Watsonville Community Hospital has struggled to maintain fiscal sustainability. (Contributed)

WATSONVILLE >> Watsonville Community Hospital is running out of options and may shutter by April if its financial situation does not improve, hospital leaders said last week. 

This comes as the Pajaro Valley Health Care District board members, the agency that operates the hospital, find themselves at a financial impasse — keep the neonatal intensive care unit closed and shut down the labor and delivery unit, or face potential closure within the next six months to a year. 

 The hospital was more than $23 million in the red in 2025 and so far this year has, at least on paper, turned a profit of about $10 million. But day-to-day operations still fall short of covering operating costs — by about $85,000 a day or roughly $2.5 million a month, according to a presentation by Chief Financial Officer Julie Peterson at a Sept. 22 meeting.

A $10.6 million state grant and a hodgepodge of smaller loans and payment plans have helped keep the hospital afloat in the short term, but the state money has already run out and the operational deficit remains.

It has been operating for months with between a couple of days’ and a couple of weeks’ worth, whereas hospitals ideally have months’ worth of cash at any given time. 

The 2025 Republican-backed budget reconciliation bill, known as the One Big Beautiful Bill Act, decimated funding for government health care and is one of a number of reasons the hospital has struggled. Roughly 85% of Watsonville Hospital’s patients use Medi-Cal or Medicare health insurance, making the financial impacts for the hospital significant as more uninsured patients seek care in the emergency room.

Hospital leaders have sought a solution to the financial challenges in a partnership with a larger health care system that can take over the hospital’s daily operations and financial ups and downs, and allow it to stay open. Potential partners included Sutter Health, Kaiser Permanente, UC San Francisco, Salud Para La Gente and CommonSpirit Health. 

After negotiations fell apart with one potential partner, which hospital leaders announced in May, there have been no updates shared with the public. Hospital leaders have not shared details about which potential partner fell through and which — if any — still remain on the table.

Tim Moran, the hospital’s interim CEO, declined an interview with Santa Cruz Local, but wrote in an email, “The hospital is running with approximately eight days of cash on hand. Growth initiatives and partnership are being actively pursued, but the results of those efforts will not benefit the hospital for months to come.” 

All five potential health care partners stated that they could not comment on where negotiations stand with Watsonville Hospital.

For Nora Yerena, founder of Central Coast Doula Services, a Watsonville-based program offering Santa Cruz County mothers labor support, the potential hospital closure hits home. Fifteen years ago, Yerena’s child was born more than two months premature.

“If I had to go through the hour-long drive of traffic, at that time, the chances of me not making it there conscious, better yet alive,” said Yerena, who delivered her baby at Watsonville Hospital. 

Her baby was born at just 31 weeks and was transferred to Dominican Hospital’s neonatal intensive care unit. Yerena commuted from Castroville to visit the infant. Keeping Watsonville’s NICU closed, which treats some premature babies, and closing the maternity ward would be devastating for Pajaro Valley families, she said.

If the board decides to close the maternity ward, a 120-day notice to the state is required, and the board is obligated to have one public hearing during the first 60 days “while this decision making is being undertaken,” according to Moran.

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