Healdsburg District Hospital to explore management deal with St. Joseph Health

Healdsburg District Hospital has formally opened talks with Sonoma County’s largest hospital operator about a lease agreement that could lead to St. Joseph taking over management of the 43-bed north county facility.

The hospital’s North Sonoma County Healthcare District hopes the partnership will help stabilize the 113-year-old hospital’s finances by giving it access to more financial resources and cost-saving strategies. Like many rural and critical access hospitals, Healdsburg District Hospital has struggled financially in recent years.

“I am personally very enthusiastic about the potential of this strategic partnership. We’ve been working on it for a long time, and I look forward to it coming to fruition,” said Susan Campbell, chairwoman of the district’s board of trustees.

The district and St. Joseph, which operates Santa Rosa Memorial and Petaluma Valley hospitals, have been affiliated since 2010 through an agreement that allows the hospital to recruit physicians and develop integrated clinical services. Campbell said one of her goals joining the board five years ago was to see Healdsburg District Hospital deepen that partnership.

The two parties have signed a memorandum of understanding that will lay out the terms of the lease agreement for St. Joseph to manage and operate the district hospital and all associated clinics for several years.

The hospital, located at 1375 University Ave., is currently operated by the health care district and serves about ?10,000 patients a year. The district was created in 2001 and includes about 60,000 residents in Healdsburg, Windsor, Geyserville, Cloverdale and surrounding areas.

It has struggled financially for years, Campbell said. The hospital’s budgeted net revenue for 2018 is $44 million, but its total operating expenses are expected to be $52 million, she said.

That $8 million net operating loss is offset by the district’s parcel tax funds and intergovernmental transfer funds that total about $6 million.

Campbell said the hospital’s finances have improved this year, with a net operating gain of $300,000 from January to June.

St. Joseph, which merged in 2016 with health giant Providence Health & Services, recently announced plans to form a joint operating company with Adventist Health in Northern California. The Healdsburg hospital also has collaborative relationships for services with Adventist Health West and the Northern California Healthcare Authority.

“St. Joseph Health is pleased to explore a greater partnership with North Sonoma County Healthcare District regarding the operations of Healdsburg District Hospital,” said Kevin Klockenga, regional chief executive for St. Joseph Health in Northern California.

“Increasing our partnership makes sense as we continue to work together to explore ways to expand accessibility to healthcare for all,” he said.

Both St. Joseph and Healdsburg District Hospital officials said they expect to complete discussions over the lease and management agreement over the next year. Once the agreement begins to take shape, the district plans to hold several employee meetings and town hall sessions to obtain community input and feedback.

Voters in the health care district may have a say on the agreement by spring 2019.

“Our intent is to hold several community meetings between now and then to get input from our voters,” Campbell said, adding that any management agreement would have to be approved by district voters.

Campbell said partnering with St. Joseph would give the hospital access to capital resources to finance major projects, such as a state-mandated seismic upgrade. Other benefits could include discounts on ?St. Joseph health care services for Healdsburg hospital employees and saving money on hospital supplies through joint purchasing agreements.

No plans have been made to change services currently offered by the hospital, and no reduction in medical staff is foreseen. But Campbell said there could be changes to administrative staff.

“Typically in relationships like these, down the road there can be consolidation of admin staff,” she said.

The hospital has a workforce of about 250 employees and is affiliated with the Healdsburg Physician Group, a primary care practice. It also employs four physicians, recently hired after the state passed a law that allows critical care access hospitals to hire their own doctors.

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