Palomar Health approves joint powers authority with UCSD; details remain scant

Palomar Health directors approved a joint powers agreement with UC San Diego Health on Tuesday, though the 19 documents that comprise the deal still have not been made public.

Six of Palomar’s seven elected board members, with director John Clark in abstention, approved a resolution that was not published on Palomar’s website with the agenda for Tuesday’s special meeting. As a public health care district formed in 1984 to serve inland North County and a broad swath of eastern San Diego County, Palomar, like all public agencies, customarily publishes the text of its resolutions before its meetings to allow time for public review.

Obtained on Wednesday, the resolution grants Palomar board chair Jeff Griffith the authority to sign a joint powers agreement, which the University of California Board of Regents approved last week. Diane Hansen, Palomar’s chief executive officer, is delegated the authority to complete and execute an additional 15 legal documents, which will create a new legal entity called the “Palomar/UCSD Health Authority.”

Listed in the resolution approved Tuesday, these documents appear to govern exactly which assets each party will contribute to the authority that will run Palomar Health’s day-to-day operations and also guide its long-term strategy, from the provision of new services to building projects and equipment purchases.

California law allows health care districts to transfer their assets to management corporations, but allocating 50% or more, as determined by a fair market value analysis, requires a public vote. Palomar’s resolution makes it clear that it does intend to transfer significant assets but that they do not exceed the 50% limit and thus will not land the deal on a ballot. While the Palomar Healthcare District appears to maintain ownership of Palomar Medical Center Escondido, by far its most valuable piece of real estate, the resolution states that assets “including but not limited to the Poway Campus” will be transferred to the newly formed health authority. The resolution also states that the agreements require “placing a deed of trust on Palomar’s Poway Campus.”

Further details are not spelled out in the board’s resolution, which also lists numerous financial transactions, including an “asset purchase agreement” between Palomar and the UC Regents, a $50 million line of credit agreement, and a “tax revenue contribution agreement” between Palomar and the new authority.

The wide-ranging pact also includes amendment of a forbearance agreement with Palomar’s lenders, a requirement that lenders created after the public health care district breached financial covenants on more than $700 million in revenue bond debt. Palomar, like many medical providers, has struggled to operate in the black since the COVID-19 pandemic, reducing psychiatric services, consolidating labor and delivery in Escondido and delaying promised bonuses to its workers. 

Palomar and UC officials said in a preliminary approval meeting last week that the authority will have a board made up of six directors and that Hansen will continue to oversee the authority. Plans are also underway to add additional personnel at Palomar facilities, including an expanded cancer center and cardiac services, which would include building out two currently vacant floors at Palomar Medical Center Escondido.

Board member Clark, the lone abstention in Tuesday’s vote, said in emailed comments sent Wednesday that while he hopes the complicated plan works, he is “deeply concerned” that the authority “may mark the beginning of the end of the Palomar Health District.”

He questioned the decision to retain Hansen as CEO.

“Since assuming leadership at Palomar Health, the organization has lost approximately $400 million and entered a state of financial bankruptcy, while her annual compensation exceeds $2 million,” Clark said. “This decision does not seem logical or in the best interest of the district.”

Speaking last week, Hansen and Patricia Maysent, chief executive officer of UC San Diego Health, said that the authority’s board will be made up of six members, three appointed by the university and three by Palomar’s elected board. Clark said that he objects to that structure because the Palomar board will not be able to appoint its elected members as its representation on the authority board that will run Palomar. The details of the governance structure for the authority are contained in the joint powers agreement between Palomar and the University of California that has not yet been made public.

Clark said in an email that board members were presented with the documents that they approved on Tuesday during a closed-session meeting held just before the open session.

“We were given hundreds of pages to go over in (about 1.5 hours) in a closed session, then they took away the documents before the public meeting,” Clark said.

A UC San Diego Health spokesperson said in an email Wednesday that full disclosure is coming: “The agreements will be posted when they are done and executed. That is expected to happen this week.”