In a stunning reversal likely to boost the prospects for a continuation of hospital services and nearly 100 well-paid jobs in West Sonoma County, the newly elected Palm Drive District Health Care Board member Richard Power had withdrawn his opposition to the upcoming Measure A to sell the building to the only buyer in years willing to operate a hospital.
At a February 4 meeting of the District Board, Power voted 4 to 1 with the majority of the Board to approve the sale of the hospital for what a final definitive appraisal found to be the legal “fair market value” of $5.2 million. The two-page final term sheet for American Advanced Management Group (AAMG), a health services company with a proven track record specializing in turning around the fate of besieged small community hospitals like Palm Drive, can be read below and here: Term Sheet of Hospital Sale to AAMG Feb 4 2019
AAMG, whose COO Matt Salas recently explained in detail “Why Sonoma Specialty Hospital is Good for West County” here in the Sonoma Independent. The renamed Sonoma Specialty Hospital (SSH) features a range of outpatient services that include radiology (3-D Mammography, X-rays, dexa scans), lab work, as well as surgery and other services to come online in the future. A high quality drop-in Urgent Care facility, that utilizes the full range of hospital services, just opened in the previous Emergency Department. It is available to anyone with non-life threatening illnesses and injuries from 9 a.m. to 9 p.m., seven days a week. SSH is in the process of being certified as a Long Term Acute Care hospital to care for patients who require ICU and other high quality long term care for their eventual recovery.
In the County Voter Guide for the Special Election on March 5, Richard Power had joined Board member Jim Horn in signing his name to a rebuttal against Measure A, writing, “We urge you to vote “no” as well—unless our taxpayers and former employees get a fair deal.”
At the February 4 Board meeting,Richard Power reversed his stand and spoke strongly in support of the sale for its expertly appraised value of $4 million plus a $1.2 million promissory note that would be triggered if AAMG re-sold the facility.
Richard Power stated, “I believe that we’ve entered into a transaction, that in the context we’re working in, does reflect the fair market value.”
Power continued, “It’s not one that fits a classic – how you buy a house, or how a business would sell, but this is not that kind of a situation… The decision was made with AAMG, the goal is to have a healthcare facility here . . .that clearly has value. \The pricing reflects what they’re getting, and I hope they’re successful. If they’re not, we’ve taken steps to protect the district in its ability to pay off the rest of its loans, with whatever money would come from it.”
During a Town Hall meeting on February 6, Power elaborated on why he now supports the sale. “The ballot statements had to be provided to the county before we had any deal, or even knew what the deal was,” he explained. “As that process developed, the board went through the process of [seeking a] professionally arrived at determination of value in order to figure out a way to sell the property at that value. I was one of the people that said ‘Be sure that the fair market value question has been answered.’ From my perspective it has been answered.”
Although Board member Jim Horn had, in his ballot statement opposition rebuttal, referred to a higher valued appraisal for the property in his opposition statement to Measure A, that document was never provided to the public and was, according to multiple sources, only a few pages long, hastily done, and failed to account for the millions of dollars of deferred maintenance improvements necessary to keep any medical facility open. At the February 4 Board meeting, Jim Horn backtracked on his ballot statement mis-statement about the hospital’s appraised value, agreeing that when the $1.3 million cost of demolishing the building was subtracted from the $6.5 million value of the raw land, $5.2 million was indeed the fair market value for the property.
Horn then commented that he still “quibbled” with the manner in which the $1.2 million promissory note would be forgiven after AAMG had operated the facility for ten years because, despite the comprehensive assessment that he and others had accepted, “I just have a gut feeling that the hospital is worth more.” Other speakers at the meeting observed that taxpayers have spent millions of dollars per year supporting health services at the facility, effectively more than 20 times the cost of the ten year forgiveness note to AAMG. And that the community will therefore be getting a great deal out of the sale, which eliminates all future liability for taxpayers while providing an urgent care facility, out patient surgery and other health care services at not cost to the District for the next ten years.
Jim Horn’s view was clearly not shared by attorney Richard Power, or Board Chair Dennis Colthurst, who have worked for months on the complex negotiation. Nor was it shared by Board members Eira Klich-Heartt, or Gail Thomas, or Board attorney Bob Arnone, who explained that by law, the Board had to receive the fair market value to sell the public asset, and that the final value had been derived by a revised January 2019 appraisal by specialist Health Care Appraisers Inc.
Horn’s unsubstantiated “gut feeling” led him to be the only on of the five Board members to vote against the sale on February 4.
Palm Drive Health Care District Board Chair Dennis Colthurst noted that he and Richard Power, along with the CEO and owner of AAMG, had worked on Super Bowl Sunday to negotiate the terms of the carefully crafted term sheet. “With this plan,” Colthurst said, “I believe in my soul that we’ll be able to continue as a hospital and be successful.”