Forging a New Path for Petaluma Valley Hospital

PHCD owns Petaluma Valley Hospital (PVH) and is currently negotiating a definitive agreement to transition and lease the hospital’s operations to Paladin Healthcare. Its current lessee, St. Joseph Health, is continuing to operate PVH to give the District time to reach an agreement with Paladin.


District and St. Joseph are currently discussing and developing agreed-upon terms of an operations transfer agreement. Our expectation is that all parties will work expeditiously to reach the necessary agreements.

For more information on the due diligence process PHCD undertook to select its new long-term operation, please click here.


PHCD’s Board of Directors and CEO are committed to helping the community stay up-to-date on the process and engaged in our progress.



Petaluma Valley Hospital Operations Transition Updates

These updates are aimed at providing information and an official perspective to all Petaluma Valley Hospital (PVH) medical staff, employees and volunteers on the work being undertaken by all three parties involved in this transaction. It is the expectation of the District that all three parties and their representatives make themselves available for important meetings and calls to keep the momentum and accomplish our common goal of a smooth transition. Please do not hesitate to contact Ramona Faith if you receive any information that is contrary to these communications or if you have concerns.


To review all of our updates, please visit our blog.


LATEST UPDATE: January 4, 2018


In lieu of our regular Update, we share an editorial published in the Argus Courier on January 4, 2018 from our CEO, Ramona Faith and PHCD Board President Elece Hempel.


Resolutions for PVH in 2018


The end of every year is a time to reflect on the year that was, and think of hopes and wishes for the coming year. Looking back, it’s easy to see what makes Petaluma a tremendous city and community. Families and businesses find it a desirable place to be, and we witnessed our community at its best when we came together in the most productive and heartfelt way to aid our friends in the north and east who suffered extreme loss from the devastating fires.


We are very proud of how our hospital, Petaluma Valley, responded in the time of crisis. As we’ve gone back to business as usual here in Petaluma, the experience was an important reminder of how beneficial this hospital is to our community and our county. Just last month, PVH received an “A” grade in the Hospital Safety Score by the Leapfrog Group, an independent national nonprofit. The Hospital Safety Score was developed by the nation’s leading experts on patient safety and validates PVH’s commitment to its patients and its community. It was the highest-scoring community hospital in Northern California.


The Petaluma Health Care District, your public agency working to ensure local access to health care and wellness services, has been striving to secure a new operator for PVH for the last two years. St. Joseph Health entered into a 20-year lease in 1997 and provided the community a larger health system, greater financial stability and expanded regional resources.


Unfortunately, and to our surprise, SJH abruptly ended negotiations for a new lease after nine months in 2016 because we couldn’t agree on fair market rent; a non-compete clause assuring that SJH would not compete with the hospital by offering services in Petaluma that could and should be offered through PVH; and maintaining women’s health services.


After pursuing a second RFP process, the District selected Paladin Healthcare, one of three bids received, based on its thorough proposal that aligned with community-identified priorities, demonstrated its strengths as an organization, and articulated a strong vision for PVH.


Paladin’s bid was a 20-year lease with an option for a 10-year extension. Paladin asserted that core services would be maintained, there would be heightened awareness and focus on sustaining quality, it would bring new services based on community need and physician input, and it was interested in cooperating and collaborating with SJH.


Our ability to secure this lease with Paladin faced significant challenges in 2017 while SJH continues to operate the hospital post lease expiration.


The information technology system at PVH, comprised of critical health documentation functions like medical records, is the biggest obstacle to Paladin’s ability to take over operations. SJH upgraded the hospital’s Meditech IT system several years ago. During that upgrade, the system moved from a standalone platform to a SJH-integrated system. The District, Paladin and SJH have been discussing how to develop a new IT system for PVH.


Transferring an IT system with a hospital is standard practice, oftentimes with the existing operator leasing back the existing IT system to the incoming operator while a new upgraded IT system gets up and running. SJH hasn’t agreed to leave a functioning IT system for a new operator since the current system is now part of a remote system. Developing a new system will cost millions of dollars and take 12 to 18 months.


In light of this, Paladin has restructured its offer from a lease to a management agreement proposal with the District because of the costs and complications involved with creating a new IT system, as well as the ensuing delays relative to transferring hospital operations. The District just received and will be reviewing this offer in January. Up to this point, a management agreement has not been considered due to the financial risk it places on the District and this community during these unpredictable times of rapidly changing health care economics and government policies.


