San Benito County and Salinas Valley Health officials last week jointly submitted a letter of intent to take over operations of Hazel Hawkins Memorial Hospital and its associated services through a joint powers authority that would raise extra long-term capital for the hospital, in part, by assessing new impact fees on commercial and residential developers, according to the county.
The county and Salinas Valley Health delivered the LOI to the San Benito Health Care District on Oct. 26. The San Benito County Board of Supervisors had voted 5-0 on Oct. 24 to submit the LOI in partnership with the Salinas-based healthcare provider. In a press release, the county said the proposed partnership is “prompted by concerns for the future of healthcare in (the) community.”
The non-binding LOI signals that the county and SVH are ready for formal, detailed discussions about how their partnership could address the future operations, governance and financing of HHMH, which is currently overseen by the SBHD and its board of directors. The proposal includes HHMH as well as its skilled nursing facilities and physician clinics.
SBHD and HHMH officials have been seeking a potential partner or buyer since the board declared bankruptcy earlier this year. The Oct. 26 letter from the county and SVH is the second LOI the Hollister hospital has received from a prospective buyer; the first was from Modesto-based American Advanced Management, a for-profit healthcare provider, in August.
The hospital is still evaluating the proposal from AAM, and will discuss details of the management and capitalization terms of the county’s proposal over the next 60-90 days, says a press release from HHMH.
Specifically, the LOI from the county proposes that SBHD and San Benito County form a joint powers authority “to capitalize, govern and oversee the management of HHMH;” and to enter the new JPA into a management agreement with SVH to operate the hospital, its rural clinics, skilled nursing facilities and other services that would be determined, according to the county.
The cities of Hollister and San Juan Bautista would be invited to participate in the JPA.
The JPA would be governed by a board of directors, which would include a member of each participating entity. An additional 3-5 board members would be added from among the community, and these would likely include healthcare experts, residents with needed skills and physicians, the county said.
County Administrator Ray Espinosa noted that a recent study of HHMH by ECG Management Consultants found that the community served by the local hospital will have increasing demands for healthcare services long into the future—and a partnership with the county and SVH could meet these needs by keeping HHMH under local control. The ECG assessment was commissioned by the county.
“The county is proposing that we continue to develop more detailed business plans. We believe that it is possible to maintain the hospital through the proposal outlined in the LOI, and that this is what our community deserves,” Espinosa said. “The county is hopeful that the hospital will receive this proposal favorably and will continue to work with the county and Salinas Valley Health. We believe that by working together, we can solve the hospital’s difficulties without losing control or selling the facilities to a for-profit company.”
JPAs are authorized under the California Government Code to provide a mechanism for one or more public agencies to jointly exercise powers in common to the members, the county’s press release explained. In the formation of the JPA, a specific purpose is established—in this case the operation and financing of healthcare services. JPA’s have the authority to issue bonds or to enter into contracts with outside agencies, such as SVH, to ensure fulfillment of stated goals.
“Salinas Valley Health is dedicated to our communities and recognizes that we are a part of the larger healthcare ecosystem of Monterey, Santa Cruz and San Benito counties,” said Pete Delgado, President/CEO of SVH. “We are happy to work with the County of San Benito and Hazel Hawkins Memorial Hospital in identifying potential opportunities to ensure Hazel Hawkins can continue providing life-saving care to the community.”
The county’s proposal includes the assessment of development impact fees as a future revenue stream for HHMH, allowing the partnership to satisfy SBHD’s goal to increase the capital available to the hospital, says the county’s press release. The impact fees would be assessed by the county, as well as the cities of Hollister and San Juan Bautista if they choose to participate.
Additional long-term capital could materialize from the development of new healthcare programs and services under the county/SVH partnership, county officials added.
Other provisions of the county’s proposal with SVH include:
– SVH would lead and manage all aspects of HHMH; and manage all employees and financial aspects of the organization, contracting, and clinical program developments.
– SVH would confirm a three-year strategic plan with goals for an annual operating and capital budget. SVH would lead and manage physician development and facilitate the expansion of local services in the service area.
– SVH would oversee, manage and ensure quality of care.
– SVH would ensure compliance with all local, state and federal regulatory rules.
In addition to the LOIs from the county and AAM, local healthcare officials have received inquiries about a potential partnership with HHMH from a small number of organizations that have not been identified yet.
HHMH Interim CEO Mary Casillas said the hospital and its board are “looking forward to hearing more” from the county and SVH regarding their proposal.
“We will continue to work with all interested parties that come forward,” Casillas added. “Our main goal is to find the best partner with the means, experience and commitment to maintain access to healthcare for all residents of San Benito County.”