Three seats on the board of Palomar Health are up for election this year, with two of the three incumbents facing challengers, as the healthcare district grapples with financial uncertainty and a controversial new management structure.
The three incumbent candidates typically align in their votes, while their challengers seem to want the healthcare district to go in a different direction. If challengers manage to take two of the three seats, it could disrupt the current board majority’s voting patterns and significantly impact how the board handles challenges ahead.
Palomar Health is a public health care district that operates Palomar Medical Centers in Escondido and Poway.
Public health care districts are a form of local government called special districts, meaning they are independent from city and county governments. And they are governed by a seven-member board of directors elected by the public.
In Division 4, incumbent board member Laura Barry, who has also been on the board since 2020, is facing challenger Abbi Jahaaski, a nurse who previously worked at Palomar Health before moving to Tri-City Medical Center.
And in Division 6, incumbent Jeff Griffith, who has served on the board since 2012, is facing challengers Joe Muga, a clinical psychologist, and Gaurav Dhiman.
Incumbent board member Terry Corrales, who represents Division 2, is running unopposed. She was first elected to the board in 2020.
Is a Shift Coming?
The dynamics on Palomar Health’s board of directors has been the same for years. The board has almost always been split when it comes to voting, with five board members typically voting one way, and two board members – John Clark and Laurie Edwards-Tate – typically voting the other way.
Corrales, Barry and Griffith are part of the group of five that usually align in their votes.
Clark told Voice of San Diego in 2022 that there have been hundreds of board votes over the years that have gone this way in what he said is an effort by some board members to align themselves with CEO Hansen.
Hansen, herself, has admitted to having favorites on the board. She said in an interview with the Escondido Times-Advocate last year that she has “seven total [board members], but five amazing board members who have been very supportive in all of the difficult decisions that we’ve had to make as an organization.”
Some of these previous votes include a controversial decision in 2021 to abruptly switch the medical group that provides Palomar Health’s physicians and other staff, resulting in major backlash from Palomar’s doctors and nurses who protested and took a vote of no confidence in the hospital’s executive leadership.
It was also the same 5-2 voting structure when Palomar’s board voted for financial reports to be presented to the board and to the public on a quarterly basis, rather than the previous monthly financial reports, despite Palomar’s ongoing financial struggles.
And most recently, Corrales, Barry and Griffith were part of the group of five board members who voted in favor of sweeping management changes that critics say could be an attempt to privatize the public hospital system.
In Feb. 29 of this year, Palomar Health’s board voted 5-2 in favor of 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 and have its own appointed board of directors, not elected. And Palomar’s elected board will no longer have the power to fire CEO 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. Jahaaski, who is challenging Barry in the Division 4 race, criticized the new management contract in a recent interview with the Coast News.
“It doesn’t feel like a transparent decision, and it doesn’t feel like a decision that really has an employee’s or patient’s best interest,” she told the Coast News.
Similarly, Muga, the candidate who is challenging Griffith for the Division 6 seat, has also raised concerns about the Mesa Rock deal.
“What I have seen happening on the Palomar Health board recently does not pass the litmus test of democratic ideals,” Muga told the Coast News. “They have thrown away their responsibility as a publicly elected board and hired a private firm, Mesa Rock, to oversee the management of the hospital at a cost of $8 million per year.”
Griffith told the Coast News that the district did not privatize, but created a legal entity that allows Palomar to “negotiate in a safe area.” He used Palomar’s new partnership with Sharp Healthcare as an example of what Palomar has been able to achieve under the new structure.
The new management contract is what led to the Escondido Democratic Club’s decision to no longer support the Democratic board members who voted in favor of it. Those are Corrales, Barry, Griffith and board Vice Chair Linda Greer, who is not up for reelection this year.
“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.
Palomar Health’s attorneys have maintained that the 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,” attorneys said in letters responding to the Escondido Democratic Club. Read the full response from Palomar’s legal team here.
Ongoing Financial Struggles
Amid its significant structural changes, Palomar Health is also facing ongoing financial struggles.
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 healthcare district ended the last fiscal year with a significant bottom-line loss.
Palomar’s most recent financial report shows it ended the fiscal year with a net income loss of almost $54 million. That’s about $109 million short of what Hansen promised Palomar Health would bring in.
In July 2023, Hansen told the Escondido-Times Advocate that Palomar would achieve a “$55 million bottom line” for the 2024 fiscal year, promising that it would be the “best year this organization has ever had.”
Across the country, hospitals are seeing revenue declines that have resulted in cuts to entire departments, massive layoffs and in some cases, mergers and acquisitions between hospitals.
Palomar Health officials have said the new management structure will help the hospital system improve its ability to compete against private and for-profit hospital systems and strengthen its financial future.