Watsonville Community Hospital
(Kevin Painchaud / Lookout Santa Cruz)
Health & Wellness

Watsonville Community Hospital reaches preliminary agreement for sale to avoid closure

Watsonville Community Hospital officials have reached a tentative agreement to sell the hospital’s operations to the Pajaro Valley Healthcare District Project — a recently formed nonprofit made up of local government bodies and healthcare nonprofits. If successful, the purchase would prevent the closure of the hospital.

UPDATE: The various entities that make up Watsonville Community Hospital filed Chapter 11 a bankruptcy petition Sunday, listing debts of at least $13 million — including a $1 million Pacific Gas & Electric claim. The figure does not include money owed to employees or to retirement plans, but is likely millions more. Read the federal filing below.

After announcing to employees in November the hospital could suspend its operations if it didn’t find a buyer due to financial challenges, Watsonville Community Hospital CEO Steven Salyer announced Friday that the hospital reached a preliminary agreement with a local nonprofit, the Pajaro Valley Healthcare District Project, for its purchase.

“We are excited to have reached a preliminary agreement with the PVHDP for the acquisition of the hospital’s operations and to have funding to continue the life-saving work of providing care to our community,” Salyer said in a release.

The hospital holds 106 beds and employs more than 620 employees and 200 physicians, according to its website. Earlier Friday, nurses at the facility held a news conference demanding that the hospital stay open.

When asked for comment, Roseann Faris — a nurse at the hospital and its California Nurses Association union representative — said she hadn’t seen the news about the preliminary agreement. At the time of publication, Faris said she had not yet received approval to speak further.

The hospital plans to file a motion asking a bankruptcy court to approve the district as the purchaser. Using the Chapter 11 process, the court would need to approve the sale of the hospital’s operations through an auction, according to the release.

At the moment, Medical Properties Trust owns the land and the buildings that make up the hospital, but it has been managed by Prospect Medical Holdings since January.

Mimi Hall, CEO and president of the group seeking to purchase the hospital, said there is still work to be done before they reach a final agreement, but at the least, an “imminent closure” was averted.

“This is a framework that allows us to seek necessary legislative and financial support to complete the acquisition and renew the hospital under public stewardship,” said Hall, in the release. “We look forward to working with our state and local elected officials and our partners who are dedicated to advancing community ownership of the hospital.”

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Made up of the county of Santa Cruz, the city of Watsonville, Salud Para La Gente and the Community Health Trust of Pajaro Valley, the nonprofit incorporated this summer, according to Hall. The project is in the process of formalizing as an official health care district — which is similar to a water district but focused on a community’s healthcare needs.

While the project is the entity purchasing the hospital, the hope is that once the healthcare district is formed it would transfer ownership to the district.

“Our project could reach an agreement with the current owners for a hospital sale...it could happen before a district is formed, it could happen after a district is formed,” said Hall. “What we would do is transfer ownership to the eventual health care district.”

The district would have a board of elected members who make decisions on behalf of the constituents to run the hospital.

The hospital expects to request a hearing from the bankruptcy court to consider the sale in February 2022, according to the release. In the meantime, hospital officials say they have received enough funding to continue operations while the sale is processed or through the end of March 2022.