Palomar Health pulls plan to increase CEO’s pay by 20%

Palomar Health, a financially troubled North County public hospital district, has shelved a proposal to give its chief executive officer a 20% raise.

A contract amendment that was to come before the district’s directors at their meeting Monday was removed without explanation Friday and the Escondido medical provider’s board chair and attorney did not respond Saturday to a request for more information on the move.

The contract amendment was the only resolution under consideration at the meeting. Directors were being asked to increase Palomar CEO Diane Hansen’s base salary by 20%, but also to cancel a “variable compensation” clause in her contract that currently qualifies her for incentive payments between 10% and 30% per year, according to a 2023 contract amendment approved by the board and obtained by The San Diego Union-Tribune.

Net-to-net, the proposed changes, because they eliminate incentives, appeared to potentially save Palomar some CEO expense in the coming years.

On Oct. 20, 2023, Palomar’s board set Hansen’s annual base salary at $1.69 million, specifying a series of 12 additional percentage increases in 2024, 2025 and 2026 that appear to have taken her base salary to about $2 million with the application of an automatic 3.5% base pay bump scheduled to be made on Jan. 1, 2026, though it is not clear whether that increase actually happened.

Kevin DeBruin, Palomar’s chief legal officer, did not respond to requests Friday to confirm Hansen’s current base salary amount, which is not stated in the board resolution that previously appeared on the agenda.

However, that calculated amount does appear to be in the ballpark. A government compensation site published online by the California State Controller’s office states that Palomar’s chief executive officer received total wages of $2.3 million in 2024, the most recent year for which data is available. An additional $127,554 in retirement contributions and health benefit payments pushed the executive’s total compensation past $2.4 million.

According to the same site, Patricia Maysent, chief executive officer of UC San Diego Health, is listed as receiving $1.88 million in total wages in 2024. UC San Diego and Palomar are currently in the final stages of developing a joint operating agreement in which the university would invest in Palomar, which has cut back on maternity and behavioral health services amid financial difficulties, and would have equal weight in decision-making through a special governing board.

If Hansen’s current base salary now stands at roughly $2 million, as the previous contract from 2023 suggests, a 20% increase would put her annual salary at $2.46 million. However, the 20% bump that the board was to consider on Monday appears to supersede additional 1.5% increases due in April, July and October of 2026. Those percentages would have increased Hansen’s base pay to $2.37 million by the end of 2026, at which point she would have also been due an incentive payment of at least 10%.

By eliminating incentive payments, the board would appear to actually pay less in 2026, and going forward, than it otherwise would under her existing contract, which expires at the end of 2027.

The length of Hansen’s amended contract, the one that was up for ratification Monday, is also unclear. The board’s resolution states that the executive’s contract will be extended “as permitted by law,” though a specific number of years is not stated. California Health & Safety Code, specifically a section that governs public health care districts such as Palomar, does include language requiring that contracts for hospital administrators “shall not exceed four years.” Palomar’s attorney did not confirm Friday afternoon that the contract term would be four years.

Jeffrey Scott, a widely recognized expert of California health care district law, said that it is reasonable to assume that the language in the contract, had the board ratified it, would have extended the term of Hansen’s contract for four years. Moreover, he said that Palomar’s decision to include only the board resolution that modifies Hansen’s contract, and not the amendment itself, is seldom done.

“In my view, it is highly unusual and not appropriate that the actual Amendment is not before the Board for consideration,” Scott said in an email Friday. “The resolution is just a direction to prepare an Amendment.

“How can the Board approve a contract without knowing the length of the term? Will the Amendment ever be presented to the Board and public in an open meeting? It is also inconsistent with the Brown Act and transparency. This may sound self-serving, but one thing I have learned over the many years of representing public agencies is that elected Boards and public agencies should never be afraid of being open and transparent with the public.”

Hansen has faced criticism for receiving increasing salaries as Palomar has faced severe financial turmoil, which has included millions in losses and erosion of its financial condition severe enough for the district to seek a forbearance agreement with its lenders in early 2025.

Palomar is the main medical provider in inland North County and is the largest public health care district in the state. Its Escondido hospital includes a busy trauma center that is a key part of the region’s overall trauma system, as is its emergency department, which draws patients from throughout the region.