Just two years ago, Watsonville Community Hospital was saddled with a $30 million debt and was facing bankruptcy and possible closure.
But on Wednesday, the Pajaro Valley Health Care District (PVHCD) Board of Directors—the agency that oversees the publicly owned hospital—heard a budget report which, although it still includes a debt, nevertheless paints a picture of solvency and a positive direction for the first time after years of corporate mismanagement.
Board member Marcus Pimentel, who also oversees Santa Cruz County’s finances, called the unanimous passage of the budget as “an incredible moment.”
“We’re at 99.98% funded in 14 months since taking over operations of this hospital, September 2022,” Pimentel said.
Pimentel attributed the success to the hospital staff, and to the community that supported PVHCD’s purchase and takeover of the institution in 2022.
“This is a historic, monumental national achievement here in Watsonville, and for this hospital,” he said.
The picture could drastically improve next year, if voters living in the district approve Measure N, a bond measure that would raise $116 million that would go toward purchasing imaging equipment, expanding and modernizing the emergency department and other upgrades.
The money would also go toward purchasing the building and land on which it sits, thus saving $3 million in annual rental costs.
The former owner—Halsen Healthcare—sold those assets to Alabama-based Medical Properties Trust for $40 million in a leaseback agreement that is now attributed as a driving factor in the hospital’s financial troubles.
Halsen is also accused in a lawsuit of taking much of the hospital’s funds for themselves.
“The hospital is balanced, but when we factor in that we don’t own the land, we still have a shortfall and it’s really important that we do everything we can to get that land back and the building under local control,” Pimentel said.
Hospital leaders are optimistic that a new cardiac catheterization lab and an upgraded Da Vinci surgical robot will bring in more patients and revenue.
The catheterization lab has been closed since 2017, and is now one of the biggest reasons the hospital transfers patients to other facilities, CEO Steven Gray said.
“We’ll have that service in 2024 to be able to keep patients here,” he said.
Gray added that, while the budget is reason to celebrate, the hospital is not yet out of the woods.
“Operationally, this budget is balanced, but ideally you have a budget that also creates capital,” he said. “That also generates an income at the end of the year.”
This includes current and new services, new equipment and in bringing new providers into the community.
“This budget doesn’t quite do that,” he said. “This budget keeps us solvent and keeps us healthy and moving forward. The bond measure will improve that and help us get closer to a place where we have the ability to generate the capital we need to reinvest in the services and continue to grow for years to come.”
