The closure of the hospital’s maternity ward also means the neonatal intensive care unit will remain closed permanently, after it shut down in July. (Erika Zaro — Santa Cruz Local)

WATSONVILLE >> Watsonville Community Hospital leaders are moving forward with closing labor and delivery services amid a deep financial crisis. The closure could take effect as early as March 2027.

The decision was made by the Pajaro Valley Health Care District Board of Directors, which oversees the hospital, at a Wednesday night board meeting. About 100 people attended the meeting, including staff, nurses and mothers who have given birth at the hospital. 

The closure of the hospital’s maternity ward also means the neonatal intensive care unit will remain closed permanently, after it shut down in July. Hospital leaders announced last month the hospital’s finances were so bad they would need to shutter labor and delivery or else run out of money within a year.

“We don’t have the luxury to wait or else we put the whole hospital and the whole system at risk,” said Marcus Pimentel, a hospital board member. 

After extensive, at times emotional public comment, he suggested the board could wait until the next special board meeting on Nov. 11, to see if Santa Cruz County voters adopt Measure E on Nov. 3. The measure is a countywide 0.5% sales tax hike that could bring revenue to the hospital. 

Pimentel and board member Joe Gallagher voted against moving forward with the closure. Board president Tony Nuñez and board members Alexandra Friel and Emily Balli voted in favor.  

A second reading of the resolution will now go back before the board in the coming months. If finalized, the hospital must then give the California Department of Public Health a 120-day notice of the closure, a requirement by law in order to give patients proper notice and allow for surrounding hospitals to prepare for more patients. The notice would not automatically close the unit in 120 days if the hospital’s financial situation changes and the board votes to keep it open.

The closing of labor and delivery services would mean that 85 hospital personnel could be without a job, according to the board. It also means that many expecting mothers in the Pajaro Valley will now have to travel farther in order to receive care. The next-closest maternity wards are in Salinas and Santa Cruz.

Many nurses and community members raised concerns about the inevitable overcrowding at surrounding hospitals, and questioned if they can truly absorb and care for the high amount of new patients.

“This is not going to be safe for our patients and community,” said Roseann Farris, a critical care charge nurse who has worked at Watsonville Community Hospital for 30 years. 

Another ‘really rough year’

In September, the board announced it must close its maternity ward to keep the hospital from shuttering as it loses $85,000 a day. Maintaining hospital operations as normal would likely lead to the closure of the entire hospital within the next six months to a year, said Tim Moran, the hospital’s interim CEO.  

Hospital board staff estimated that labor and delivery, and the NICU, lose approximately $10 million a year. The two service lines accounted for $27,000 of the hospital’s daily cash loss, Moran said at a board meeting on Oct. 22.

At a March 25 meeting of the Pajaro Valley Health Care District board of directors, a lack of cash on hand was the topic of the evening. (Amaya Edwards — Santa Cruz Local/CatchLight Local file)

Last year, the hospital was more than $24 million in the red. 

“It was a really rough year,” Julie Peterson, the hospital’s chief financial officer, said at the time. The 2025 losses were due to fewer patient visits and an onslaught of setbacks including a cyberattack, equipment failures, and state and federal funding changes.

In July 2025 the federal budget bill, called the One Big Beautiful Bill Act, decimated government-funded health care and other safety net services. Then, California cut back on health insurance coverage and benefits for some noncitizen residents.

About 1 in 3 Santa Cruz County residents that rely on Medi-Cal are expected to lose coverage by 2029. Thousands of Pajaro Valley residents are expected to lose health insurance, and the impacts to the hospital will be steep as roughly 85% of Watsonville Hospital’s patients use Medi-Cal or Medicare health insurance. 

Hospitals are legally required to stabilize patients in a medical emergency. As more residents lose coverage, more emergency room visits from uninsured patients are expected. 

Speaking of the sobering financial outlook of the hospital at a January board meeting, Nuñez said “we refuse to cut services until we absolutely have to.” 

The board approved a 2026 budget with a $5 million loss, and while so far this year the hospital’s finances are net positive, that has largely come from a one-time distressed hospital grant from the state. The hospital has been operating with razor-thin margins and in September, it only had about five days of cash on hand. 

Hospital leaders were seeking a partnership with a private company to pull the hospital out from continued fiscal disaster, but no viable option has emerged.

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