Sonoma West Medical Center scales back revenue forecasts

Sonoma West Medical Center has dramatically scaled back its monthly revenue forecasts as the Sebastopol hospital struggles to collect payments for medical services and become financially sustainable.

The medical center, a revamped version of the failed Palm Drive Hospital, was launched last fall and has yet to turn a profit. Its operating losses for April are expected to surpass $600,000, up from an operating loss of $47,000 in March and $400,000 in February, CEO Ray Hino said.

The unexpectedly large April loss stems from two factors, Hino said.

First, the medical center is taking a “more conservative approach” to calculating how much money it expects to collect from Medicare, Medi-Cal and insurance companies, Hino said.

Health care providers rarely collect the full amount billed to patients and their insurers. Prior to the new revenue forecast, the hospital had projected it would collect about one third of gross charges, the same formula Palm Drive Hospital used to estimate its revenue.

In May, Sonoma West reduced its forecast, projecting it would collect only 29 percent of gross charges, Hino said.

“It’s not what we had hoped for,” Hino said. “We need to do better. We expect that we will. We are launching some initiatives to increase gross revenue ... launching some initiatives to do a better job at collecting every dollar that’s owed to us.”

The revised formula for projecting hospital collections was responsible for about half of the April operating loss, Hino said. The hospital also saw a decline in patient activity in April, when it performed fewer surgeries and logged fewer overnight patient stays than March.

At the end of its first six months as a licensed hospital, Sonoma West had amassed operating losses of $1.43 million, Hino said. Much of that deficit, however, has been offset by tax revenues from the Palm Drive Health Care District, which helps fund hospital operations. Hino said Wednesday that the hospital’s “bottom line” losses through the end of May are estimated at $308,000.

Hino said the hospital will not be able to pinpoint its exact operating losses for several months, until it has collected all that it can for its medical services. In the meantime, he said, hospital officials are “taking steps” to improve revenue flows, including finalizing the build-out of hospital infrastructure, trying to get more doctors to schedule surgical procedures at the hospital and working with emergency medical services to get more ambulance visits.

“We are taking proactive steps,” Hino said.

Jim Maresca, president of the board of directors of the Palm Drive Health Care District, which supports the medical center with significant funding for operations, said the news is disappointing.

“Yes, I am concerned,” Maresca said. “I am talking with a number of people about what we might do to address that. Everybody is concerned. Nobody’s got their head in the sand with this one.”

Since it reopened to the public on Oct. 30, 2015, the hospital has treated 8,434 patients.

A shortage of hospital beds in Santa Rosa has helped keep the new medical center busy, Hino said.

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