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Apr 5, 2007 10:11 pm US/Pacific
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Sebastopol Palm Drive Hospital Declares Bankruptcy
SEBASTOPOL (CBS 5 / AP / BCN) ―
The board of directors for Palm Drive Hospital in Sebastopol sought Chapter 9 bankruptcy protection in a Santa Rosa court Thursday, while the cash-strapped facility develops a plan to restructure about $3 million in debt owed to creditors.
The 37-bed hospital will remain open through the bankruptcy process, which could take up to three years.
Naomi Fuchs, the president of Palm Drive's board of directors, announced she will remain on the board but step down as president to bring fresh leadership to the hospital.
"I want what is best for the hospital, and I believe I have a lot to contribute," she said.
Dan Smith, a Sebastopol businessman who secured an emergency infusion of cash to help Palm Drive pay employees last month, had demanded that Fuchs resign from the board. He stormed out of a board meeting on Wednesday and accused Fuchs of lying to the audience about the severity of the hospital's finances.
Palm Drive has operated in debt every year since it became a health care district in 2001. Palm Drive lost $4.9 million in its most recently concluded fiscal year, Semple said.
The hospital has averaged fewer than 10 patients a day in recent times and there were just 14 patients at the hospital on Thursday, Semple said. But the hospital anticipates a fuller patient load if Sutter Medical Center in Santa Rosa closes by early 2008 as planned.
Palm Drive will prepare a complete financial analysis of its debts and a plan of operation during the bankruptcy proceedings, Semple said, and the percentage of debts that will be paid to creditors also will be determined.
Smith contributed $2 million in stock as collateral to allow the Exchange Bank to extend the hospital's line of credit from $750,000 to $1.3 million, Semple said. Smith's action allows the hospital to repay its line of credit to the bank by the end of December instead of at the end of this month, Semple said.
The hospital will receive a $1.3 million second installment of parcel tax collections at the end of this month which will be used for operating expenses, Semple said. That and the extended line of credit should allow the hospital to pay for its operations through the end of August, Semple said. After that, he said more money will have to be raised.
(© CBS Broadcasting Inc. All Rights Reserved. This material may not be published, broadcast, rewritten or redistributed. The Associated Press and Bay City News contributed to this report.)