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Valley Forum: Here’s why Sonoma Valley Hospital needs a parcel tax


Trustees of the Sonoma Valley Healthcare District are often asked why our hospital needs a parcel tax? It’s an important question deserving a direct answer.

The Sonoma Valley Healthcare District was formed in the 1940s specifically to levy taxes to help ensure that we, as one of many small, rural communities, had access to critical healthcare services. The legislation recognized that smaller communities like ours would have to provide support, in the form of taxes, if they wanted to have a hospital.

In addition to our Valley’s small size, our residents are older than the average community in the state and nation. In addition, almost 20 percent of Sonoma Valley households with children are living in poverty. Both of these populations use government insurance programs (i.e. Medicare and MediCal).

In fact, more than 60 percent of Sonoma Valley Hospital’s gross revenues come from government reimbursements. These reimbursements do not cover the full costs of care. They are increasing as a percentage of our hospital’s income, up by 5 percentage points since 2013. Revenues from commercial insurers, who still reimburse the hospital at rates slightly above costs, have been flat and no longer fully subsidize the hospital’s operations. No organization can be sustainable when more than 60 percent of its income doesn’t cover costs. The parcel tax is a crucial component to fill this gap.

The overall mismatch between revenues and expenses has continued to grow over the last five to 10 years as all insurers have ratcheted down reimbursement rates.

The changes in government provided insurances have had a particularly dramatic impact on our hospital’s ability to make ends meet. New regulations and rules have severely limited the length of stays permitted; financially penalized hospitals for re-admissions, regardless of the cause; significantly decreased the number of illnesses that can result in an admission to the hospital; and kept increases in government reimbursement from reflecting normal increases in operational costs.

The result is that inpatient days at hospitals across the country are down significantly. Here in Sonoma, our inpatient days and admissions are down 14 percent over the last four years. Unfortunately, these declines in in-patient days have not been matched by reductions in cost as regulations, to ensure patient safety, mandate many expenses and define staffing levels.

At the same time, several other factors continue to put pressure on hospital finances. Current revenues and finances do not provide sufficient cash to cover ongoing capital replacement needs. Medical technology continues to improve requiring investments in new equipment. Finally, many procedures that once required a hospital stay are now done on an outpatient basis with lower reimbursement.

Sonoma Valley Hospital’s leadership team has not been sitting idly by while all of this has happened. Much has already been done.

New emergency department - The community helped to build a new surgical center and emergency department. That new facility has led to a 14 percent increase in volumes.

New physicians - The hospital is actively recruiting new specialist doctors. These new physicians bring additional procedures and revenues to the hospital (and surgical volumes are up).

New service lines – The hospital has developed and grown new service lines that contribute positively to our financial health. For example, occupational health has grown dramatically over the past two years and provides a new stream of patients and revenues for the hospital.

Pricing – While only possible in certain areas, our hospital financial team has identified areas where we have been able to raise prices, and effectively improve the profitability of the hospital.

Managed expenses – Our leadership team has done an excellent job of creating efficiencies wherever possible and has managed to hold expense increases to a minimum.

But, we must not forget that the most important job of a hospital is to provide high quality care for patients. That is what’s most important and we shall do nothing at the risk of sacrificing patient care and patient satisfaction.

What does the future hold? The current healthcare environment is highly unpredictable. The future of the Affordable Care Act is currently in limbo and its future is unclear. But, the longer-term trend of declining government and commercial insurer reimbursements is unlikely to be reversed under any scenario, which will continue to create financial challenges for hospitals like ours that serve small, rural communities.

Simply put, if we want a hospital and emergency department in the Valley, we need to be willing to fund it, in part, with a parcel tax. We encourage everyone to vote “yes” on E and support our hospital.

Sharon Nevins is the treasurer and Joshua Rymer is the second vice chair of the Sonoma Valley Health Care District board of directors.