Palm Drive 2.0

Hospital board now working with doctor-led plan to reopen

Sebastopol’s Palm Drive Hospital and emergency room have been closed for about a month and after much discussion, its elected district board has put the hospital’s future in the hands of a hotly debated, doctor-led plan.

“We selected the [Palm Drive] Foundation as the one to negotiate with,” says board member James Maresca, referring to a proposal by members of the Palm Drive Foundation.

But there are still big challenges — state and federal regulations at every turn, and broader questions of financial sustainability that are being faced by small hospitals around the country.

And, of course: Can the Palm Drive emergency room reopen or are West County residents looking at the prospect of an “urgent care center”?

Meanwhile, Dr. Jim Gude, a driving force behind the doctor-driven plan now under consideration, is no longer the foundation’s top administrator.

“I’m stepping back,” says Gude, whose new role, he says, is to help Palm Drive staff-up on doctors and nurses in its new guise.

“I’m not going to be doing what I did earlier, which was doing everything I could to prevent the closing of this hospital,” says Gude.

Also out of the picture: Tom Harlan, the hospital’s embattled CEO, who resigned late last week. Prior to his departure, Harlan told the Bohemian, “I am supportive of an objective review of any and all serious proposals that will allow our board to reimagine and reinvent this hospital.”

West County residents are being offered the promise of local hospital, streamlined of bureaucratic fat, that would point the way forward in the new, post-Affordable Care Act world of health-care delivery.

The hospital is not alone in struggling to gain purchase in the new normal of Obamacare.

According to the industry journal Becker’s Hospital Review, seven small hospitals around the country either filed for bankruptcy or closed in the first quarter of 2014 – “a tipping point for many financially beleaguered hospitals and health systems,” Becker’s noted.

The shuttered hospitals included community health centers in rural areas and localized health networks, and their eventual fates range from outright closure to buyouts from larger health providers and insurers. For example, a regional hospital in Casa Grande, Ariz., filed for bankruptcy to complete a sale to Banner Healthcare.

A Long Beach, New York hospital was absorbed by a larger area health system. The fate of others is in limbo.

The challenges faced by smaller hospitals like Palm Drive is systemic. Much of the pressures facing all hospitals – but especially smaller ones – are tied up in cost-saving, healthy-living efforts to reduce in-patient care and rely on outpatient services and treatment.

Another hurdle: Medicare regulations designed to excise fraud have essentially outlawed doctor-run hospitals.

Board member James Maresca says federal Medicare officials have overreached in their anti-fraud efforts, which was the upshot of a recent U.S. House of Representatives hearing two weeks ago that criticized the Centers for Medicare & Medicaid Service along those same lines.

“It is possible to have physician-run hospitals without having fraud,” says Maresca.

Even still, Palm Drive isn’t taking any chances: Exit Dr. Jim Gude, enter as-yet-unnamed hospital administrator.

“We will have a hospital director who is not a physician,” Gude says.

Yet Medicare remains linchpin for success at Palm Drive. And, ironically, the foundation plan basically flips the Obamacare model on its head and emphasizes elder care as a key component to financial viability for the hospital.

By contrast, the Affordable Care Act’s success hinges on buy-in from younger people to subsidize high-use consumers.

Over half the people who used Palm Drive were Medicare patients, says Maresca, and the foundation plan would enhance services of special benefit to seniors, ramping up Alzheimer’s treatments, for example.

“If we don’t have Medicare on board, nothing is viable,” says Maresca.

Board members also hope to engage in some sort of general services contract with the physician-led effort, which would keep Palm Drive operating within state law.

The elephant in the room is the fate of the emergency room, which reopens under the foundation’s proposal, even as the same proposal notes the facility needs an upgrade.

Harlan summed up the ER dilemma facing the hospital: State regs require any hospital with an emergency room to also provide acute care beds – which Palm Drive had a hard time filling.

Given the proximity of three major hospitals to Palm Drive, Harlan notes, operating “a full service inpatient acute care hospital with less than nine occupied beds…is financially unsustainable without significantly augmented funding sources.”

The rub? “Without acute care beds, a ‘stand-alone’ emergency department may not be operated in the State of California,” Harlan said.

But Gude says not to get caught up in talk over a separate “urgent care center” to solve the acute-bed dilemma: “Ambulances don’t go to urgent care centers,” he says. “Our goal is to provide a true emergency room. We think it’s economically viable.”