Sonoma West Medical Center expects sharp cut in tax funding after pullout prevails

A two-year campaign by Russian River-area residents seeking to abandon the taxing district that supports the struggling Sonoma West Medical Center in Sebastopol has prevailed, and the fallout is expected to immediately add to the financial challenges facing the small hospital serving western Sonoma County.

The “detachment” effort, waged by a group calling itself Taxpayers Against Unfair Taxes, or TAUT, will reduce the annual contribution made by the Palm Drive Health Care District to the hospital by 40 percent, to $600,000.

Currently, the district collects $4.2 million in parcel taxes from residents stretching from Sebastopol and along the Russian River to the coast. Almost half of the tax revenue goes to debt payments on past borrowing to support the former Palm Drive Hospital, which was mired in financial problems that led to its closure in 2014. It reopened under new management as Sonoma West Medical Center in late 2015 but has continued to face strong financial headwinds.

The hospital reported an operating loss of $479,000 in December on monthly expenses of $2.4 million. Dan Smith, chairman of the Sonoma West Medical Center’s board of directors, said the hospital remains on track to break even by June and will overcome the revenue loss from the detachment campaign.

“Obviously, it reduces the amount of money that the district has available to support the hospital,” he said.

Smith, a software entrepreneur, spearheaded the hospital’s reopening, donating at least ?$9 million of his own money to the medical facility over the years.

The tax revolt, which results in a pullout by residents in the Monte Rio, Guerneville and ?Forestville school districts, “does not dissuade anybody from having a hospital,” Smith said.

The detachment was formally approved and recorded this week by the Sonoma Local Agency Formation Commission, or Sonoma LAFCO, after only one resident in the affected area objected.

Supporters of the detachment campaign contended that residents in the Russian River corridor receive little benefit from the Palm Drive Health Care District and many of them are Kaiser Permanente members or use the new Sutter Santa Rosa Regional Hospital, which they claim is easier to get to than the Sebastopol hospital.

“It’s been a long haul and I think it was justified,” said Jeanette Dillman, a key detachment supporter who lives in Pocket Canyon outside Forestville. “I’m very happy that LAFCO listened to us.”

The campaign began around the time hospital supporters were angling to relaunch and rebrand Palm Drive Hospital after its 2014 closure. When it reopened in October 2015 under a new name and new management, TAUT members had already begun gathering signatures in support of detachment.

By May 2016, the group had gathered more than the required 2,046 signatures needed to trigger a municipal services review of the district by LAFCO, which regulates the boundaries of local governments and special public districts.

In September, LAFCO voted to approve the detachment. The process included an opportunity for residents in the affected area to voice their opposition, starting in mid-December. Mark Bramfitt, LAFCO’s executive officer, said only one person had submitted a petition opposing the move by Wednesday.

“We’re done with the detachment,” he said. “The folks who are living in those three school districts are no longer in the district.”

However, the affected property owners will continue to shoulder their share of the taxing district’s existing $22 million debt. Currently, annual taxes amount to $155 dollars per parcel for landowners in the district.

The district was formed in 2000 through a special election that saw more than 90 percent of the west county voters favoring both the formation of the district and a $5.9 million in general obligation bonds to buy the hospital, then privately owned.

Palm Drive Health Care District says the hospital serves 50,000 residents from a region spanning roughly 200 square miles. The district is currently working through its second Chapter 9 bankruptcy filing. It’s first was in 2007.

After continued financial strain and leadership turnover, the team that reopened the hospital stepped aside last year and brought in an outside operator, Southern California-based Pipeline Health.

Gail Thomas, a Palm Drive board member and district treasurer, said the medical center struggles like all the other taxpayer-supported district hospitals in the county.

She voiced hope Friday that the county Board of Supervisors would allocate funds to Sonoma West Medical Center and the county’s other small hospitals to keep them open.

“I think the hospital, like all small hospitals, is fragile,” she said. “Do I think the hospital is going to close? No.”

Smith and Thomas both pointed to a recent patient satisfaction survey conducted by health care consultants Press Ganey, where the 37-bed hospital got high marks for its emergency department.

Smith attributed the high marks to changes made by Pipeline Health, which has provided management services to the Sebastopol hospital since last summer

Pipeline, which owns and operates four hospitals in the Los Angeles area, as well as a university-owned hospital in Washington, D.C., is among three health care companies that have submitted bids to operate Petaluma Valley Hospital. The bidding period ended at the close of business Friday.

The other two bidders were Orange County-based KPC Health and Paladin Healthcare, based in Los Angeles County.

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