Hazel Hawkins faces possible closure in 2023

Hazel Hawkins Memorial Hospital employees received notices this week indicating the Hollister hospital could close as soon as February 2023, according to HHMH administrators. 

The hospital’s issuing of Worker Adjustment and Retraining Notifications (WARN) to its employees follows a string of unfortunate financial announcements from Hazel Hawkins—including staff wage cuts, a hiring freeze and a failed bid to secure a $10 million bridge loan from the San Benito County Board of Supervisors. 

Hazel Hawkins’ board of directors on Nov. 4 approved a resolution of a fiscal emergency, which authorizes the hospital’s administrators to file a petition under Chapter 9 of the U.S. Bankruptcy Code. The hospital has not yet filed for bankruptcy.

Less than a month before that, the hospital board ended its contract with former CEO Steve Hannah. Appointed as interim CEO was Mary Casillas, who was formerly Hazel Hawkins’ Chief Operating Officer. 

At a special meeting Dec. 15, the county board of supervisors rejected a request from Hazel Hawkins staff for a $10 million loan. Hospital staff said that amount would have significantly helped Hazel Hawkins stay open through the fiscal emergency. 

The board, however, agreed to advance the hospital’s expected payment of $1.1 million worth of property taxes. The payment would have been due to Hazel Hawkins in April 2023 as a regular disbursement of property tax revenues. The hospital is also scheduled to receive about $1.1 million in the coming weeks for its December property tax revenues, according to HHMH staff. 

“We are thankful that the county decided to advance property tax funds, and we hope they will reconsider bridge funding for the health and safety of our community,” said Casillas. 

A $10 million loan from the county’s reserve fund would have given the hospital more time to figure out a plan to restructure without having to declare bankruptcy or reduce healthcare services, HHMH staff said. 

The incoming flow of property tax revenues might not be enough to keep HHMH open. On Dec. 16, the hospital announced it was beginning to implement a plan to “cut costs to remain operational and as it continues to search for bridge funding and partners willing to facilitate a long-term restructuring plan.”

Specifically, HHMH is working with advisors to establish a long-term cash management policy, says a Dec. 16 press release from the hospital. Initial steps include a hiring freeze and “strategic review” of staff positions. 

Some HHMH staff are taking a temporary reduction in wages “on a voluntary basis,” the press release adds. “The wage reductions are a collaborative idea put forth from staff who want to help the hospital.”

HHMH is also reviewing periodic automatic replenishment (PAR) levels to find more cost-efficient supplies and conducting audits in the billing department to maximize collections, says the press release. While these changes extend HHMH’s ability to operate in the short term, administrators said fully exploring strategic alternatives will require funding. 

HHMH has also requested a $3 million bridge loan from California State Treasurer’s California Health Facilities Financing Authority (CHFFA) program, staff said. HHMH has also met with State Assemblymember Robert Rivas’ office and State Senator Anna Caballero’s office and held advocacy meetings with the Association of California Healthcare Districts and California Hospital Association. 

At the federal level, HHMH negotiated an extension of its one-year Medicare overpayment repayment plan to five years. HHMH is also making headway with major payors to improve reimbursements.

Locally, HHMH will continue to meet with representatives to discuss available options. Casillas will soon meet with Hollister Mayor-elect Mia Casey to discuss the distress of the hospital and how HHMH can work with the city. 

“Through these local and regional efforts, the hospital’s main goal is ensuring vital healthcare services throughout the community continue without interruption,” says the Dec. 16 press release. 

HHMH administrators said the cost-cutting plan will not affect the quality of care provided by the local hospital.

The hospital then announced on Dec 19 that it had issued WARN Act notices to HHMH employees. Such notices are required by federal law to be issued 60 days before a possible closure by a large employer, says a Dec. 19 press release from HHMH. WARN notices can be extended or retracted if the hospital is successful in finding enough resources to stay open. 

The WARN Act promotes transparency and is designed to allow employees and their families to prepare for a potential loss of employment. The WARN notices sent out by HHMH indicate that if all of the hospital’s efforts to seek funding fail, the hospital will run out of sufficient cash to continue operations as of Feb. 18, 2023. 

“HHMH is still working steadily, however, to overcome cash flow challenges, including undertaking an aggressive cost savings plan, seeking private sources of funding and collaborating with state and local leaders,” says the latest release. 

According to Casillas, although HHMH has been focused on addressing its immediate cash-flow needs, the most likely source of long-term stabilization for HHMH will be a strategic partnership. HHMH cannot continue as a stand-alone service provider and successfully compete with larger, regional healthcare providers.

“With everyone’s support, and with critical improvements on our end, we still believe that we can find a partner that will enable HHMH to remain viable and continue providing top-quality health care services to our community,” Casillas said. 

Multiple factors led to the hospital’s current financial dilemma, including inflation, reduced reimbursements and the process of financial recovery in the face of the Covid-19 pandemic, according to hospital staff.