or sell the property to a private, for-profit health care company to run as a long-term acute care facility.

Support for Measure A appeared definitive in semi-final results, with a margin of 77 percent in favor and 23 percent against, based on returns from 40 of 40 precincts and mail-in ballots received by Monday. The nearly 7,000 tallied ballots represented a turnout of roughly 28 percent, with an unknown number of votes left to be counted.

The special election asked voters to endorse a deal brokered by the majority of the Palm Drive Health Care District's board of directors. It wants to lease or potentially sell the district-owned hospital to Modesto-based American Advanced Medical Group.

The company has managed the site since September as a nonemergency, extended-stay care facility, going by the name Sonoma Specialty Hospital.

Matt Salas, the hospital's chief operating officer, hailed the election win Tuesday, saying it would advance a transition toward a more specialized, sustainable medical center.

“This will turn what was a competitor to the larger hospitals essentially into being a partner,” he said. “That was really the reason why the hospital struggled in the past, because it was unaffiliated and Kaiser and Sutter steer customers to their hospitals. Small hospitals have very few patients, and it's tough to survive.”

Residents of Sebastopol, Graton, Bodega Bay, Occidental and other townships were able to cast ballots in the special election. The health care district serves about 50,000 people, and about half are registered voters.

Marcia Kay, 70, of Occidental, said she voted in favor of Measure A because she wants to preserve hospital services in west county.

She has serious concerns about the length of time it would take to get to Santa Rosa in the event of a medical emergency like a stroke or heart attack. Though the present and future hospital does not provide such care, Kay said she still prefers the option of some medical treatment nearby.

“Having something there is better than having nothing,” Kay said.

Measure A needed only a simple majority to pass.

Palm Drive Health Care District levies an annual tax of $155 to support the medical campus. The previous operator, Sonoma West Medical Center, sought to run the facility as a full-service hospital, including an emergency room, since it reopened in 2015. Sonoma West is currently going through liquidation bankruptcy proceedings.

Meanwhile, the health care district's estimated debt is $28 million. The lease-sale deal would give it a much-needed infusion of cash to help clear those obligations, which stem from past borrowing to support the hospital.

As part of the agreement with AAMG, the company will rent the 5-acre property, including a 50,000-square-foot main building, for $275,000 a year for up to two terms, each six years long.

The voter-backed deal will also allow AAMG to buy the property outright within the first two years for a “fair-market value” of $5.2 million. The health care district's executive director previously said the medical campus was appraised at $10 million in 2017.

Under a purchase of the site, $4 million of the sale proceeds would immediately be paid to the district to help clear debts. The remaining $1.2 million owed to the district would be paid over the next 10 years, or be forgiven if AAMG continues to operate the site as a health care facility.

Had voters rejected the measure, AAMG would have continued operating under the existing general services contract, but new terms would have had to be crafted and brought back to voters as early as November for another special election.

“By doing the lease-sale option, it almost guarantees that we're going to have a hospital in town,” said Dennis Colthurst, president of the five-member health care district board. “This was the one Hail Mary chance for that to happen. I'm fairly confident that we'll have a hospital and robust urgent care to serve the west county.”

EDITOR'S NOTE: This story has been updated to remove Forestville from the list of areas voting in the Palm Drive Health Care District. It left the district in February 2017.

Staff Writer Martin Espinoza contributed to this report. You can reach Staff Writer Kevin Fixler at 707-521-5336 or kevin.fixler@pressdemocrat.com. On Twitter @kfixler.