Watsonville (Calif.) Community Hospital could suspend its labor and delivery unit and neonatal intensive care unit amid ongoing financial challenges that have left the hospital with about eight days of cash on hand.
While no decision on the hospital’s service lines has been made, a staff analysis resulted in recommendations on areas to optimize or potentially close. The Pajaro Valley Health Care District’s board is scheduled to discuss the issue at its Oct. 28 meeting. Any service changes will require 120 days’ notice to the state, Watsonville Community Hospital interim CEO Tim Moran said in an Oct. 22 statement shared with Becker’s.
“[Efficiency] alone will not significantly change the financial outlook for the hospital,” Mr. Moran said. “Growth initiatives and partnership are being actively pursued, but the results of those efforts will not benefit the hospital for months to come.”
Mr. Moran flagged in mid-October “a serious financial gap” that could close the hospital within six to 12 months without action. The labor and delivery unit and NICU combined lose about $27,000 a day, according to the hospital, which averages two births a day. Mr. Moran said the birth rate is declining, with some families seeking services at other facilities.
A Watsonville Community Hospital financial analysis of year-to-date data through June 2026, shared with Becker’s, showed women’s and children’s services with a negative contribution margin of about $3.5 million, or $19,262 a day. The hospital’s NICU saw a negative contribution margin of $1.3 million, or $7,189 a day. Its ICU was also negative, at about $2.8 million, but the emergency department and surgery and special procedures each had positive margins of about $7 million.
“Watsonville Community Hospital is not alone in having to confront a fiscal crisis,” Mr. Moran said. “One in five hospitals in California is distressed, due in large part to dramatic losses in Medi-Cal reimbursements beginning in this year and expected to continue through 2028, driven primarily by the impacts of the federal H.R. 1 legislation. With eligibility changes, WCH’s high government payer patient mix will shift to lower government reimbursement and a higher uninsured population.”
Should the units close, Watsonville Community would work with Dominican Hospital in Santa Cruz, Calif., so the hospital’s patients have a path to receive care. Dominican Hospital runs the county’s only level 3 NICU, in affiliation with Stanford’s Lucile Packard Children’s Hospital.
Watsonville-based Salud Para La Gente, which has provided OB-GYN and midwifery staff to Watsonville Community Hospital for a decade, is planning to ensure patients receive continued care. Additionally, Natividad Medical Center in Salinas, Calif., and Sutter Maternity & Surgery Center in Santa Cruz can support these patients, the hospital said.
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