District Recommends Buyer For Petaluma Valley Hospital

PETALUMA, CA — The Petaluma Health Care District is recommending the sale of Petaluma Valley Hospital to NorCal HealthConnect, LLC, a secular affiliate of Providence St. Joseph Health, the current and longtime operator of the Petaluma hospital.

The district has approved a non-binding letter of intent for the transaction, and the parties said in a news release Thursday they have agreed on a fair market value purchase price of $52.6 million.

The community will be asked to approve the sale on an expected Nov. 3 ballot measure; the sale, if approved, is expected to close on or before Dec. 31.

Community forums will be scheduled in August so that southern Sonoma County residents can learn about the recommended sale and how it would impact the community, according to the news release.

The district said its decision to pursue the sale of Petaluma Valley Hospital aligned with its goal of keeping the important asset in and serving the community for the long term.

NorCal HealthConnect has agreed to maintain the facility as a highly functioning hospital providing critical services for a minimum of 20 years.

NorCal HealthConnect’s commitment to providing these services includes the hospital’s emergency room, which serves approximately 19,000 patients annually, including Kaiser-insured patients, according to the news release.

The district, which is a community operated public agency, said it expects to invest the sale proceeds into current and future community health programs.

"For the last four years, since our search began for a long-term operator, we have been steadfast in finding a solid future for Petaluma Valley Hospital," said Ramona Faith, CEO of the Petaluma Health Care District.

"After vetting all potential hospital operators and lease options, the District Board determined NorCal HealthConnect presented the best option for our community over the long term," Faith said.

"Our number one priority has been to ensure continued local access to a quality acute care hospital with an emergency department," Faith said. "While health care delivery has dramatically changed over the last decade and has put a strain on the viability of community hospitals, we are so thrilled that this community can continue to have a local hospital in Petaluma."

Because NorCal Health Connect is a secular affiliate of Providence St. Joseph Health, southern Sonoma County residents would have access to an integrated network of hospitals and medical offices across the North Bay Area, including Santa Rosa Memorial Hospital and Queen of the Valley Medical Center in Napa.

NorCal HealthConnect would continue providing all current hospital services for a minimum of 20 years, with the exception of The Family Birthing Center which it would maintain for a minimum of five years — the parties acknowledging that in this era, many community hospitals are closing their obstetric services.

NorCal HealthConnect would also assume hospital maintenance, capital expenditures and seismic work, and invest in the health of southern Sonoma County through its community benefits programs.

"Our desire to attain long-term stability for Petaluma Valley Hospital has never waivered," said Kevin Klockenga, regional chief executive for Providence St. Joseph Health Northern California.

"Our top priority has always been to ensure continued access to high-quality health care locally," Klockenga said. "This decision is the next step towards ensuring the hospital will continue to be here to serve Petaluma residents, and all those in need, for years to come."

Should voters approve the sale, the community will have "substantial capital to invest in programs supporting the region’s most challenging community health priorities such as: health equity, education, mental and behavioral health, senior wellness, homelessness and housing," according to the news release.

The district said its board of directors would collaborate with local nonprofit, health, business and community leaders to develop a strategic plan for investing in services and programs to improve health in southern Sonoma County.

What Happens If Voters Do Not Approve The Sale Nov. 3?

If the sale is not approved by the public, Providence St. Joseph would continue as the operator for up to 30 months, then return the hospital to the Petaluma Health Care District.

"During that time, the District Board will re-evaluate its options to lease or sell the Hospital, if possible," a representative for the health care district said in an email to Patch.

"A new operator must be identified, an agreement must be reached and the new operator must be ready to take possession and operate the Hospital within this 30 month time period. There can be no assurances that the District will find an operator and in which case, the Hospital will likely close."

Why Does The District Need To Sell The Hospital, Is It Because The District Has No Money?

"The District does not operate the Hospital and does not have the sufficient financial resources to provide working capital and other capital needed to be able to operate the hospital," the district representative told Patch.

"Continued operation of the hospital— to ensure continued access to a local acute care hospital with an emergency department— remains the District’s top priority. The District is pursuing the sale because it was the only viable option that assures the Petaluma community access to a local acute care hospital with an emergency room for a minimum of 20 years. As a result of the sale, NorCal HealthConnect will assume responsibility for deferred and ongoing maintenance, capital expenditures and seismic compliance."