A Sound Business Decision

July 11, 2017

This is the first of what will be regular reports from the Chair following meetings of the Sonoma Valley Health Care District Board concerning issues facing the board and the hospital. My intention is to expand the conversation about our hospital and provide greater context regarding board decisions.

The main topic at the recent board meeting (July 6) was the District’s plans for the South Lot, a subject that received considerable community attention this year. The board held a closed session before the meeting to review the pricing implications of the proposals received through the RFP process.

While we’re still early in the process, the board voted to not keep the property for future hospital use although no decision was made regarding the buyer. It’s zoned for residential and it’s clear the city and our neighbors want it to be used for housing. All proposals we received through the RFP process included housing.

There are several reasons why the majority of board members voted to sell the property and not retain it for an unspecified use sometime in the future, which I’d like to share.

1. Stay on mission – The mission of the District is to provide health care in the Sonoma Valley. Our community has made it clear it wants us to provide an Emergency Department and high quality health services and we feel undertaking anything else is a distraction from this mission.
2. Make a sound business decision – Guiding our thinking regarding the South Lot are what we believe are good business decisions that support this mission by improving the hospital’s financial health and sustainability. A sale allows the District to:

• Pay off the $2 million loan which costs us $150,000 each year, and do so before it comes due in 2018.
• Avoid increasing hospital debt. The hospital is still paying off debt resulting from past requirements to install an Electronic Health Record and seismically upgrade the facility. We are making good progress on this and don’t wish to incur more debt.
• Own the parking lot that was required with the building of the new wing.

Purchasing the South Lot was a sound business decision at the time and it still is. We originally leased it in 2009 for construction staging and parking during construction of the new wing. In 2011, we renewed the lease with an option to purchase, with some of the lease payment used to reduce principal.

In August 2016, we exercised the option and purchased the lot through a private loan which is due in August 2018. The loan interest is the same cost as the prior lease payments, so there were no savings in operating costs except we do not have to pay taxes as a governmental agency. Now we have the opportunity to sell it for more than we paid while retaining the one acre employee parking lot.

We have been asked, why not bank the land for the future? To be honest, there are no foreseeable future needs for the property outside of the parking lot. We still have room for expansion within the hospital in the space remaining from the old ED, and we believe we can meet seismic requirements beyond 2030 without further expansion.

The fact is, most hospitals today are contracting, not expanding. Government and private payer regulations continue to decrease inpatient care and overnight stays. Fewer beds will be needed in the future as care continues to move to outpatient treatment, and even into the home.

Some have suggested that the land should be used in a way to benefit the community such as with affordable or workplace housing, or provide community meeting space, which are worthwhile ideas. But as I noted, our mission is health care, not land development or housing. We’re certainly receptive to proposals that benefit the community that keep in mind the time constraints imposed by our current loan.

Our goal as we move ahead is to find the best near-term solution for the hospital and our community, and we will continue to review the options presented to us and share our thinking with the community.

In closing, I’d like to note that the information discussed at board meetings can be found in the board packets that are available on the hospital website (at sonomavalleyhospital.org under the Health Care District section), and that most meetings are streamed live on our local cable station, SVTV, with recordings of past meetings also available for viewing. Board meetings are open and public comment is welcome and encouraged.

Sincerely,

Jane

Jane Hirsch, RN, MS
Chair of the SVHCD Board of Directors