Palm Drive closure would take estimated $18 million out of economy

SEBASTOPOL -- While the impending closure of Palm Drive Hospital has raised continued questions of access to health care and emergency services for residents of western Sonoma County, the economic impact and effect on jobs would be significant.

The hospital is Sebastopol's largest employer, with some 240 employees, of which about 100 are full-time equivalent, and the loss of those jobs would translate to a total economic loss of roughly $18.1 million for the local economy, assuming another hospital or large-scale employer doesn't replace Palm Drive, according to Dr. Robert Eyler, professor and director for the Center of Regional Economic Analysis at Sonoma State University.

The $18 million loss translates to about 2 percent of Sebastopol's roughly $955.6 million total economy, Dr. Eyler told the Business Journal, and the institution supports additional jobs beyond hospital walls.

"If Palm Drive has about 240 workers then it supports another 84 jobs according to the economic impact model for Sebastopol. Sebastopol, at the end of 2013, had about 4,200 payroll workers," he said, citing figures from the state Employment Development Department.

"That is a large number," said Teresa Ramondo, executive director and CEO of the Sebastopol Area Chamber of Commerce, when told of the $18.1 million figure. "I know there are significant impacts other than the ones directly related to the hospital. Anytime someone loses their job, there is that trickle down and that is a very significant number."

Palm Drive had allocated $18 million for labor costs and $2.8 million on professional medical fees, according to the district that oversees the beleaguered facility. In recent weeks, the severity if its financial woes emerged, and in response the district filed for Chapter 9 bankruptcy protection and plans to shutter all services by April 28.

Hospital officials have attributed the deep losses to a number of factors, among them a dwindling patient census, having a patient base that is two-thirds Medicare or Medi-Cal, both of which pay substantially less than private insurance, reduced reimbursement rates under the Affordable Care Act and stiff competition with and proximity to three major health systems in Santa Rosa, less than 10 miles away.

Last week, the hospital was granted a $450,000 emergency loan from a from a U.S. bankruptcy court judge that will help it make payroll and meet operating expenses through bankruptcy proceedings. According to a staff report prepared for the Sonoma County Board of Supervisors, which authorized a $1.8 million bridge loan to help pay for post-bankruptcy operations, the institution needs about $925,000 to meet payroll, $340,000 for employee health insurance and $280,000 for physician payments.

Beyond the hospital, Sebastopol, with a population of roughly 7,500, doesn't have many large-scale employers, save for city government, school districts and O'Reilly Media, which has about 150 employees, Ms. Ramando said.

While it's not known exactly how many of Palm Drive's employees live in Sebastopol, the 240 total employees translates to about 3.2 percent of the city's population, and about 5.7 percent of the total workforce in the city. The economic impact of $18.1 million is based on the roughly 100 full-time positions.

Ms. Ramando cited additional concerns beyond health care access and employment, noting that the closure could force people to move out of the area in search of employment. "It's just hard to know what will happen with the closure of our hospital," she said. "What will happen with our doctors, our office space, will people return?"

She noted other large employers include several grocery stores, but little else compares with the hospital, which is not far from downtown.

"It's pretty significant and you don't get those kind of businesses every day," she said.

Efforts are under way to preserve the hospital by two local physicians, Dr. James Gude and Dr. Michael Bollinger, along with former district board member Dan Smith. Their hope is to maintain emergency services while severely scaling back the hospital to five beds and keeping the emergency department.

Whether or not that plan will be successful remains to be seen, and time is running out: the district has said all operations would likely be shuttered by April 28.

Still, Ms. Ramando said she hoped something would emerge for the sake of the city's economy and health care access.

"These are hard things to let go of, even if it's the right thing do from a business standpoint. Once you lose it, you probably don't get it back. I hope they figure something out."

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Correction: An earlier version of this story contained incorrect information, basing the economic impact off of 240 full-time positions, which is the total number of part-time and full-time equivalents, instead of 100 full-time equivalents. It has since been corrected.