Palomar Health’s board is considering a significant change to the hospital’s management structure and it’s raising some eyebrows.
The hospital district’s seven-member board of directors will vote on a proposed contract Thursday with Mesa Rock Healthcare Management Inc., a private management company, the Union-Tribune reported Monday.
Palomar Health is a public healthcare district that operates Palomar Medical Centers in Escondido and Poway. It’s governed by a seven-member board elected by the public.
The proposed changes would essentially end the board’s direct supervision of Palomar Health’s top executive staff, including CEO Diane Hansen, and make it harder for the public to access certain records.
Let’s get into it: According to the drafted contract, Mesa Rock Healthcare Management, Inc. is a nonprofit formed this month – February 2024. An attorney for Mesa Rock, William Kushner, said at the Feb. 21 board meeting that the paperwork to incorporate the organization was filed last week.
It’s unclear who exactly runs Mesa Rock, but Kushner said he works for someone named Eric Friedlander. The U-T found out that Friedlander is connected to Starpoint Health, a company that runs ambulatory surgery centers in Los Angeles, but not much else is known about him.
The proposed contract would last 15 years and give Mesa Rock the power to oversee the day-to-day operations of both hospitals.
Mesa Rock will also have its own appointed board of directors, not elected. And Palomar’s elected board will no longer have the power to fire the CEO, only the Mesa Rock board will have that power.
Because Palomar is a public institution, it’s subject to the California Public Records Act. But if this contract is approved, records created and owned by Mesa Rock – a private company – will not be subject to the Public Records Act.
Similarly, those top executives that will become employed by Mesa Rock also will not be subject to the Public Records Act.
Attorneys for Palomar Health said at the meeting that this will help Palomar compete on an even playing field as other private institutions whose deals and discussions can’t easily be scrutinized by the public and their competitors.
Why this matters: Public healthcare districts, unlike other hospitals, have an added responsibility to the state and to the public. They are required to remain transparent to the communities they serve.
All of them, including Palomar Health, must submit annual financial reports to the California State Controller and obey all state laws from governing public records and record keeping to elections and public access to documents.
That’s because they are created by the public, their governing boards are voted in by the public and they are partially funded by the public.
Most health care districts receive a share of local property taxes. Palomar Health, for example, receives millions of dollars in property tax revenue each year.
A structural reorganization like the one being considered could completely change how public healthcare districts are governed.
Board member John Clark said during the meeting that this felt like a power grab. He wanted the board to get an outside attorney to review the contract and provide another opinion, but his motion didn’t pass.
Board members Clark and Laurie Edwards-Tate are the same board members that have had tension with CEO Hansen and the other board members for years. It has culminated in heated board meetings, no-confidence votes and even a lawsuit filed by Edwards-Tate against the health care district late last year.
Financial hardships: Palomar officials say this agreement will help Palomar resolve its financial issues.
“The idea is that we allow for the continuation of this healthcare district to stay intact. And we have the ability to operate in a different fashion that gives us more flexibility to make decisions to partner with other organizations or affiliate with other organizations in a different way without having everything negotiated in public,” Hansen told Beckers Hospital Review.
The hospital district is currently operating in the red, with an operating income of -$18.8 million so far in this fiscal year, which started July 1, 2023. That’s according to its most recent quarterly financial report, which shows figures through December 2023.
A hospital’s operating income refers to the profit it earns from its core operations, which is mainly patient care, as well as things like gift shops, parking and cafeterias – it’s the difference between a hospital’s total operating revenue and its total operating expenses.
Hansen had originally promised a $55 million bottom line for this fiscal year, saying the hospital would start to see those gains by October.
Palomar isn’t the only hospital system struggling financially. It’s part of a larger trend of hospitals across the nation seeing declines in patient volume and overall revenue.
A report by the American Hospital Association called 2022 the worst financial situation for hospitals since Covid. The California Hospital Association reported that half of all hospitals in California finished 2022 with negative margins.
There are some unanswered questions: Who runs Mesa Rock? How will the new Mesa Rock board be appointed? How will this impact Palomar’s elected board of directors? As a public institution, would this violate any part of the Brown Act or the California Public Records Act?
I’ll be following this story as it develops.
In Other News
- ICYMI: The Escondido City Council is considering a policy on homelessness that calls for a “public safety-first” approach that includes cracking down on crime and putting an end to free resources that “enable drug abuse or homelessness.” (Voice of San Diego)
- The developer of a proposed housing project in Del Mar is suing the city for repeatedly rejecting it. I’ve been following this project since last May, catch up here. (Voice of San Diego)
- The March Primary is next Tuesday, and the Coast News put together a guide on the races to watch in North County. (Coast News)
- Construction began Monday on a barrier wall below a landslide in San Clemente that has stopped passenger train traffic between San Diego and Orange counties for more than a month. (Union-Tribune)
