The University of California Board of Regents approved a collaborative agreement between Palomar Health and UC San Diego Health on Tuesday, clearing the way for final approval by the North County health system’s board of directors next week.
Palomar’s board met briefly Tuesday, granting approval to put “all agreements necessary to enter into a joint powers authority” between the two organizations on a future agenda for action, and Palomar Chief Executive Officer Diane Hansen said that the final vote is not far in the future.
“While the final details and legal documents are still being fine-tuned, we expect the JPA agreement to be finalized by mid-next week,” Hansen said.
If ultimately approved and signed off on by the state Office of Healthcare Affordability, the deal would be a major bulwark for Palomar, which has suffered significant financial stress in recent years, and also a major gain for the university health system, which has recently sought expansion outside its core facilities in La Jolla and Hillcrest.
Palomar serves inland North County with hospitals in Escondido and Poway, while UCSD has its main facilities in La Jolla and Hillcrest, recently acquiring Alvarado Hospital near San Diego State University, which it renamed East Campus Medical Center.
Though the full details of the partnership have not yet been disclosed, executives did say Tuesday that the JPA will immediately seek to complete two unfinished floors at Palomar Medical Center Escondido, providing additional square footage for additional services that UCSD hopes to locate there. Near-term investments, said Patricia Maysent, UC San Diego Health’s CEO, include a comprehensive cancer center and the expansion of cardiothoracic surgery.
UCSD has already loaned Palomar about $50 million to help stabilize its finances, and Maysent said that the Regents agreed that additional investments will be made in the JPA, though specific amounts have not yet been specified. The executive said that the Regents, who approved the agreement with Palomar during a closed session meeting on Tuesday, want to jump on the chance to invest in services with Palomar.
“Just to give you a flavor of how this was discussed today at the Regents (meeting) was really, this is a lifetime opportunity,” Maysent told Palomar’s board and executives.
Working with Palomar, Maysent confirmed, delays plans for a second 250-bed medical tower at Jacobs Medical Center in La Jolla, a project that demanded significant future funding alongside a $2.5 billion plan to rebuild UC San Diego Medical Center and its surrounding campus in Hillcrest.
Investing in expansion at Palomar, if it can reduce the need for a second tower in La Jolla, “probably frees up some resources” to get the Hillcrest project done.
And, Maysent added, UCSD already had a plan to add an oncology center in inland North County.
“We have a big hub that we’re building in Rancho Bernardo, and part of that hub was going to be a big cancer footprint, but now we won’t do that, we’ll just shrink that hub down and the cancer center will be here at Palomar,” Maysent said. “We’re seeing these synergies that we think will end up being good for both organizations.”
Plans are also underway to move some specialists already serving Southwest Riverside County to the Palomar campus, which has some vacant medical office buildings available.
The executives said that the JPA will have its own six-member governing board with three appointees made by the university and three made by Palomar’s elected board. The details of how the JPA will be run and how governance will work have not yet been released, though those details should be available when the final documents are voted on by Palomar’s board.
The deal would need to be reviewed and approved by the state Office of Healthcare Affordability, a sign-off that is expected to take an additional 45 to 60 days, meaning that the new arrangement is not expected to begin operating until early 2026.
Joint powers agreements allow public organizations and agencies to work together without giving up their own autonomy. In this case, the JPA under development between Palomar and UCSD appears to allow the university to make significant investments in the public health care district without taking it over.
Hansen stressed that the authority, which will have its own governing board, “is not a merger or a takeover.”
“To be clear for all of our employees, there will be no changes to Palomar Health or (Palomar Health Medical Group) team members’ employment status or benefits,” Hansen said. “Palomar Health and PHMG will continue to serve our patients, just as we always have.”
Palomar has recently entered a forbearance agreement after budget problems caused significant financial losses, causing the district to breach its financial covenants on more than $700 million in revenue bond debt. That debt, executives said, will not be assumed by the university.
UC Regents approve Palomar Health collaboration. ‘This is a lifetime opportunity.’
