Quick Take
After millions in annual losses under for-profit management, Watsonville Community Hospital recorded its first month of positive cash flow in years in October as it transitions to public ownership. Next moves include establishing a charitable foundation to help continue the community fundraising that was crucial in making that transition happen.
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Six months into public ownership, Watsonville Community Hospital leaders say they’re on track to break even by the end of 2023, and they’re focused on ramping up services geared toward the community’s needs.
The Pajaro Valley Health Care District (PVHCD) purchased the hospital out of bankruptcy and became the new owners Sept. 1 — ending two decades of for-profit ownership and launching the start of drastic changes to reverse annual losses of about $22 million.
“We’re confident we’re going to be close to break-even by the end of 2023, which is drastic improvements on years prior,” said CEO Steven Salyer. “It’s quite a feat, and we’re excited about that.”
Those drastic changes involve reducing the number of traveling nurses by about 80% and moving the majority of nurses into full-time positions, renegotiating insurance contracts, establishing a fundraising nonprofit, hiring several administrative leaders and working to mend relationships with a community that has felt neglected by the revolving door of for-profit CEOs for 20 years.
Salyer says the hospital saw losses of about $22 million in 2021 and 2022. However, it’s closing the gap with about $12 million saved from renegotiating insurance contracts, $8 million saved from shifting nursing schedules to majority full-time to reduce the reliance on traveling nurses, and $1 million saved from a new contract for the hospital’s basic supplies.
In October, the hospital recorded its first month of positive cash flow in years, which allowed it to put about $400,000 directly into operations.
PVHCD board chair John Friel said it’s an admirable accomplishment in a year — but the hospital is still looking to the community for support. He said the hospital’s new fundraising arm, the Pajaro Valley Healthcare District Project, has a new board of directors that will be leading those efforts. The new board was appointed in December, days before the hospital and the project agreed to move forward to make it the fundraising arm as a charitable foundation.
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The district project — which was previously led by a different board and is the same nonprofit that led the fundraising campaign last year to purchase the hospital — will likely establish a new name to avoid confusion with the similarly named health care district.
“We’re hoping that the folks that have been so generous to help us get here and get out of bankruptcy will continue to be generous again as the year progresses,” said Friel, who was CEO of the hospital decades ago. “I think that will happen because they know that the money that they give is staying in the community — it’s not going to pay off an operator who’s in [Los Angeles] or Tennessee, but it’s here. It’s going towards a particular service line, or it’s going to a new piece of equipment, making the hospital stronger. So we’ll be relying on that going forward.”
Ensuring that the hospital focuses on the community’s needed services is vital, said Roseann Farris, an intensive care unit nurse at the hospital. She also represents the hospital’s unionized nurses as the chief nurse representative of the California Nurses Association.
“Moving forward, our registered nurses would like to see our public-sector employer immediately work on securing basic services to support our community’s health care needs, including gastroenterology, pediatrics and psychiatry,” she said in a statement, adding that they would like to see the hospital also continue moving away from telemedicine.
She also argued that the hospital’s shift into majority full-time positions didn’t eliminate the need for expensive traveling nurses.
“[D]espite the employer’s decision requiring a majority of our nurses to move into full-time positions with very little flexibility in offering part-time positions, the fact is that this change has not solved the need for costly traveler nurses and that it caused attrition,” she said.
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Salyer said he doesn’t know how many nurses left specifically because of the new contracts because the hospital doesn’t track reasons they leave. However, he said just a handful of employees didn’t stay on at the hospital after the new contracts and staffing schedules went into place.
Salyer said there are currently 22 open nursing positions; when he first joined the hospital in July 2021, there were 48 open nursing positions.
The hospital is recruiting gastroenterology positions and is also in talks with other groups to provide coverage, he added.
“Any service lines or any expansion of services are not going to be a unilateral decision by the CEO of the organization,” he said. “We’re going to go through a full strategic planning process with our new board and front-line staff are going to be a part of that process, key community members, physicians, directors — that’s the process to identify where we focus.”
Salyer said the health care district board will start the strategic planning process this month and has hired a third-party firm to help with the effort.
One example of a service line that could come out of the strategic planning process, he added, was an inpatient behavioral health unit.
“We worked with the county, we had a series of community meetings where many community leaders came to the hospital to understand how the community felt about what the needs are for inpatient behavioral health,” he said. “It’s quite evident that there is a need for increased capacity for inpatient behavioral health.”
Salyer said the strategic planning process could take 12 to 16 weeks. And if the behavioral health unit becomes a priority, he hopes the hospital could open it in summer 2024.
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Funding the creation of new services like the inpatient behavioral health unit will be one of the charitable foundation’s main priorities.
The foundation’s new executive director, June Ponce, said the board is already starting its first fundraising project — an employee giving campaign that will last about a year. She said deciding how the funds are used is a process the organization is working on. Hypothetically, she said, it could raise $10,000 in this campaign and have an application process where employees request $3,000 to use toward diversity training.
Ponce most recently served as the hospital’s marketing and outreach director, and before that worked at Cabrillo College leading recruitment and outreach at local high schools.
“How can we help fund and support what the community needs? We’re going to do that with either employee giving, physician giving, community giving, hosting events,“ she said. “All the things that a foundation needs to put into place to make sure that this hospital continues to thrive and to make sure that the hospital is financially viable.”
In addition to Salyer, the new board includes Jennifer Dacquisto, president of Bank of America Monterey Bay; Brent Dunton, vice president and business banking officer of Santa Cruz County Bank; Irene Chavez, senior vice president and area manager of Kaiser Foundation Health Plan; and Janet Heien, former director of human resources at Driscoll’s.
The board held its first meeting Jan. 30, and has yet to decide how often it will meet. The foundation directors plan to select 10 additional individuals to serve on the board.
