With no discussion, Palomar Health directors approved borrowing $20 million from UC San Diego Health Friday, in a move that both sides said was about shoring up the public health care district’s flagging finances.
In a statement, the university health system said that the loan expresses solidarity with a fellow public entity.
“Palomar Health is a long-time community partner of UC San Diego Health, and this loan reinforces our continued collaboration as we work together to meet the expanding need for high-quality health care services in the region,” the statement said. “As a public institution, UC San Diego Health serves as an essential health care safety net for the region.
“If we allow any health system to fail, patient access will suffer and our staff and facilities will feel the strain. Ensuring community-wide stability while planning for the future is the only way we can continue to deliver outstanding patient care, drive groundbreaking research and inspire the next generation of health care providers.”
The financial assistance is particularly significant because the university, like all public institutions, faces significant financial insecurity with grant funding, and possibly Medi-Cal reimbursements, the ongoing focus of federal budget cuts. Palomar is a significant provider of medical care for inland North County, serving as the region’s trauma center. Its main hospital in Escondido represents a $500 million investment that residents who live inside the district’s boundaries pay through ongoing property tax levies.
Asked after the Palomar board’s short special meeting Friday to explain the reason for the loan, Diane Hansen, Palomar’s chief executive officer, was more succinct.
“It’s simply to bolster the recovery,” Hansen said.
Palomar is currently engaged in a turnaround effort, its executive telling bond investors in a recent meeting on its more than $700 million in revenue bond debt that the operation is about halfway to a goal of $150 million in savings necessary to regain financial stability. The organization’s financial statements show that it suffered a $165 million loss in fiscal 2024, and that trend continued in the final six months of the calendar year.
Friday’s vote was not the first time that Palomar has recently borrowed cash from its neighbors. A forbearance agreement that the inland North County health system recently signed with its lenders after breaching its revenue bond covenants indicates that Sharp loaned Palomar $25 million in 2024. Sharp and Palomar announced in late August, without mentioning the loan, that they will partner in certain aspects of their operations. That announcement, board records show, was preceded by the Palomar and Sharp approving the loan and an “exclusivity arrangement” in May 2024.
The specified term of exclusivity between Sharp and Palomar is not specified in the agenda documents. Sharp declined to comment on the arrangement.
