Quick Take:
After 20 years of struggling under for-profit ownership, Watsonville Community Hospital has returned to public hands as of Thursday. The Pajaro Valley Health Care District board and CEO Steven Salyer say they have a plan to make the hospital sustainable.
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As of Thursday, the Watsonville Community Hospital is operating under the ownership of the Pajaro Valley Health Care District. With more than $65 million in public fundraising to buy the hospital out of bankruptcy court done, the hospital began its new life under that new, assembled-in-2022 public board.
One of the first big announcements is the hospital’s leadership going forward. The five-member board will keep Steven Salyer as CEO; Salyer had served in that role since he was hired by the previous owners in July 2021. Salyer, who has assembled a new management team over the past year, emphasizes the signal change from the ownership and management that had led the hospital into bankruptcy.
“I re-formed a brand-new team through bankruptcy,” he said. “So I hired a chief nursing officer, I hired a chief operating officer and I hired a chief financial officer all through this bankruptcy. We should be perceived as a brand-new team.”
On Thursday, standing outside the hospital’s entrance, he described to Lookout how his executive team and the district’s board plan to break even by 2024 or earlier. Last fiscal year, the hospital’s losses totaled almost $22 million, and losses this year are expected to be about the same.
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“We’re not a large, for-profit chain anymore,” Salyer said. “What we are is an organization that’s owned by the community and is accountable to the community. We owe it to our community since they own us. We owe it to the 500-plus donors who gave nearly $65, or a little over $65 million, to this organization. We owe it to them to run an efficient hospital, a hospital that truly cares about our community that will provide outstanding quality service.”
Salyer and two district board members, Marcus Pimentel and Jasmine Nájera, among other hospital employees, also spoke to the media Thursday about the historic efforts to save the hospital after it declared bankruptcy in December — and how they plan to turn it around. About one year ago, a coalition of local nonprofits and government entities formed the Pajaro Valley Healthcare District Project and led what is considered the “largest community fundraising campaign in county history.”
The district, which was formed through legislation sponsored by state Sen. John Laird, is scheduled to host its first board meeting as the official owner Thursday evening. The district began meeting in March to prepare for the transition, but became the official owner and operator Thursday after the successful purchase of the hospital this week.
Even prior to taking ownership, the district and Salyer began to face major challenges: how to get the hospital to break even and how to balance that with the needs of its staff.
Roseann Farris, a nurse in the critical care unit and the nurses’ union representative, said nurses are hopeful about a publicly owned hospital, but also concerned about their contracts.
“For years, Watsonville Community Hospital nurses have stood up for our patients against predatory, for-profit health care corporations,” she said via email Wednesday. “While we are encouraged to see our hospital returned to the community, the Pajaro Valley Health Care District needs to respect the nurses and our collective bargaining agreement.”
Salyer said out of the more than 600 employees, just a handful did not accept offers of employment. He added that the hospital is always hiring nurses and techs and encouraged community members to apply.
Making the scheduling changes — which greatly favored full-time work over part-time — was necessary, Salyer told Lookout. Doing so provides more consistent patient care, and drives down costs, he said.
He described some of the major aspects of the hospital’s business plan, which was put together by a team made up of consultants, district board members, the Pajaro Valley Healthcare District Project and hospital administrators. Among the primary strategies is renegotiating with insurance companies so the hospital is paid more for its services. Iif negotiations with those payers goes as planned, Salyer said, it could result in a $11 million annual budget difference.
This interview has been edited for clarity.
Lookout: The hospital lost more than $20 million last year and is projected to lose that again this fiscal year. Can you describe your business strategy?
Salyer: So I’m adopting the business plan that was created through the bankruptcy process, which was from the buyer’s side. At the end of the day, what we want is parity when it comes to payers within the community. So when you have Kaiser, Aetna, Blue Cross, Anthem, those type payers, we want to get paid what other hospitals are getting paid. And what you’ll see in our board meetings, you’ll hear it in open session, for the longest time, even though this organization was a large part of a large for-profit system, the payer contracts were very subpar. They were below the 25th percentile from the state and national. Everyone around us was getting paid a lot more for the same type of service. One of our key strategies is going back to individual payers and negotiating appropriately, getting buy-in with them that, we need to partner together for this hospital to survive so that we can take care of your patients — the payers’ patients — the Kaiser patients, the Blue Cross Blue Shield patients, the Aetna patients. We need appropriate funding, so we can take your dollars and invest in quality, which benefits your population, your payers, which is also our population. So we’re mutually aligned. And that strategy is working. We’re actively working hard right now with those individual payers to bring parity, you know, amongst us and other organizations.
