ESCONDIDO — The Palomar Health board of directors has approved the creation of a joint powers authority between the healthcare district and UC San Diego Health to address financial challenges and improve healthcare access for district residents.
The final authorization establishing the Palomar/UCSD Health Authority came during a special board session on Oct. 21, following approvals from both the UC Regents and the Palomar Health Board last week.
According to UCSD Health, the new joint powers authority, or JPA, is intended to “stabilize and expand healthcare services for the community” in the state’s largest public healthcare district by area.
Leaders from both UCSD Health and Palomar Health said the agreement will be mutually beneficial by enhancing management and operations and expanding services across all Palomar Health facilities. The partnership also allows UCSD Health to extend its reach into North County.
Initial plans include creating a comprehensive cancer center at the Escondido campus, developing two unfinished floors for destination healthcare services and adding other medical subspecialties.
Palomar Health leaders emphasized that the JPA is not a merger or a takeover by UCSD Health.
The agreement transfers fewer than 50% of the district’s assets — including the Poway campus — to the joint powers authority and establishes a $50 million line of credit for the district.
Formation of the JPA will include contribution, loan, employee leasing, and forbearance agreements, along with a promissory note secured by a deed of trust and a master trust indenture between Palomar Health, Arch Health Partners and U.S. Bank Trust Company.
The governing board will consist of six members: three appointed by Palomar Health and three by UCSD Health.
District leaders hope the move will improve Palomar Health’s financial position after recent challenges, including a $165 million operating loss in fiscal year 2024 and a one-year forbearance agreement with lenders in January that waived financial covenants tied to more than $700 million in revenue bonds. Palomar Health has two years to stabilize its finances.
UCSD Health will not assume Palomar Health’s debt.
The JPA agreement passed with six votes in favor and one abstention.
Director Terry Corrales called the partnership “the best way to move forward” to keep Palomar a public healthcare district, adding that it will provide “fantastic services” and new opportunities for employees. She said she saw “no downsides” and described the move as a “jump into the future.”
Director Abbi Jahaaski said that while the agreement is not perfect, it is a necessary step to keep the district open to the community.
Director John Clark, however, called the plan “the beginning of the end” for Palomar Health and a move of “desperation,” suggesting the district’s financial troubles were due to mismanagement by CEO Diane Hansen.
“I hope it works out,” Clark said.
Clark abstained from the vote.
Director Laurie Edwards-Tate said she shared some of Clark’s concerns but agreed the agreement is the best option for now.
Director Linda Greer rejected Clark’s criticism of Hansen.
“It’s not the fault of a single person,” she said.
The JPA still requires final approval from the California Office of Health Care Affordability, a process that could take up to 90 days. Once approved, the authority will begin operations.
