Tri-City Medical Center in Oceanside would transfer all of its assets and obligations to Sharp HealthCare for 30 years, operating as Sharp Tri-City Medical Center, if voters approve its affiliation with the region’s largest health care system.
The two parties posted draft affiliation, lease and transfer agreements for the deal on Tri-City’s website — tricitymed.org — last week, conducting the first of five planned community forums on Thursday that are required by state law before the matter is put to a public vote, likely on the primary ballot in June.
While some technical details remain to be added, the bones of this pact are available within the 109 pages now in the public domain. Overall, the agreements attempt to preserve Tri-City’s basic services and secure cash for maintenance and expansion under Sharp management, though restoration of discontinued labor and delivery services is not guaranteed.
Like many stand-alone hospitals in California, Tri-City has struggled in recent decades to go it alone, especially as health insurance coverage has moved toward managed care, a payment model that favors large operators able to offer all services that patients need, from doctor visits to skilled nursing stays.
Tri-City hospital nurse Elisa Romero, who was born at the hospital, has positive things to say about it at the meeting. Listening are, LtoR: Sharp HealthCare Chief Strategy Officer Scott Evans, Sharp HealthCare CEO Chris Howard, and Dr. Gene Ma, Tri-City Health Care District CEO. (Charlie Neuman / For The San Diego Union-Tribune)
Financial strain forced Tri-City to close its behavioral health unit in 2018 and discontinue its maternity services, including its well-regarded neonatal intensive care unit, in 2023 after the exodus of local community clinics that decided to refer their clients to Palomar Health in Escondido for delivery.
Over the years, Tri-City, like most stand-alone hospitals nationwide, has struggled to grow without a large affiliated medical group providing primary care services in the coastal North County areas it was created to serve. Sharp, by comparison, has thrived in this area, with its Rees-Stealy and community medical groups operating from medical office buildings throughout San Diego County and referring their patients to Sharp’s hospitals in San Diego, Chula Vista, La Mesa and Coronado when they need surgery or procedures that require inpatient treatment.
Like every other major medical provider in the region, Sharp seeks total geographic coverage and has long lacked a significant physical presence in coastal North County. Having an affiliated hospital in Oceanside would anchor its network in the north, providing expansion opportunities for its existing medical groups similar to those now sought by UC San Diego Health and Scripps Health, both of which are pursuing expansions in San Marcos.
Tri-City is owned by the Tri-City Healthcare District, a public entity with its own seven-member board of directors elected by voters in Oceanside, Vista and Carlsbad. State law does allow health care districts to transfer their assets to private nonprofit companies at a price considered below fair market value. But such transfers can take place only if voters deem that they are undertaken “for the benefit of the communities served by the district,” and provided that certain requirements are met.
Overall view of the crowd during the meeting. (Charlie Neuman / For The San Diego Union-Tribune)
The proposed lease has a 30-year term that specifies rent of $1 per month. Said to be very similar to a lease that Sharp made in 1991 with the Grossmont Healthcare District to run Grossmont Hospital in La Mesa, Sharp agrees to assume more than $80 million in outstanding debt and to invest at least $100 million in the property through a newly formed nonprofit company called Tri-City Medical Center Corporation.
As is the case for Grossmont, which also has its own private nonprofit operating company separate from the elected district board, Tri-City Medical Center Corporation would have 15 appointed directors. Elected health care district directors would appoint five corporate board members, all of whom would need to be registered to vote within the district’s boundaries. Three of the five members, officials said during Thursday’s meeting, can be elected members of the district board.
Nonprofit corporations such as Sharp that receive transferred health care district assets must commit to “operate and maintain” them and to transfer them back to the district at the end of the agreed-upon lease period. Five years before the 30-year lease ends, the district and Sharp would convene and discuss renewing the lease. Sharp is the only company in the region that has experience in this process. The Grossmont Healthcare District renewed its Grossmont Hospital lease with Sharp in 2014, with 87% of voters agreeing to extend the arrangement through 2051.