One of the benefits of bankruptcy, and one reason we chose to go this route, is it speeds up the process of negotiation. Instead of this [negotiation] dragging out — which can be up to a year or more — we’re looking at maybe 60 days, we’ll have the majority of the payers finalized and new contracts are signed.
Per the business plan, we’re shooting for an additional $11 million per year by renegotiating. As we go through this process, we’ll be updating the board on where we currently sit with those negotiations.
Other strategies include working with potential partners to lease out our unused office space that we own, for example, within our medical office building, which would bring significant dollars to us.
Another major initiative while we are looking at starting inpatient behavioral health, inpatient psych. We’re going to partner with the county, and other entities like Kaiser Permanente as well who need inpatient behavioral health. We have a perfect space on our second floor of the hospital, which is unused. So we’re currently looking at a possible 21-bed new inpatient behavioral health center. In 2023 there could be possible construction that’s going on, with an implementation in 2024. The goal is we could see roughly $800,000 in new revenues or new margin to the organization.
We’re also looking at over $1 million in savings by realigning with a new purchasing company — where we get our basic supplies.
I think it’s important for the community that our staff, we’re not just going to be in cost-cutting mode, we’re also going to be looking at ways to benefit our patient population. We’re going to be expanding the product line. I’ve already talked about inpatient behavioral health, which might also have an outpatient component as well. But we’re looking at creating a cath lab to perform catheterizations [a tool to look at the arteries of the heart to treat abnormalities]. The cath lab total project is a little over $3.5 million. However, initial estimates on increased margin, staggered over years, but in the first year, it will basically break even in a little over a year. After that, we will see significant improvements.
We’re going to judge how these initiatives are working. But if they work to plan, we’re looking at break even sometime closer to 2024 and maybe even sooner.
Lookout: Nurses and other employees have voiced concerns about the quality of care and how scheduling changes — which reduced the number of part-time positions — will further affect the quality of care. Can you address those concerns and how you’re responding?
Salyer: The board made a decision to hire, for the most part, mostly full-time staff within the organization. When you look at other organizations that are around us, other other hospitals, other health care entities, we’re not on par with them when it comes to the amount of full time staff versus part time staff. Due to the desire to have standing quality care, you need, as an organization, a good percentage of your staff to be full-time. Employees are more consistent, if they’re here, in full-time schedules. There are savings when it comes to benefits, etc. With the single goal for this hospital to perform well, to survive, and to thrive long term, we need to be similar to other organizations that are around us. The board made that decision in order to improve health care and efficiencies as well as the cost, the cost structure with the organization. It’s an absolute must. This organization has to do that.
Lookout: The hospital went through 20 years of for-profit ownership and years of financial struggle. How will this new board and your administrative team be different?
Salyer: I think it’s important for the community to know — so I got here last July, and after 60 days of being here, so just two months in, I had to divert the entire team to focus on preparing the organization to make it through bankruptcy. So it’s an abnormal time for the organization. So it’s not the executive team who caused the bankruptcy — that executive team left, or were forced out [by Medical Properties Trust]. The board at that time terminated the executive team that was on site. I came in July. I reformed a brand new team through bankruptcy. So I hired a chief nursing officer, I hired a chief operating officer and I hired a chief financial officer all through this bankruptcy. We should be perceived as a brand-new team. We successfully led this organization through bankruptcy during a pandemic, with all the uncertainty. My team did a phenomenal job, getting this hospital to a point where we were able to transition and sell it appropriately. But now we’re going to transition to operating and working with the board to execute on those business strategies that we’ve just discussed. We’re a brand-new business, a brand-new executive team.