The Escondido Democratic Club has stopped supporting four Democratic elected members of the Palomar Health Board of Directors because of a new management agreement the board members supported in February.
The club’s leadership says the new contract with a private nonprofit management company will greatly reduce public access and transparency. Palomar Health officials say the move will allow the hospital system to better partner, and compete, with private medical providers.
The Escondido Democratic Club’s leadership voted unanimously on March 9 that Board Chair Jeff Griffith, Vice Chair Linda Greer and trustees Laura Barry and Terry Corrales will not receive the club’s endorsem*nt for any city, county, state or federal level seats in future elections, according to a written announcement obtained by Voice of San Diego.
The club previously endorsed Greer in 2018 and Griffith and Corrales in 2020. Griffith and Corrales’ terms are up this year.
Background: Palomar Health is a public health care district that operates Palomar Medical Centers in Escondido and Poway. It’s governed by a seven-member board elected by the public.
On Feb. 29, Palomar Health’s board approved a 15-year management services agreement with Mesa Rock Healthcare Management, Inc., a private nonprofit management company that was officially formed one week earlier – Feb. 20, 2024 – according to the California Secretary of State’s website.
The new contract gives 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, Diane Hansen, only the Mesa Rock board will have that power.
The board is not required to hold public meetings like Palomar Health’s elected board is. And because Mesa Rock is not a public institution like Palomar Health, it won’t be subject to the California Public Records Act.
The Palomar Health board voted 5-2 in favor of the sweeping management changes. Republican board member Michael Pacheco was the fifth “yes” vote, and Republican board members John Clark and Laurie Edwards-Tate were the two “no” votes.
About a week after the new contract was approved, the Escondido Democratic Club announced they would no longer be supporting the Democratic board members who voted in favor of it.
“These misguided, ill-advised votes from our four elected Democrats have unlocked the front, back and side doors for further privatization of our community’s public hospitals in the future,” the club said in the announcement.
The board members and executive staff, the announcement said, neglected to conduct public outreach regarding the agreement before it was approved and purposely sped up the agreement process.
But its criticism of Palomar’s board members extended beyond just this vote. The announcement mentioned previous campaign contributions that Greer and Griffith received from Palomar’s top executive staff, including CEO Hansen, saying that money may have been a motivating factor for them to support the agreement.
It also criticized the board’s previous track record of failing to be as transparent as possible with the public about Palomar’s financial struggles.
The four board members did not respond to a request for comment.
Finally, the club found several faults with Hansen’s actions over the past few years saying she has favorites on the board and retaliates against those who don’t align themselves with her, that she gives “repeated false narratives about inflated financial gains” and that she is using this agreement as a “power grab.”
Palomar Health’s legal team responded to the club’s allegations via a letter sent to the Escondido Democratic Club’s leaders on May 31, as well as a separate letter sent to the San Diego County Democratic Club’s leadership on April 16.
In both letters, John Kern, one of Palomar’s attorneys, said the Escondido Democratic Club’s announcement is misleading and full of “misinformation.”
Kern said the new contract is not an attempt to privatize Palomar Health. Rather it is “designed to save and strengthen Palomar Health as a public institution.”
“The decision to enter into a contract with Mesa Rock is specifically designed to reduce the risk of privatization, because it helps remove some of privatization’s driving forces: limits on public entity investment, rigid and cumbersome meeting restrictions, and inability to guarantee the confidentiality of the trade secrets of strategic partners,” the letters said in part.
“Palomar’s elected Board will retain oversight responsibility over Mesa Rock through, among other things, approving the CEO and controlling the annual budget,” the letters said, adding that the changes will not impact day-to-day staff, physicians, nurses, union contracts, hospital policies, credentialing or medical decisions.
No one from Palomar’s management team is receiving any additional compensation from the agreement, Kern said.
He added that members of the public were given ample opportunity to learn about the agreement and express their feedback.
He also refuted several other claims that the club made; click here to read the responses from Palomar’s legal team in full.
Why this matters: Public health care 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 including governing public records, record keeping, holding fair elections and maintaining 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 through property tax revenues.
So, the concern is that a structural reorganization like this could completely change how public health care districts are governed.
Palomar officials say the health care district will remain a public institution and that the new agreement is not an attempt to privatize it. Instead, the move will help the hospital system improve its ability to compete against private and for-profit hospital systems and strengthen its financial future.
Voice of San Diego has previously reported on Palomar’s financial hardships over the past couple of years, which is a trend across hospitals nationwide. The hospital system will likely end this fiscal year in June with a significant bottom-line loss.
Palomar’s most recent quarterly financial report, which shows operations through March. 31, 2024, shows a $40 million net loss so far in this fiscal year.