The IT challenge needs to be resolved before Paladin — or any new entity — will come in and operate PVH. This major and costly issue for all three parties coupled with the uncertainty PVH doctors and staff are voicing about the hospital’s future are hurdles to tackle, reengage and resolve in 2018.


Throughout this two-year process, we’ve experienced a head-on collision with the changes in health care related to business, politics, technology and how care is delivered. It has caused us to think differently about adaptability and a long-term plan to ensure PVH’s vitality well into the future. Health care delivery will continue to change, but local access to core hospital services still needs to be provided to Petaluma residents. This includes a quality emergency room and the hospital services required to support an ER. PVH sees 18,000 ER patients annually, making it one of the busiest emergency providers in the county.


Keep in mind that California doesn’t allow free-standing ERs that are not attached to a hospital, and PVH does not meet the criteria to be deemed a critical access hospital, like Adventist Health Clearlake, Healdsburg District Hospital and Redwood Memorial Hospital in Humboldt County, a SJH-owned hospital. Regardless, we believe core services of the hospital should remain available and be sustained in Petaluma. We are steadfast in our aim to maintain and potentially augment these vital services at PVH.


On behalf of the District Board of Directors, we will work very hard in 2018 to tackle the difficult task of navigating the regional health care needs, balancing those with sweeping changes in health care delivery, and defining PVH’s future under these circumstances. We understand the community’s, physician’s, and employee’s concerns about an uncertain future and are listening to what they have to say, and we want to continue being open with the process and its challenges. With the holiday season behind us, we look forward to discussions with SJH to address the IT barriers and reviewing Paladin’s management agreement proposal.


One thing is for sure, this community needs and deserves a cooperative and collaborative process and a resolution for PVH – a critical asset in Petaluma serving all of Southern Sonoma County.



Reports and Presentations

Key Informant and Focus Group Summary Report

PHCD Request for Proposals

2016 Property Condition Report

Petaluma Valley Hospital Retrospective - Wayne Fairchild

Due Diligence News


January 4, 2018

Resolutions for PVH in 2018


August 17, 2017

Petaluma hospital transfer further delayed


June 15, 2017

Hospital transition underway


April 13, 2017

Petaluma Health Care District in Focus


March 15, 2017
Letter to the Editor: Hospital changes

March 15, 2017
Paladin, St. Joseph work through Petaluma Hospital transfer agreement

March 10, 2017
Vote for New Petaluma Valley Hospital Lease Deferred

March 2, 2017
Poll: Paladin right choice to run PV hospital

February 26, 2017
Petaluma Valley Hospital's new manager Paladin Healthcare known for turnarounds but facility is healthy

February 17, 2017
Petaluma Health Care District Moves Forward With Paladin Healthcare as Recommended Operator for Petaluma Valley Hospital 

February 6, 2017
Three Operators Vying for Petaluma Valley Hospital

January 30, 2017
Petaluma Valley Hospital Contract Gets Bidding Interest

January 26, 2017
Early Interest in Petaluma Hospital Contract

November 13, 2016
Petaluma Health Care District Plans New Hospital Process

October 20, 2016
Details emerge in hospital talks

October 6, 2016
Petaluma Patch - Petaluma Health Care District and St. Joseph Health End Lease Negotiations for Petaluma Valley Hospital

October 5, 2016
Petaluma Health Care District and St. Joseph Health End Lease Negotiations for Petaluma Valley Hospital

October 5, 2016
Petaluma Argus Courier - St. Joseph Out as Petaluma Valley Hospital Operator

October 5, 2016
North Bay Business Journal - St. Joseph Health, Petaluma Health Care District End Hospital Negotiations

April 28, 2016
St. Joseph top bid for PVH

January 22, 2016
St. Joe's, Prime Healthcare bid to operate Hospital

January 19, 2016
Petaluma Health Care District Set to Review Two Lease Options for Petaluma Valley Hospital

January 5, 2016
Petaluma Valley Hospital's future up for discussion

December 3, 2015
Petaluma Hospital Bids Coming Into Focus

November 10, 2015
Petaluma Health Care District Seeks Public Input on Priorities for Selection of Pe taluma Valley Hospital Operator

October 20, 2015
Petaluma Health Care District Moves Due Diligence Process Forward
Announces four potential operators at Petaluma Valley Hospital

September 24, 2015
Multiple bids for Petaluma hospital 

September 24, 2015
Important health decision