Yes, I think Patch's 'point' was local news for smaller communities - if I'm remembering right, with a focus on affluent areas that could support ad sales.

It's not avoiding neighborhoods in or near them, they just aren't necessarily easy to spot in their list.

For example, there are http://hollywood.patch.com/ and http://southsanfrancisco.patch.com/

I believe that's the idea, yes. Small communities tend to be underserved for news content and local businesses don't want/need to advertise in their region's metro news sites, but may be interested in something more local.