This story has been updated from a previous version.
A cascading wave of fiscal challenges such as the election of President Donald Trump, his One Big Beautiful Bill Act (OBBBA) and a cyber attack, has Watsonville Hospital’s leadership team worried that it will not have the financial means to continue to run the facility.
As a result, the Pajaro Valley Health Care District (PVHCD) Board of Directors voted Wednesday to seek an outside health care provider to take over day-to-day management of the hospital.
The board formed a two-person ad-hoc committee to look into a partnership with Sutter Health, Common Spirit Health—the organization that owns Dominican Hospital—and other interested health management organizations.
Since PVHCD took over Watsonville Community Hospital in 2021—saving it from potential closure in the face of bankruptcy and bringing it back into community ownership—it has made significant progress in righting the institution.
Voters passed Measure N in 2024, a $116 million bond that allowed the district to purchase the hospital building and property, renovate imaging systems such as MRI and CT scanners, and begin plans to renovate the emergency department. It has also created a new cardiac catheterization lab, which opened last month.
And two years after losing $33 million as a result of the bankruptcy, the hospital was on track to break even in 2024, said PVHCD Board Chair Tony Nuñez.
That was until a cyber-attack set off a cascading wave of fiscal challenges, and the passage of OBBBA—also known as H.R. 1—which will result in massive cuts to Medi-Cal and Medicare.
The hospital, which predominantly serves those with government insurance, is now facing financial uncertainty.
“It’s really bleak,” Nuñez said. “We’re talking anywhere on an annual basis of losing from $3.5–$7 million each year in revenue (starting in 2026).”
The search for external partnerships began last year, when the board sent requests for proposals to several healthcare providers such as Salud Para La Gente, Kaiser Permanente, the County of Santa Cruz and UC San Francisco.
That move to bolster the financial picture of the hospital and expand its services was part of PVHCD’s 2023 strategic plan, Nuñez said.
“This was the next step of us bringing services back to Watsonville and expanding services at Watsonville Community Hospital,” he said.
Talks are now underway with Kaiser to rent out unoccupied space at 65 Nielsen St., where they will offer specialty care.
But after initially declining management services offers from Common Spirit and Sutter, the newly formed ad-hoc committee will bring a list of guiding principles to hospital CEO Steven Gray in September, that could include a mandate that the PVHCD Board will still oversee the hospital, and that it will keep its name.
Gray will bring those principles to the negotiating table with the health care organizations.
“Now we’re here in this position where we need a partner to help us weather this really awful storm that is going to be coming for us over the next five years as a result of H.R. 1,” Nuñez said.
The challenge, he said, is that the hospital is not yet turning a profit, which means it cannot make smaller renovations, pay past-due bills and purchase supplies.
A larger healthcare network, he said, would have more cash on hand to do so.
But the most important incentive is that the hospital is running the risk of not being able to make it past OBBBA and the damage that will happen as a result.
“We cannot let that happen,” Nuñez said. “We can’t get to a point again where we are staring bankruptcy in the face. We can’t get to a point where we are going back to our community and saying ‘we might close.’”Watsonville Hospital is not alone in its financial troubles. According to protectourhealthcare.org, 36 hospitals have already closed since the passage of OBBBA, and another 750 are at risk.
I’m confused, OBBBA didn’t exist the last time WCH faced bankruptcy. What was to blame that time? Maybe WCH needs a DOGE…?
Here we go again. The hospital promised they could run the hospital if only we supported financial support. Now they’re selling out again amid their screw ups. Why can’t they manage effectively. PS Their care team in emergency sucks.
Partnering with Sutter Health would be the best bet.
This hospital was doing well right before the hack. The damage from that started the tail spin. Also, due to ICE fears the visits have dropped significantly like half…which also has an impact. They are also projecting a loss because of the Big Beautiful Bill which is just plain ugly if you read it. They are a 70 percent Medi Cal. Which is going to be gutted. People need to understand this is not mus management. They are preparing for hard times that are coming. I love this place.This is a wonderful little hospital, and the employees are your neighbors. Everyone needs to buck up and help them.
The ongoing blame for the cyber attack persists even a year later. It is essential for individuals to take responsibility, and the community deserves transparency regarding the allocation of their tax dollars. The hospital’s condition is deteriorating, and the quality of care is unsatisfactory. An investigation may be warranted to uncover the underlying issues. Additionally, what was the final outcome of the cyber attack? It seems more convenient to shift the blame rather than address the management failures and the exorbitant salaries being paid to some executives.
Let this place close! Stop all the b.s. Todd Stop blaming the big beautiful bill and all your other lefty ideas. Have the courage to say this hospital is going bankrupt because the majority of their clients are a bunch of illegals that do not pay their hospital bill. PLEASE STOP ✋️!!! While you are at it, do more research and report that the average visit at this place costs over 25k… of course nobody can afford to pay this, therefore the hospital passes the bill to taxpayers.
In a prior comment we as a community are asked to get on board to save the hospital. Blaming the Big Beautiful Bill, ICE, and a cyber attack. Please, almost every auto dealer in the nation experience a cyber attack over a year ago, many lost a significant amount money for 2 weeks, but none went out of business. One writer mentioned “it is a wonderful little hospital'”. I agree it WAS a great hospital up to the quake of 89. I have friends and family that work there and support them. The management, the board, officials & CEO should be held responsible. The damage, reputation, & deterioration the current administration has brought forth on our little hospital are rotten to the core and may not be financially viable. One person stated an investigation should be ensued. Sad!