Sharp sees strategic advantage in new deal with Tri-City Medical Center

With a voter approval rate that has remained over 90% since election night, Measure H, Sharp HealthCare’s 30-year lease of Tri-City Medical Center, appears certain to pass.

But how this partnership will turn out, well, that’s less certain, especially given the massive changes underway in health care nationwide.

The immediate future is clear. If the partnership with Tri-City closes at the end of the month, as anticipated, Sharp will begin investing $100 million in the Oceanside public hospital district.

Chris Howard, Sharp’s chief executive officer, said this week that a range of actions will need to unfold in the coming years. Modernizing Tri-City’s payroll and electronic medical records systems are near-term priorities, as is rebuilding its shuttered labor and delivery department and also increasing services such as oncology.

Progress, the executive noted, will come down to not just remodeling floors in Tri-City’s existing medical buildings, but in the recruitment of physicians willing to work in bolstered departments.

A key, Howard said, is extending Sharp Rees-Stealy Medical Group to North County. But taking that step requires a critical mass of local doctors willing to participate.

“Over time, there will be a Sharp Rees-Stealy presence farther north than our Del Mar and Rancho Bernardo clinics that we have today,” Howard said. “But the timing of that is still to be determined.”

Sharp Community Medical Group, he noted, already has a significant number of members in the area. These doctors are independent, but come together in what’s called an independent physician association to jointly contract with health insurance companies.

Likewise, Tri-City has already begun using its powers as a public health care district to recruit additional obstetricians to the area. Having a critical mass of referring OBs, Howard noted, is the key to restarting Tri-City’s labor and delivery department.

“There is a lot that has to be orchestrated before we could just say, ‘OK, it’s ready,’” Howard said. “That’s the planning that’s taking place right now.”

The public seems to agree with this vision. In the week’s final release of primary election ballot results early Friday evening, 92% of votes cast were for approval.

Tracy Younger, chair of Tri-City’s board of directors, attributed the high level of public support to a recognition that continuing to go it alone has not worked out well, as evidenced by a repeated need to cut services.

“I think that our community recognizes that you just can’t survive in today’s world as a stand-alone hospital and, you know, partnering with a robust system like Sharp, it just ensures our long-term survival,” Younger said.

But insurance is the bigger issue, notes health care industry strategic consultant and Rancho Bernardo resident Nathan Kaufman.

While he said he hopes for the best for the new Sharp-Tri-City partnership, it is exceedingly difficult to turn around hospitals such as Tri-City with busy emergency departments that attract high percentages of patients with Medi-Cal coverage, which notoriously fails to cover costs.

Speaking from an East Coast airport after delivering a health care speech on the challenges that the industry faces, and headed for another consulting gig before flying home, he said that everyone in health care is bracing for the effects of difficult trends.

Congress allowing Affordable Care Act subsidies to expire this year, and upcoming changes to Medicaid - Medi-Cal in California - combine with a difficult long-term demographic trend to create a very difficult moment for the entire health care sector. The challenge is especially difficult for those who operate hospitals that can’t turn away patients who are unable to pay.

“Everyone is talking about the fact that we’re in for a correction, and it’s in part based on the fact that, because of the ACA cuts and the Medicaid work requirements, we’re going to have 15 million more uninsured in America,” Kaufman said. “The payers have gotten really stingy, denial rates have been increasing on average.”

While medical providers have generally relied on fees from commercial health insurance companies to cover losses from patients who can’t pay, or whose government coverage doesn’t cover costs, the current situation is eroding that payment source.

“If your rates are $100, after denials and bad debt, you’re only going to get $91, so you’re not even collecting your contracted rates,” Kaufman said.

And, he added, the overall size of the pie is simultaneously getting smaller where commercial health insurance is concerned. There are simply fewer working-age Americans with private coverage.

As research from research think tank Trilliant Health demonstrated in 2022, a demographic shift has qualified an increasing share of Americans for Medicare coverage.

Between 2022 and 2027, Trillian estimated, the working-age population was estimated to decrease by 1.2% while the population age 65 and older “is expected to increase by 13% during the same time period.”

“Commercial business, as a percentage of hospital revenues, is declining,” Kaufman said. “That’s due to the lack of ACA enrollment and also to the aging of the population, so they are fighting over a massively shrinking pie.”

It seems clear that San Diego County’s major health care players see North County as the place where the competition for those dwindling commercial health care dollars will be fiercest. UC San Diego Health is working on a partnership with Palomar Health, while Scripps Health plans to build a new hospital in San Marcos, very near Kaiser Permanente’s latest medical center, which opened in 2023.

Adding hospitals such as Tri-City, Kaufman said, has no proven ability to necessarily make competition more effective in such a situation.

“I do wish them the best, but there’s no evidence that I’ve seen, either in California or around the country, that people wanting to do what Sharp wants to do with Tri-City will be successful,” Kaufman said.

Sharp clearly believes that its Sharp Health Plan, a highly rated commercial carrier that it controls, is an ace in the hole. Already, Sharp Health Plan billboards have popped up along highway 78 in North County, and Howard said that he believes Tri-City, judiciously upgraded, is the perfect complement.

“Sharp needed a hospital in North County to ensure we could serve the entirety of the region, because, up till now, Sharp Memorial Hospital has been our northernmost hospital,” Howard said. “I think there’s an enormous opportunity to grow our Sharp Health Plan business in North County, and for Tri-City to be a vital part of that strategy.”

Tri-City, though, is chartered by the state to serve a very specific geographic area that takes in most of Carlsbad, Vista and Oceanside. This special district both supports Tri-City with property tax collections and allows the organization to ask for the public’s support of general obligation bonds.

State law requires municipal service reviews of such districts to make sure that they are hewing to their missions and using their resources for the purposes that voters intended when they were created.

Adam Wilson, a consultant to the San Diego Local Area Formation Commission, said that the organization is updating just such a review of the region’s health care districts. Current partnership talks at Tri-City and Palomar, Wilson noted, bear scrutiny through a lens of public service.

“These partnerships certainly raise the question, ‘what is the role and responsibility of a public health care district moving forward now that they have these third-party entities operating more or less as a controlling partner?’” Wilson said. “How do we maintain transparency, how do we maintain open lines of communication between public districts and third-party governance?”

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This story was originally published June 7, 2026 at 5:15 AM.