At the urging of local legislators and others, Palomar Health directors tabled plans to revise the public health care district’s bylaws Monday, indicating that they may revisit the issue after the organization resolves its current budget difficulties.
Without referencing pointed public comments made to the board during the evening meeting, Kevin DeBruin, Palomar’s chief legal officer, said that negotiations are “nearing completion of the forbearance agreement,” an essential pact with the insurance company that underwrites $700 million in revenue bonds whose covenants were violated due to a recently revealed $165 million operating loss for the 2024 budget year.
“The executive management team and legal have reviewed these changes and we recommend, at this time, to table those changes to a later meeting,” DeBruin said.
The decision came after legislative aides read a joint letter from state Sens. Brian Jones and Dr. Akilah Weber Pierson and Assemblymembers Tasha Boerner and Darshana Patel, who expressed “deep concern” that the proposed changes “raise serious concerns about accountability and long-term implications for the hospital system’s operations and public trust.”
“We strongly urge you to delay any major changes to the bylaws or governance structure at this time,” the legislators said. “Palomar Health represents a significant public investment and, as an elected public board, you have a fiduciary duty to protect and preserve the integrity of this institution.”
In addition to its budget woes, legislators referenced an ongoing investigation by the California Fair Political Practices Commission and the lack of a “comprehensive plan for transparency and accountability” as reasons why Monday’s proposed action should be delayed.
Palomar’s board approved a 15-year management services agreement with Mesa Rock, a newly created private nonprofit corporation, in March. The company is to employ Palomar’s entire executive leadership team, including Chief Executive Officer Diane Hansen, a move said to provide a better venue for deal-making as the entity would not be subject to public records law. Palomar’s board would retain budget approval and the authority to sever the management agreement if they decided the organization was not accomplishing its goals.
David Drake, an alternate board member of the Local Agency Formation Commission of San Diego County board, accused the Palomar board of violating public meetings law and wondered why more information is not available on Mesa Rock.
“I’ve just got to tell you, this is a disaster,” Drake said. “Every further step that takes place gets worse and worse, so all I can say is, the heck with you, do better.”
LAFCO, which referees disputes between political subdivisions, is conducting a municipal service review of all four public health care districts in the county.
Revising Palomar’s bylaws would memorialize the shift, substituting a management services agreement, rather than a President and CEO hired by the board, as the entity with day-to-day and strategic authority to operate the organization. Several existing standing committees, including those that handle financial matters and human resources, would also have been eliminated while others, including audit and compliance and community relations, would be retained.
Board members John Clark and Laurie Edwards-Tate voted against the decision in the spring and made it clear Monday that it still lacks their support. But the majority of directors seemed to remain on board.
Board Chair Jeff Griffith said he still believes that the agreement is Palomar’s best chance to compete more effectively in a market dominated by much larger players, all private entities.
“If we get to a point where Mesa Rock really doesn’t make sense, it will go away,” Griffith said. “We’re trying the hardest to make sure that Palomar Health continues as a public health care district.”
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