At present, Watsonville Hospital Corporation is in Bankruptcy Court, putting this essential institution at risk. It’s critical to this region that Watsonville Community Hospital continues serving the community. Fortunately, our local and state governments, health-focused nonprofits, medical establishment and donors are working hard to complete its purchase. But there’s more to do. The hospital’s future is in our hands. It’s vital that local business leaders like ourselves step up to ensure this purchase is completed and the hospital can continue serving the community.
Many are rightly asking why, if the hospital failed as a for-profit institution, will it succeed as a nonprofit? The answer is simple, the previous owners were focused on extracting profits rather than on the long-term viability of the hospital. They failed to invest in the equipment required to sustain profit-generating services like the Cath Lab, which lost accreditation and had to close. Nor did previous management keep on top of its insurance collections, taking in 50% less for its services than other hospitals statewide.
How could for-profit investors drop the ball on such central functions for any business? It was because the hospital lacked continuity of management with 20 CEOs having passed through the corner office in only a decade. No business succeeds without strong long-term management.
So how can the hospital be saved? The proposal is to convert the hospital to a nonprofit entity run by a new management team with decades of experience running hospitals. This team would be committed to seeing through a multi-year turnaround plan developed by experts with extensive expertise in health care operations, finance and turnarounds. Rather than reporting to a Board of Directors appointed by out-of-state investors, the hospital’s management will be closely supervised by a board comprised of locals with deep roots in our community.
Despite only being in bankruptcy for a little over half a year, there are signs this turnaround is working. First, the team managed to negotiate with the hospital’s landlord to lower the rent by 25%. The turnaround plan includes the reaccreditation of the once profitable Cath Lab and investing in the infrastructure needed to improve insurance collections. Over 95% of all hospital services, inpatient and out, are covered by insurance, Medi-Cal/Medicare and commercial.
Further, the new team is implementing measures to renegotiate insurance contracts using procedures that have yielded results for other hospitals in the state. Already, with the new normal after the pandemic, the hospital is seeing patient visits return to near pre-pandemic levels. This combination—investing in revenue generation and greater revenue capture for services provided at market rates from rising patient visits—will provide a path forward toward the hospital reaching solvency and, eventually, profitability.
While the financial turnaround of the hospital is within reach, the funding required to save it is still not there. There has been broad community support—local, county and state—from $25 donations from single individuals to a $25 million appropriation in the state budget. And there’s a whole host in between, including from health care—Blue Shield, Kaiser Permanente, Dominican Hospital, Stanford Children’s Hospital and the Community Health Trust of the Pajaro Valley have all contributed—to local corporations such as Driscoll’s, Inc. and Dobler & Sons. This support has come together in a short timeframe. While momentum is on our side, more funding is needed.
Out of a total of $67 million needed to acquire the hospital and make the necessary investments to turn it around, an impressive $59 million has already been raised, leaving only $7.8 million to close the gap. Recently, a generous foundation agreed to provide a loan for donations and pledges secured by Aug. 5. The loan will cover pledges to be paid any time before the end of 2025. A team is ready to answer your questions regarding donations. Contact Celeste DeWald at [email protected] for information.
Making sure Watsonville Community Hospital stays open is critical to our businesses, and we know it is to yours as well. Please join us in helping this vital community organization continue providing quality health services to the Pajaro Valley.
Watsonville business leaders John Bargetto, Tom Broz, Caroline and John Eiskamp, Rocky and Judy Franich, Kevin and Jee Kajihara, John Martinelli, Karen and Clint Miller, Miles Reiter, Sally-Christine Rodgers and Randy Repass, Kirk Schmidt, Tom Wilson and William and Neva Hansen wrote this article together. Their views are their own and not necessarily those of the Pajaronian.