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May 27, 2022

Hospital reaches preliminary sale agreement with proposed health district

WATSONVILLE—Just hours after a group of roughly 150 nurses amassed in front of Watsonville Community Hospital to drum up public support and stop its closure, they received a welcome bit of news.

The Pajaro Valley Healthcare District Project (PVHDP) has reached a preliminary agreement to purchase the hospital, WCH CEO Steven Salyer announced in a press release sent Dec. 3.

The news came about a week after Salyer announced it was facing closure without a buyer.

In a letter to employees, he cited financial trouble stemming from years of declining revenues compounded by the Covid-19 pandemic.

Without the agreement, Salyer said the hospital would have had to begin canceling services and transferring patients this week,  and possibly close by Jan. 28.

The noon rally garnered support from hundreds of people driving by.

“The nurses are here to stand for our community, to push to keep this hospital open,” said Registered Nurse Roseann Farris. “And we will do whatever we can to do that.”

But in the press release, Salyer stated that the hospital has received enough funding to operate through the end of March 2022.

“We are excited to have reached a preliminary agreement with the PVHDP for the acquisition of the hospital’s operations and to have funding to continue the life-saving work of providing care to our community,” Salyer said.

Farris said that union officials are reaching out to local and state elected officials for their help.

Some 650 employees who were given notice about possible layoffs have now been spared, at least temporarily. 

The loss of one of the county’s biggest employers, Farris said, would be devastating for both the employees and the community.

“But bigger than that is to think about what it would mean for healthcare in our community,” she said. “What would that mean for South County, what would that mean for North County and beyond?”

Nurses also say that the loss of South County’s only emergency room would throw into upheaval the county’s ability to deal with medical emergencies.

Emergency room nurse Quiche Rubalcava says that WCH ER sees from 75-90 patients every day.

“The impact would be catastrophic for the County of Santa Cruz, and close to catastrophic for the neighboring counties that would have to take the volume of patients coming in for heart attacks, strokes, complicated births,” he said. “There aren’t enough resources in those counties to support the increased volume of patients with critical health care needs.”

The PVHDP is a nonprofit created by the County of Santa Cruz, the city of Watsonville, the Community Health Trust of Pajaro Valley and Salud Para La Gente.

Hospital officials announced Tuesday that they had begun Chapter 11 bankruptcy procedures, which they say will provide the funding necessary to continue operating as the case commences and the local group prepares to purchase it.

The case was filed in the U.S. Bankruptcy Court for the Northern District of California. Under the bankruptcy procedures, Medical Properties Trust will loan $16 million to give the hospital the ability to pay its bills while the sale goes through.

The bankruptcy will be led by Irvine-based Force 10 Partners, a firm that specializes in corporate restructuring.

“Our goal is to keep Watsonville Community Hospital open so that it can provide critical health care to the community while also saving approximately 650 jobs,” said Chief Restructuring Officer Jeremy Rosenthal. “We appreciate the continued support of our physicians, nurses, other staff, and labor union partners as well as our vendors as we work through this process.”

PVHDP President and CEO Mimi Hall said the tentative agreement gives the organization time to seek legislative and financial support.

“While we still have work to do before a final agreement, this step averted imminent closure of Watsonville Community Hospital and provides a realistic path toward a stable, sustainable hospital that supports the health and welfare of the people of Pajaro Valley,” Hall said.

Hall cautioned that the preliminary agreement is only for PVHDP to be the primary—or “stalking horse”—bidder as the sale moves forward.

It is too early, therefore, to talk about the sale price for such a complex transaction, which will be further complicated by the bankruptcy proceedings, Hall said.

In addition, the PVHDP still has to officially establish itself through the state legislative process, Hall said.

“Thank goodness we got to this place where the hospital can stay open,” she said. “I feel like we pulled off a small miracle.”

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