Quick Take:

Watsonville Community Hospital’s governing board is set to vote next Wednesday to appoint Stephen Gray as its next CEO. Gray is the current chief administrative officer and operations executive for Sutter Bay Medical Foundation – Santa Cruz Division.

Watsonville Community Hospital says it has chosen Stephen Gray, a top executive with Sutter Bay Medical Foundation, to become its new CEO amid the hospital’s ongoing struggles to find a sustainable financial footing.

Several people told Lookout that Gray’s administrative experience and his commitment to underserved communities are qualities the ailing hospital needs in a chief executive who will have to pilot the operation out of bankruptcy and onto a reliable path to public ownership.

“He believes strongly in the mission of a health care delivery system — that is, even though your financial margin is next to impossible to meet, he will not let go of the commitment to serve the poor, the disabled, the uninsured and the elderly,” said Dr. Larry deGhetaldi, who earlier this year retired from Sutter Health as vice president of governmental medical affairs and has worked closely with Gray over the years. “He has that sort of liberal belief — some confidence in his ability to manage difficult situations.”

The hospital’s governing board will vote on Gray’s appointment at a meeting Wednesday. “We conducted an extensive search and were delighted to have four exceptional finalists,” John Friel, chair of the Pajaro Valley Health Care District Hospital Corporation, said in a statement.

Gray is the chief administrative officer and operations executive for Sutter Bay Medical Foundation – Santa Cruz Division. He first joined as CAO in 2012. From September 2017 to September 2019, he served as CEO for Sutter Eden Medical Center in Castro Valley before returning to Santa Cruz. Gray also oversees the Sutter Maternity & Surgery Center of Santa Cruz. He holds master’s degrees in business administration and in public health. He has lived in Capitola for 11 years.

The hospital’s most recent CEO, Steven Salyer, resigned in March, citing family matters. Matko Vranjes, the hospital’s current chief operating officer, has been serving as interim CEO since Salyer’s departure.

Salyer’s resignation was a surprise to the hospital, Friel previously told Lookout. The sudden vacancy in the CEO’s office came at a difficult time for the hospital, which has been undergoing a transition from 20 years of private control to public ownership.

Stephen Gray.
Stephen Gray. Credit: Handout

The Pajaro Valley Healthcare District — through a historic $65 million fundraising campaign — purchased the hospital in September 2022. Since then, the district’s board has been steering the 106-bed acute care hospital out of bankruptcy; it saw about $20 million in annual losses in 2021 and 2022.

While district officials say the hospital’s financial situation is improving, it continues to lose about $5 million in operating costs a year and has struggled in some months to make payroll for its 650 employees and more than 300 physicians.

Last month, the state’s Distressed Hospital Loan Program gave the hospital an $8.3 million no-interest loan to stay afloat and allow financial breathing room to invest in a cardiac catheterization lab — a specialized area of the hospital that will focus on tests and diagnosis of cardiovascular diseases.

The hospital continues to serve a population that overwhelmingly relies on government health insurance — Medicare and Medi-Cal — which hospital officials say reimburses an estimated 14 cents for every dollar spent caring for these patients.

“They’re doing a wonderful job caring for the poor, the elderly and the disabled, and they lose money every time they take care of those patients,” deGhetaldi said.

The Pajaro Valley Health Care District also does not yet own the building or the land underneath it, paying around $4 million a year to lease the building and land from Alabama-based Medical Properties. The district has floated the idea of a possible 2024 bond aimed at raising enough money to buy the building and land outright.

State Sen. John Laird, who led the passage of the legislation to create the district, told Lookout that he thinks Gray is a good choice.

“He’s got great experience and he’s grounded in the community,” he said. Laird added that he called Gray as soon as he heard the news Thursday, telling him he wants to be “his partner” in what he will do at the hospital.

The board will vote on Gray’s appointment at its meeting next Wednesday at 5 p.m. in the community room at 85 Nielson St. in Watsonville.

Have something to say? Lookout welcomes letters to the editor, within our policies, from readers. Guidelines here.

After three years of reporting on public safety in Iowa, Hillary joins Lookout Santa Cruz with a curious eye toward the county’s education beat. At the Iowa City Press-Citizen, she focused on how local...