Sonoma West Medical Center to shutter emergency room, become long-term acute care hospital

Aug. 23--Sonoma West Medical Center, which is expected to run out of money by the end of the month, would lose its emergency department under a plan to transform the struggling Sebastopol facility into an extended-stay hospital under new management.

The move was given a green light last week when the Palm Drive Health Care District, which owns the hospital, approved a management services agreement with Modesto-based American Advanced Management Group.

The new operator plans to transform the hospital into a long-term acute care hospital, which provides hospital-level care for patients with complex medical conditions who must remain in the hospital setting for 25 days or more. The nearest such facility is in Kentfield.

"I think it's going to be a win-win for the hospital," said Dennis Colthurst, district board president. "We're going to be full. We're going to have 32 potential long-term acute care beds."

The hospital's name would change to Sonoma Specialty Hospital. The management services agreement gives Advanced American Management Group, or AAMG, the exclusive option to enter into a lease or purchase agreement with the district to acquire all or part of the hospital's assets, including its license, equipment, supplies and furnishings.

Colthurst and other hospital supporters applauded the move, saying it would allow the hospital to remain open and, aside from its emergency department, maintain many existing services, including laboratory, imaging and operating rooms.

But the district's lone vote against the plan, Jim Horn, said the plan places the taxpayer-funded district in financial liability. The agreement makes the district financially responsible for losses incurred until the hospital's license is transferred to AAMG, or until the hospital is leased or sold to the management group.

In essence, he said, the agreement uses district parcel tax funds to subsidize the start-up costs of what will eventually be a for-profit hospital. In its current agreement with Sonoma West Medical Center, Inc., the district is not responsible for the hospital's debt and losses.

"It's just nuts," said Horn. "We basically dropped the firewall as long as it takes us to transfer the license or sell the hospital."

Horn said losses could run into the millions of dollars before the license is transferred to AAMG or before the hospital is sold or leased to it. A sale or lease would require voter approval, which would not likely take place until March 2019.

AAMG expects losses of $4.7 million between September and March, according to the management group's own projections. The agreement also calls for a monthly management fee of at least $100,000, which would be taken from hospital revenue. If the hospital lost money, the district would be responsible for payment.

The hospital has struggled financially ever since it reopened in 2015. Last spring, hospital officials entered into a business deal with a Florida-based drug testing company that triggered a lawsuit by Anthem Blue Cross. The insurance giant accused Sonoma West Medical Center of conspiring in a billing scheme that defrauded Anthem and its members of $16 million.

Colthurst said that legal dispute is between Anthem and Sonoma West Medical Center. The new management services agreement would end the district's relationship with the current hospital operator, he said.

"SWMC basically goes by the wayside," said Colthurst. "SWMC owns their debt. It's not a district issue."

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