Quick Take:
Watsonville Community Hospital held its first State of the Hospital address Friday morning, with leadership providing updates to the Watsonville community on how it plans to use Measure N dollars, changes in hospital finances and potential challenges the hospital might face amid possible cuts to Medi-Cal/Medicaid.
Watsonville Community Hospital outlined its next steps to draw millions in funding approved by a 2024 ballot measure and warned of potential challenges the hospital may face if the federal government moves ahead with cuts to Medicaid, in a Friday update to the community.
“Our hospital’s future is not a guarantee,” said Watsonville Community Hospital CEO Stephen Gray. “The past few months have definitely brought challenges.”
Gray said the health care industry is vulnerable and under attack from multiple angles. One of those threats is the Trump administration’s proposal to speed up $880 billion in cuts to Medicaid — a joint federal and state program that helps cover medical costs for low-income families — and add new limits on its eligibility criteria, he said.
If the changes are approved, it could lead thousands of residents in the Pajaro Valley Health Care District to lose their coverage under Medi-Cal, California’s Medicaid program that helps low-income residents access care, said Gray.
Cuts to Medicaid, Gray said, could potentially force the state to eliminate coverage for undocumented residents. Nearly two-thirds of the $161 billion used to fund Medi-Cal comes from the federal government, according to a report from CalMatters. Federal cuts could possibly increase the costs of health care for patients, he said, and further create challenges for the patients’ access to health care and the hospital’s financial sustainability.
The hospital will still help patients who might lose their coverage under Medi-Cal, it’s part of the hospital’s mission, he said. Gray did not elaborate further on what could happen if cuts to Medicaid are approved.
“Our goal is to prepare for everything and know that we have plans in place to improve and expand the services that we have available,” Gray told Lookout. The hospital has to “make sure that we’re using every dollar that we have at our disposal as efficiently as possible,” for the hospital and health care district, he said.
The hospital’s goal is to be more transparent with the community, said Gray, about what it’s doing and challenges it expects to encounter in the future, like cuts to Medicaid. Last November, the hospital fell victim to a cyberattack, said Gray, and it’s still picking up the pieces months later. The cyberattack caused a delay in how the hospital sent bills and received payments from insurance companies and patients since hospital staff had to work with paper charts for a few weeks.
The hospital also shared plans for how it will be using Measure N funding after purchasing the 27-acre property and its buildings for $40 million in October from an Alabama-based real estate investment firm. Last year, voters approved the $116 million bond that would help with hospital infrastructure improvements and purchasing its property.
The hospital will use $14 million remaining of the first portion of the bond money to invest in infrastructure and safety improvements, which include better lighting fixtures in its emergency room and renovations to CT and MRI machines, said hospital board chair Tony Nuñez.
Watsonville Community Hospital does not receive the $116 million from the bond in one lump sum, rather it receives portions of the funding over a period of time, said Nuñez. The hospital received $55 million to be used specifically for the purchasing of the hospital property and infrastructure repairs.
Nuñez added that the hospital is making the first steps toward expanding its emergency room. This year, it will begin working with architects and contractors to design what an expanded ER would look like, he said.The design process is expected to take a year to complete. Construction won’t happen for another two years, said Gray.
The expansion will double the size of the hospital’s emergency room, which currently has 12 beds, said Nuñez. On average, hospital staff see nearly 100 patients per day, for a total of nearly 35,000 patients a year.
Watsonville Community Hospital also saw a decrease in financial losses in the past two years, said Gray. In the district’s first full year of operating the hospital in 2023, annual losses decreased from $30 million to $13 million, and in 2024, that number went down to $800,000. Gray attributes the decrease in losses to investing in new services and equipment — such as a hyperbaric chamber and using robotic surgical tools — so staff can take care of more people and perform more surgeries, he said.
The hospital is also expanding its cardiovascular services, offering more screenings for patients and hiring specialists to its staff. Residents will not have to travel to North County to receive care, said spokesperson Nancy Gere.
Friday morning marked the first time the hospital hosted a State of the Hospital address, Gere said. Nearly 100 community members, nonprofit leaders and elected officials, including Watsonville Mayor Maria Orozco and District 2 Santa Cruz County Supervisor Kim De Serpa, were in attendance.
“This is our hospital collectively, and we’re here to inform you more about your hospital,” said CEO Stephen Gray. “We’ll continue to do this as the first of many events like this will continue to inform you about the hospital.”
