Palm Drive Hospital Closure

In 2012, Palm Drive Hospital in Sebastopol, California began implementation of an Electronic Medical Record (EMR) system using McKesson Paragon. The hospital was promised an exceptionally good deal of only $750,000 if it would adopt the McKesson implementation used at another small hospital in the area and run Palm Drive’s software on the other hospital’s servers instead of having a local implementation.

The Palm Drive board of directors understood that the EMR implementation would basically be free because the federal government would award the hospital $2M under the HITECH reimbursement program. In reality, the total cost of the system and hardware would balloon to almost $3M and Palm Drive received only $1.2M of reimbursement through HITECH. Physicians at Palm Drive became so frustrated with the unreliable implementation that they stopped admitting patients by late 2014, causing the hospital’s census to collapse and the facility to fail.

In addition to the cost of software, McKesson billed Palm Drive $1.2M in implementation, consulting and training fees above and beyond the budgeted cost of $150,000. Many departments were still operating on paper for all of their work and the medical record department had become ‘scan central’ with high speed scanners dumping documents into patient charts by the thousands. In addition, labor costs escalated rapidly due to loss of productivity during implementation. When Palm Drive closed, the halls of the hospital were cluttered with Computers on Wheels (COWS) each of which cost $10,000 each.

With EMR implementations often taking 18 months and costing many millions of dollars, this was not an unusual happenstance in the United States hospital environment. Clearly Sonoma West Medical Center could not afford to repeat this scenario, financially or administratively.