Sharp cannot do whatever it wants with Tri-City. Agreements require the property to remain an acute care hospital that maintains at least five “core” services — emergency, surgical, labor and delivery, cardiac and neurological.
Of course, Tri-City does not currently offer labor and delivery services, having discontinued them in 2023, citing unsustainably low patient volume.
The affiliation agreement does not guarantee resumption of labor and delivery. It states that Sharp will “use commercially reasonable efforts to reestablish and maintain a perinatal unit and intensive newborn nursery services unit,” but does not make an ironclad promise that babies will once again be born at a facility that celebrated births for decades before its delivery rooms went silent.
Given that Sharp, through its Mary Birch Hospital for Women and Newborns in Serra Mesa, operates the largest labor and delivery facility on the West Coast, and one of the largest in the nation, some might wonder why resumption of maternity at Tri-City would remain an open question.
Listening to positive comments about the agreement from an audience member are, LtoR: Sharp HealthCare Chief Strategy Officer Scott Evans, Sharp HealthCare CEO Chris Howard, and Dr. Gene Ma, Tri-City Health Care District CEO. (Charlie Neuman / For The San Diego Union-Tribune)
Asked for more information after Thursday’s meeting, Scott Evans, Sharp’s chief strategy officer, said that there should be no confusion about the desire to reopen labor and delivery. But, he added, such a move must be supported by evidence of demand.
“You look at the (maternity) volume at Tri-City when it closed, and it was very, very minimal,” Evans said. “It’s about ensuring we have the physicians and the maternity rates … we’re very much students of the data and understanding the geography and demographics.”
Expanding Sharp’s primary care network in the area is a big part of the maternity calculus because the number of maternity patients that can be expected in the future is heavily influenced by how many in coastal North County will end up receiving their care from Sharp-affiliated physicians.
“We already have providers out here through our independent provider associations and, of course, Sharp Rees-Stealy would be interested as well in having an additional presence in North County,” Evans said.
Other than its patients, Tri-City’s employees would be the most directly affected if the affiliation agreement is approved.
Sharp HealthCare CEO Chris Howard speaks about the agreement to the audience. (Charlie Neuman / For The San Diego Union-Tribune)
At Thursday’s meeting, Chris Howard, Sharp’s chief executive officer, took the podium when it came time to discuss employment.
If voters approve the deal and it closes as anticipated, all current employees, Howard said, will become employees of the Tri-City Medical Center Corporation. All “in good standing” at the time the affiliation agreement takes effect will be retained, though they will have to go through Sharp’s onboarding process and an employee orientation. Non-union employees will continue to be paid at their current rates, and a plan is in place to eventually increase compensation to levels that match those at other Sharp facilities.
“We’ll do that over two years because it takes time to process,” Howard said.
Sharp, Howard said, will also recognize the labor unions that currently represent Tri-City employees and, at closing, “will pay wages to represented employees covered by those collective bargaining agreements at the wage rates and pay scales contained in those collective bargaining agreements subject to good-faith bargaining.”
The agreements posted to Tri-City’s website this week are not yet complete. For example, a fair market value appraisal of Tri-City’s assets is not yet complete. And placeholder language is still in place for “transfer back” provisions. A section of the lease specifies that calls for Tri-City’s assets to be surrendered to the Tri-City Health Care District when the agreement runs out or if it is terminated early. But a separate section titled “Transfer and Assumption of Liabilities” states that “the return of assets related to the business upon termination of the lease and related obligations” are “to be added.”
A Sharp official said that final versions of the agreements are expected to be complete by Nov. 10.
The public has four more chances to comment on the agreements before the Tri-City board votes on approval.
Meetings are scheduled for Nov. 6 in the community room of the Oceanside Civic Center Library, Nov. 7 at Vista Civic Center, Nov. 12 at the Carlsbad Senior Center and Nov. 13 at Tri-City Medical Center. All meetings are scheduled to run from 5 to 6:30 p.m.