Santa Cruz County Overrides Staff, Keeps Radiology In-House

Key Decisions on Health Services and Budget Cuts

The Santa Cruz County Board of Supervisors made a series of significant decisions during its recent meeting, balancing the need to preserve critical health services while also addressing financial constraints. The board partially rejected some of the recommendations from its staff, choosing to maintain certain primary care services at the county’s health clinics that were initially slated for elimination. At the same time, it proceeded with other cuts that were seen as necessary but difficult.

One of the major points of discussion was the decision to retain in-house radiology services at the federally-qualified health centers in Santa Cruz and Watsonville. This included maintaining two full-time staff positions to operate these services for fiscal year 2025 to 2026. However, the board also approved the elimination of nearly six full-time positions in the laboratory service department, with the goal of transitioning operations to a third-party provider, Quest Diagnostics.

Supervisor Kim De Serpa, a social worker with years of experience, expressed concerns about the impact of moving patients to offsite imaging locations, especially those facing behavioral or mental health challenges. She emphasized the importance of having radiology services available directly within the clinics.

In June, after strong pushback from SEIU 521, the county’s largest union, the board allocated $380,816 to extend in-house laboratory services until September 30. This allowed for a transition to a new model with Quest Diagnostics, which would have minimal changes for patients. Additionally, the board set aside $129,000 to continue radiology services, while asking the Health Services Agency to provide updated recommendations and information on the 12 employees affected by the cuts.

Of the 12 impacted employees, six were reassigned to other departments, two retired, one resigned, one is still seeking placement, and two will be laid off by September 30. The current costs for radiology are around $500,000, while laboratory services cost approximately $1.5 million. Extending both services for another nine months would have added an additional $1.45 million to the budget, according to a staff report.

Health Services Agency leaders found no viable alternative that would result in fewer impacts than the proposed cuts. Jennifer Herrera, the assistant director, highlighted that expenses for these and other services have consistently exceeded revenue, and the situation is expected to worsen.

The impact of the One Big Beautiful Bill Act, which includes significant Medicaid cuts, has not been accounted for in the current budget. Amy Peeler, chief of health centers, noted that these services are essential for Medi-Cal patients, and the county is working to adapt to the financial challenges.

The board also directed county staff to collaborate with SEIU leadership to develop alternatives for lab and radiology services. While the union has suggested productivity solutions and revenue-generating strategies, some supervisors expressed frustration over the lack of options shared during the meeting.

Supervisor Justin Cummings called for better collaboration between the county and the union, noting the recent appointment of a new Health Services Agency Director, Connie Moreno-Peraza, as an opportunity for improved relations. Max Olkowski-Laetz, president of SEIU 521, acknowledged the challenges but praised the board for engaging with the union on potential solutions.

County Executive Officer Carlos Palacios warned that while future revenue increases might be possible, they won’t address immediate needs. He also cautioned against using one-time funds for ongoing operations. If the board decides to deviate from staff recommendations, he suggested exploring the general fund to prioritize essential services.

Palacios emphasized that the current decisions are just the beginning of more difficult budgetary choices ahead. With a projected 5% drop in Medi-Cal coverage and further cuts expected, the county faces a challenging path forward.

Supervisor Manu Koenig, who voted against the motion, expressed concern over the low reserves and the necessity of following through on previous decisions. She described the current options as the "least bad" solution.

The board's final motion required staff to return with a plan to fund radiology services using one-time funds and to explore strategies for improving revenue and productivity. It also instructed the Health Services Agency director to work with SEIU on broader strategies for maintaining health care services.