Watsonville Community Hospital will either be sold to a new buyer or—if that fails—close by Jan. 28, CEO Steven Salyer announced Monday.
In a letter sent to employees, Salyer states that the hospital is facing “significant financial challenges,” which have been compounded by decreased revenue due to the Covid-19 pandemic.
“Like many health care providers, WCH was forced to borrow millions of dollars to fund its operating losses,” Salyer wrote. “As a stand-alone community hospital, WCH was not able to absorb or avoid these losses.”
While such a closure would be a calamity for South County, the news might not be all bad. The hospital is actively seeking a buyer, Salyer says, and a group of local healthcare professionals and providers has announced its intention to purchase the hospital.
The Pajaro Valley Healthcare District Project (PVHDP), made up of the County of Santa Cruz, the City of Watsonville, Community Health Trust of Pajaro Valley and Salud Para La Gente, was formed with the express purpose of making the purchase and giving the county’s southernmost city a measure of control over its health care.
“We have been collaborating with the Hospital for several weeks to figure out how that can happen,” said PVHDP spokeswoman Mimi Hall. “We are making plans to be a bidder.”
Salyer says the sale will likely be completed through a Chapter 11 bankruptcy court process.
“This Chapter 11 filing will give our hospital the financial breathing room required to focus on patient care and operations while we conclude a sale,” Salyer wrote.
Salyer also asked the new buyer to rehire all the hospital’s employees, who face termination when the sale closes on Jan. 28.
“We are hopeful that we will be able to find a buyer and sell the Hospital, but if we are not able to do so, the Hospital will have to suspend its operations after the bankruptcy court authorizes those steps,” Salyer wrote. “We are saddened to have to take this step but are hopeful that the sale will go through, and that the Hospital will be able to continue serving the community.”
It is not yet clear whether PVHCD will be able to secure the funding necessary to make the purchase by Jan. 28. Hall says the price is still under discussion.
The Santa Cruz County Board of Supervisors has unanimously allocated $500,000, and the city of Watsonville has also pledged its support.
Also unclear is what will happen to the physical property.
When the previous owner Halsen Healthcare took over WCH in 2019, it sold the property and building to Alabama-based Medical Properties Trust (MPT), and then leased it from them in a so-called sale/leaseback.
Halsen officials said the $39 million sale price would go toward operations. That company was ousted in January 2021, when Prospect Medical Holdings took over.
Hall says that PVHDP has hired a project manager, and a team of attorneys to help with the purchase, as well as a lobbyist to help with legislative issues that will come with officially forming the group.
“We continue to plan for how to form a structure and pursue financing,” she said.