Watsonville Community Hospital is in one of the most consequential periods since returning to public ownership.
Today, the hospital is operating with roughly eight days of cash on hand. Before supplemental government payments, daily expenses exceed the cash coming in by approximately $85,000.
Those supplemental payments help close some of the gap, but they arrive periodically and will be greatly reduced in the coming years.
As such, the hospital has continued to rely on advances, loans, grants and outside assistance—including $10.6 million in state emergency funding earlier this year—to maintain operations.
That financial pressure is why, in September, the Board of Directors began a public review of a range of strategies, both new and ongoing, that could improve the hospital’s long-term stability.
These include growing surgeries and other services, improving efficiency and collections, pursuing partnerships and additional outside funding, and changes to existing services.
Labor & Delivery and the NICU have been at the center of much of the public discussion because they represent one of the most significant financial challenges currently facing the hospital. Together, these services lose approximately $10 million a year—meaning the hospital has absorbed a loss of roughly $27,000 every day for the past four years as it has worked to stabilize its finances.
While maternity care is a critically important service, sustaining that level of loss day after day, year after year, has become increasingly difficult as the hospital’s broader financial challenges have intensified.
Beginning in 2027, federal and state healthcare changes driven by President Trump’s Big Beautiful Bill are expected to further reduce the resources available to hospitals like ours.
At our Sept. 30 meeting, Michael Schrader, CEO of the Central California Alliance for Health, reported that, of approximately 78,000 Santa Cruz County residents currently enrolled in Medi-Cal, one-third could lose coverage by the end of 2028. Another 8,800 residents will be moved to a state program that reimburses hospitals at substantially lower rates.
Because more than 80% of Watsonville Community Hospital’s patients are covered through Medi-Cal, Medicare or other government programs, these changes will be devastating.
We expect cuts to government payments could reduce hospital revenue by another $4 to $7 million each year, starting next year. This does not include the extra cost of caring for people who lose their insurance.
This is the context in which the board is evaluating Labor & Delivery, the NICU and other strategies that could improve the hospital’s financial outlook.
I want to be clear—no decisions have been made. But with a service line losing approximately $10 million annually, a hospital operating with very limited cash, and millions more in expected funding shortfalls ahead, these conversations must occur.
At the same time, this cannot be just a financial calculation.
Any potential change to maternity services must consider the impacts to families in the Pajaro Valley, the capacity of neighboring hospitals, emergency transfers, transportation and language access.
Those concerns are not secondary to the financial analysis. They are part of the analysis.
The broader responsibility of the board is to weigh both the importance of the services our community relies on and the financial capacity of the hospital to continue providing them.
Watsonville Community Hospital is a publicly owned hospital. That means the community deserves transparency and to be included in the process, including understanding the risks we face if we do not act.
Our responsibility as a board is to share information, consider options and hear from people who depend on this hospital before making decisions. There are risks associated with every path before us. But there is also a very real risk in failing to act.
Please join us for a community town hall from 5:30-6:30 p.m. on Thursday, Oct. 22, in the Community Room at Watsonville Civic Plaza.
Our obligation is to make the decisions necessary to give Watsonville Community Hospital the strongest possible chance to remain open, stable and serve the Pajaro Valley for generations to come.
Tony Nuñez is chair of the Pajaro Valley Health Care District Board of Directors and Watsonville Community Hospital.
