Watsonville Community Hospital.
(Kevin Painchaud / Lookout Santa Cruz)
Civic Life

Laird advances bill to create health care district, another step in Watsonville Community Hospital transition

Through Senate Bill 418, State Sen. John Laird is pushing the creation of a health care district which could be the eventual owner of the Watsonville Community Hospital, if the sale is successful.

As Watsonville Community Hospital continues to undergo its bankruptcy proceedings and possible sale to a local nonprofit, a separate and significant part of that process is unfolding in the state legislature.

State Sen. John Laird is advancing a bill that would form a health care district that would eventually take over as owner of the hospital if the sale is successful.

Senate Bill 418, proposed as urgency legislation because of the hospital’s uncertain future, received unanimous bipartisan support in the Assembly Local Government Committee and is now headed to the Assembly Floor where it will need a two-thirds vote of the house. If it passes in that body, it will need the same from the senate before heading to the governor’s office.

John Laird
State Sen. John Laird

“The successful passage of SB 418 will ensure the continued provision of vital services to the community and protect the jobs of those who work tirelessly to keep Pajaro Valley residents and their loved ones healthy,” said Laird in a news release.

In November, it appeared the hospital had run out of solutions after years of financial struggles. CEO Steven Salyer told employees that if a buyer didn’t take over the hospital it would need to suspend operations.

However, a recently formed coalition of local nonprofits and government agencies known as the Pajaro Valley Healthcare District Project said it secured funding and reached a tentative agreement with the hospital in early December. Days later, the hospital filed for chapter 11 bankruptcy and said the project planned to acquire the hospital.

The noticing agent for the bankruptcy case, known as Stretto, lists a bid deadline of Feb. 14 and a sale hearing on Feb. 23.

Until the health care district is officially created, the nonprofit would be the entity purchasing the hospital. The plan is that once it is formed, the nonprofit will transfer ownership to the district, project member Mimi Hall previously told Lookout.

If the bill is adopted, it would give the Pajaro Valley Health Care District five years to map the district into zones that are representative of the community, according to the release. Once formed, elections would be held to elect local board members who would be responsible for making decisions affecting health care in the district.

With the creation of the health care district, the Pajaro Valley Healthcare District would join a list of more than 70 others across the state. Nearby Salinas Valley Memorial Healthcare System is a hospital within the health care district model. Not all health care districts operate hospitals and some that previously operated a hospital have closed them, according to a 2012 report by the Legislative Analyst’s Office.

The districts were created by the legislature in 1945 with the enactment of the Local Hospital District Law. They were established with the intention of giving special districts the ability to build and operate hospitals and other health care facilities in underserved areas. The name was eventually changed to the Local Healthcare District Law.

The Pajaro Valley Health District Project, made up of the county of Santa Cruz, the city of Watsonville, the Community Health Trust of the Pajaro Valley and Salud Para La Gente, formed with the specific intention of creating the health care district. Project members hope that the health care district’s public oversight model will put the community’s needs first.

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“Given the hospital’s bankruptcy status, this legislation is the only pathway to preserving access to health care, creating accountability and addressing glaring health disparities for the people of the Pajaro Valley,” said project member Hall.

The hospital holds 106 beds and employs more than 620 employees and 200 physicians, according to its website. Currently, Alabama-based Medical Properties Trust owns the land and the buildings of the hospital, but the hospital has been managed by a Los Angeles-based firm, Prospect Medical Holdings, since January.

In addition to Laird, several other local officials co-authored the bill including Assemblymembers Robert Rivas and Mark Stone, and Sen. Anna Caballero. Their districts include community members who live in areas the hospital serves.