The County of San Benito has submitted an expanded letter of intent to the San Benito Health Care District as the county continues to push for the creation of a Joint Powers Authority to run Hazel Hawkins Memorial Hospital.
The revised LOI includes financial projections and a business plan meant to help steer the hospital into “financial viability.” The plan pushes for an overhaul of the SBHCD and HHMH administration, while a public line of credit would stabilize the struggling hospital’s financial woes.
“The County was able to elaborate on its proposal based on work completed by the nationally recognized healthcare consulting firm, ECG,” said a press release from San Benito County. “The firm had been engaged to develop a strategic business plan that would restore the hospital to financial health and improve access to medical care.”
The new LOI is a more in-depth proposal from the one submitted to the San Benito Health Care District (SBHCD) last fall.
In October 2023, the County of San Benito received a report from ECG Management Consultants, a healthcare consulting firm, which concluded that HHMH’s May 2023 Chapter 9 bankruptcy filing was not necessary to fix its financial situation. Additionally, the report recommended that the hospital not be sold to a for-profit provider.
ECG also recommended that the current hospital administration be overhauled and a Joint Powers Authority (JPA) be formed to manage the Hollister hospital.
A JPA is a legal entity that allows two or more public agencies to jointly exercise common powers. In the case of HHMH, a JPA could help the hospital out financially through a line of credit provided by San Benito County and local agencies.
Within days of the report’s publication, the county formally submitted a letter of intent (LOI) to the SBHCD seeking a JPA between the San Benito County, SBHCD and Salinas Valley Health. The county also presented the report to the city councils of Hollister and San Juan Bautista in an effort to have them join a future JPA.
The SBHCD approved the county’s October LOI, and opened the door for negotiations. Salinas Valley Health has since pulled out, citing that “they were not able to take on full management of SBHCD’s facilities at this time,” according to the county press release.
Now, the updated proposal submitted by the county includes a multi-step business plan to revitalize HHMH and even expand its services without a private sale.
The county’s plan
ECG’s business plan for HHMH outlines six “core strategies,” or steps to keep the hospital going:
- Development of a JPA
- Creation of an operating governance board
- Investment of capital
- Creation of a physician group
- Healthcare system partnership
- Growth for hospital, skilled nursing facilities and rural health clinics
The initial strategies within the plan would bring about major changes to the governance of HHMH and of the SBHCD itself.
The JPA would be headed by the County of San Benito, the SBHCD and any other local governmental entities that join. The SBHCD would maintain ownership of all assets relating to the hospital, skilled nursing facilities, and rural clinics. It would also continue to collect all current and future tax revenue, according to the plan.
A “community-based” governance board similar to those of nonprofit hospitals would also be created and would overhaul the current SBHCD board to one appointed by the JPA. Board members would include county elected officials, and ECG recommends appointing non-elected members, such as a physician, to join the board. These recommendations would make the operations of the hospital more transparent to the community, according to ECG.
ECG also projects that the “free cash flows” of the hospital and the district would improve under such a JPA.
Under the plan, the JPA would infuse the SBHCD with between $10 million and $15 million, which would be a public line of credit. An additional $5 million would be “contributed” and a $10 million Distressed Hospital Loan from the state would round it all out.
The plan not only projects financial stability, but also growth for HHMH’s services.
“The business plan also demonstrated that if there was a more robust medical community that was fully dedicated to the hospital, the hospital could grow and remain financially successful into the future,” the release said.
HHMH and SBHCD administration have not yet commented on the new proposal.
The county’s expanded LOI is one of four proposals on the table for the future of HHMH. The latest came last month from the San Benito Health Care Alliance and Ovation Healthcare in a joint proposal. Michigan-based Insight Foundation of America and Madera-based American Advanced Management have also submitted LOI’s. The SBHCD is still in the process of evaluating those offers.
If the SBHCD decides to enter into a JPA with San Benito County, HHMH would no longer seek a private buyer—leaving the hospital under public control. If the SBHCD moves to approve an offer, it will still need to be taken to voters for a final ratification.