What You Should Know About The Parcel Tax
This Fall you will be asked to vote to renew the parcel tax. I’d like to address a question I am often asked: what does the hospital do with the parcel tax?
The answer is simple. Like many hospitals, the money we receive for the services we provide does not cover our costs. This shortfall in revenue from services is the result of longstanding imbalances between what our public payors can pay us versus what commercial payers can pay us.
SVH serves a community with many patients who rely on Medicare or Medi-Cal for their healthcare, both of which reimburse the hospital for services at a rate well below the actual cost of delivering those services. Historically, the parcel tax helps to make up the difference.
Currently, around 75 percent of hospital services go to Medicare and Medi-Cal patients based on the hospital’s total charges. Government reimbursements from these two programs fell $9.8 million short of costs in fiscal year 2019. If you look at hospital financials, you will see that revenue from patient services covers only around 86 percent of operating costs.
The current parcel tax of $250 annually generates close to $4 million each year to fund hospital operations and allows us to maintain services such as the ER. Without the parcel tax, the math just doesn’t add up.
Small Hospitals Face Challenges
SVH is not alone in facing this challenge. Hospitals throughout the country struggle because of the dramatic changes in healthcare over the past several decades. During this time, healthcare expenses have grown significantly while insurance reimbursement for services, including from the government, has not kept pace. And remember, hospitals are mandated to provide critical services to everyone regardless of ability to pay.
The hospital is doing its part to be financially sustainable. At the end of 2019, it was financially stronger than it had been in more than a decade due to the many steps taken to manage costs and increase revenues. This progress continued into fiscal year 2020 until Covid-19 hit. As with almost all hospitals, Covid significantly reduced revenues as patients stopped seeking routine care and outpatient services. Yet hospital costs didn’t drop as precipitously.
We cannot close our imaging department because visits are down 40 percent. We cannot close our operating rooms because scheduled/planned surgeries all but ceased. And we certainly couldn’t close the ER even though visits dropped dramatically as many stayed home during the first part of the pandemic. Only in recent months has the hospital seen a reversal of this with revenues again growing, although not yet to pre-covid levels.
The current parcel tax expires in June 2022 and the District Board approved a resolution to put renewal of the tax on the ballot this Fall. The next vote will ask our community to renew that tax at the same yearly amount but extend the term from 5 to 10 years.
A Nearby Hospital Is Critical
The value to our community of having an acute care hospital close by has been demonstrated several times recently, notably during the pandemic by the support the hospital has provided the community in terms of testing and vaccinations, care for infected patients – including ICU care – and community education. Prior to that, the hospital supported the community during the wildfires and power outages. And I don‘t need to remind you we live in an earthquake zone.
Having an acute care hospital close by is essential to our community, and not just for routine care. Natural disasters can curtail access to hospitals in Santa Rosa and Napa, as we’ve seen. But even in normal times, congested roads slow local travel. That is why many local Kaiser patients turn to SVH for emergency care.
It is a testimony to the spirit of Sonoma Valley that our hospital not just endures but is becoming stronger each year. In the past decade, we’ve conducted a major seismic retrofit, built a new wing with a modern Emergency Department and Surgery Center, and remodeled many parts of the hospital, from the patient rooms to the lobby.
Due to the generosity of our community and the outstanding work of the Sonoma Valley Hospital Foundation, we will be opening a modern diagnostic center that includes a state-of-the-art CT and MRI. An added benefit is that it will strengthen our growing relationship with UCSF Health.
You will be hearing more about the parcel tax in upcoming months from the volunteer committee of community members who are planning a Sonoma Valley outreach effort. I hope you will listen carefully to what they have to say, ask questions, and be as informed as possible before voting on this measure.
President and CEO
Sonoma Valley Hospital