Palomar Health's Comeback Plan
Palomar Health's $165 Million Crisis: The Real Story Behind North County's Healthcare Struggle
San Diego's largest public healthcare district is fighting for survival after recording devastating financial losses, but the narrative around undocumented immigrants and uncompensated care tells a more complex story than political rhetoric suggests.
Palomar Health, which operates emergency departments processing over 60,000 patients annually across North County San Diego, faces a $165 million shortfall that threatens its mission as the region's safety net provider. While immigration status has become a flashpoint in healthcare debates, the reality at Palomar reveals a different set of challenges driving the financial crisis.
The Financial Reality
Palomar experienced a $165 million shortfall in its 2024 fiscal year, which ended in June 2024. According to a recent financial report from May of this year, the healthcare district saw a $108 million operating loss from July 2024 to May 2025. The crisis reflects broader pressures facing public hospitals nationwide, but Palomar's situation is particularly acute.
Currently, about 80 percent of Palomar's patients are covered by Medicare, Medi-Cal, or they pay out-of-pocket, and those government programs don't reimburse enough to cover the full cost of care. That means the hospital must rely on the remaining 20 percent of patients, typically those with commercial insurance, to make up the shortfall.
This funding gap represents the core of Palomar's problem: government programs reimburse hospitals at rates below actual costs of care, forcing public hospitals to subsidize these patients through higher charges to privately insured patients.
Where Undocumented Immigrants Actually Receive Care
Despite political focus on emergency room costs, research shows undocumented immigrants in North County San Diego primarily receive care through an entirely different healthcare infrastructure that bypasses Palomar Health entirely.
Family Health Centers of San Diego (FHCSD) is one of the country's largest Federally Qualified Health Centers, servicing 49 clinics throughout San Diego County and specifically serves uninsured populations. TrueCare began in 1971 as North County Health Services (NCHS), a grassroots effort to serve Migrant Farmworkers in the rural areas and farming communities of North San Diego County. Today it operates multiple clinic sites in five cities offering medical, dental, behavioral health and OBGyn services to its 62,000 patients.
A number of large, well-financed community clinics exist in San Diego - such as the San Ysidro Health Center and North County Health Services - that trace their origins to the Free Clinic movement linked to agricultural unionization campaigns of the 1960s. Most of these are now FQHCs, they are strongly imbued with a sense of mission toward migrant laborers and the dispossessed.
These Federally Qualified Health Centers receive federal funding specifically to serve uninsured and undocumented populations, meaning they absorb much of this care before patients ever reach Palomar's emergency departments.
The Real Emergency Room Challenge: Homelessness
While undocumented immigrants use alternative healthcare systems, homeless populations present a more significant financial burden for Palomar's emergency departments. Every year, more than 60,000 patients require the services of our Level 2 Trauma Center, and emergency departments are legally required to treat all patients regardless of ability to pay under EMTALA (Emergency Medical Treatment and Active Labor Act).
Research shows homeless patients create disproportionate costs: they visit emergency rooms an average of five times per year at $3,700 per visit, with some high-frequency users visiting weekly. Unlike undocumented immigrants who may qualify for emergency Medicaid, homeless patients often generate true uncompensated care costs.
California's Medicaid Expansion Impact
The change, which took effect on New Year's Day, allows those ages 26 to 49 to enroll in the state's health insurance system of last resort regardless of immigration status. This expansion actually reduces pressure on hospital emergency departments by providing undocumented immigrants with access to primary care through managed care organizations.
Sharp HealthCare said in its own statement Wednesday that the expansion may help, rather than hurt crowded emergency departments. Many in the 26-to-49 age bracket do qualify for restricted Medi-Cal benefits if they are suffering an emergency. The hope, Sharp said, is that covering those in their mid-20s to late 40s will allow much care to be handled in clinics rather than emergency departments.
Palomar's Charity Care Policy
Palomar Health maintains extensive financial assistance programs that provide free or reduced-cost care regardless of immigration status. Patients or their guarantors who earn 250% or less of the FPG Guidelines are eligible for Full Charity Care: a write-off of 100% of charges. Patients or their guarantors who earn between 251% and 400% of the current Federal Poverty Guidelines are eligible for Discounted Partial Charity Care.
The policy explicitly states: "The granting of financial assistance shall be based on an individualized determination of financial need, and shall not take into account age, gender, race, ethnicity, socio-economic status, sexual orientation or religious affiliation". Importantly, "None, all patients may apply" for financial assistance.
Federal Funding Cuts Compound the Crisis
Recently announced federal cuts to Medicaid will also put additional strain on hospitals like Palomar Health that already serve a large share of publicly insured patients. The newly adopted "Big Beautiful Bill" will result in reduced federal payments to hospitals serving Medicaid patients. The bill also places stricter eligibility requirements for Medicaid, which will likely lead to an increase in uninsured individuals and, therefore, a surge in uncompensated care at hospitals, further impacting their financial stability.
These cuts directly threaten Palomar's financial viability since Medicare made up nearly 52 percent of Palomar's total revenue in the health system's most recent quarterly financial filing.
The Turnaround Strategy
CEO Diane Hansen said leadership is doing a lot of work internally to "right the ship" by reducing expenses and improving revenue. "We targeted a $150 million turnaround plan … that really represents the improvement that we're trying to drive within the organization".
The strategy focuses on attracting more commercially insured patients rather than cutting services to vulnerable populations. "The marketing we've done, the recruitments we've made, the specialists we've brought in — we're really trying to bring in top talent, whether that's on the nursing side or among our clinicians and physicians," Hansen said.
The Broader Context
Palomar Health's crisis reflects nationwide challenges facing public hospitals. The fundamental issue isn't immigration status but rather inadequate government reimbursement rates that force safety net hospitals to subsidize public program patients through higher charges to commercial insurers.
As federal cuts to Medicaid loom and more people lose insurance coverage, public hospitals like Palomar face an increasingly impossible financial equation: provide mandated emergency care to all while receiving payment that covers only a fraction of actual costs.
The real question isn't whether undocumented immigrants are bankrupting Palomar Health—the evidence suggests they're not the primary driver of costs. Instead, the crisis stems from decades of underfunding public healthcare systems while expecting them to serve as the safety net for society's most vulnerable populations.
Sources
Primary Reporting:
- Layne, Tigist. "How Palomar Health Plans to Turn Its Finances Around." Voice of San Diego, July 14, 2025. https://voiceofsandiego.org/2025/07/14/how-palomar-health-plans-to-turn-its-finances-around/
Government and Official Documents:
- Palomar Health. "Financial Assistance Full and Discount Payment Charity Care Policy." February 2024. https://www.palomarhealth.org/wp-content/uploads/2024/02/Financial-Assistance-Full-and-Discount-Payment-Charity-Care-2023-1.pdf
Healthcare System Information:
- San Diego Union-Tribune. "How will San Diego medical providers be affected by state's newly launched coverage of undocumented immigrants?" January 5, 2024.
- Health Center Partners of Southern California. "Members." April 1, 2025. https://hcpsocal.org/members/
Research Sources:
- Portes, Alejandro, et al. "Life on the Edge: Immigrants Confront the American Health System." PMC. https://pmc.ncbi.nlm.nih.gov/articles/PMC3622255/
- Public Policy Institute of California. "Health Conditions and Health Care among California's Undocumented Immigrants." April 8, 2025.
Additional References:
- Integrated Health Partners. "Integrated Primary Care Network." April 2, 2024.
- TrueCare Health Centers. Various facility pages and organizational information.
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