The San Benito Health Care District board voted Jan. 8 to explore a partnership with Michigan-based Insight Foundation of America to take over Hazel Hawkins Memorial Hospital. The decision was made during a special meeting of the district board after it received a non-binding letter of intent (LOI) from Insight on Jan. 2.
This is the third LOI received by hospital administration by an interested party looking to partner with HHMH.
Insight Foundation of America is a nonprofit healthcare organization based in Flint, Michigan that runs seven facilities in that area, including urgent care, endoscopy and imaging centers. It also has facilities in Illinois and Iowa.
“After an extensive review of a draft Letter of Intent (LOI), and after the public meeting where Insight outlined its plans and commitment to the community, the board authorized execution of the LOI and provided authority to continue negotiations and due diligence, paving the way for a potential formal agreement,” said hospital administration in a press release after the Jan. 8 meeting.
Insight proposes purchasing all of HHMH’s assets for a sum of between $59-65 million, according to the LOI.
Representatives from Insight were on hand at the Jan. 8 meeting to introduce themselves to the district board and make their case for a partnership. Insight’s chief strategy officer, Atif Bawahab, said that unlike other facilities that the nonprofit has taken over, HHMH has impressively continued to operate despite the financial issues, which is a good sign.
“Our goal here is to be additive. We’re not here to reinvent the wheel,” Bawahab said.
Insight does not have a presence in California and, if it acquires HHMH, it would register as a California nonprofit public benefit corporation, according to the LOI.
hed: Third time’s the charm?
Insight’s proposal comes months after two other letters of intent were submitted to the district board for consideration.
In August 2023, the SBHCD announced that it had received an LOI from American Advanced Management (AAM) seeking a potential “strategic partnership.”
AAM is a Modesto-based private healthcare company that operates six hospitals and other medical facilities in central and northern California. The organization was founded in 2012 when it opened Central Valley Specialty Hospital in Modesto and was the first company in California to revive a rural hospital following bankruptcy and closure.
In September, allegations of misconduct by AAM surfaced when it was reported that the organization attempted to bribe the CEO of Madera Hospital with a $150,000 check and an executive position at the hospital if it was sold to or managed by AAM.
At the Jan. 8 meeting, Richard Peil, senior managing director at B. Riley, SBHCD’s financial advisor, said that AAM is currently in negotiations to finalize a deal with Madera Hospital, and that there have been no updates regarding a deal with HHMH.
In October 2023, San Benito County submitted its own LOI proposing a Joint Powers Authority (JPA) to take over the hospital in which it would partner with Salinas Valley Health. 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. The JPA would support the SBHCD in governing the hospital.
The county based its proposal on a report it commissioned from ECG Management Solutions which concluded that HHMH did not need to file for bankruptcy to remedy its financial situation. The report also stated that a private sale to a for-profit provider is unnecessary and that the administrative board should be dissolved.
Piel also mentioned a fourth party interested in partnering with the hospital—the San Benito Health Alliance.
The San Benito Health Care Alliance (SBHCA) is a nonprofit founded by physicians at HHMH to seek a publicly-held alternative for the hospital. At an August 2023 district board meeting, representatives of SBHCA announced that they had delivered a memorandum of understanding to the board and were in continuing talks.
At the Jan. 8 meeting, Piel said that while talks between hospital administration and SBHCA, the healthcare alliance has not submitted its own letter of intent.
While the district board voted to embark on the due diligence process to vet Insight as a partner— as it has done with the two other potential buyers— residents continued to voice their concerns.
During public comments at the special meeting, Rob Bernosky, who has become a fixture at district board meetings, expressed his reservations.
“[My] biggest fear is that at some point in the future, maybe [in] a year or two years, the acquirer says ‘hey, the numbers didn’t work out. We’re going to shut this down,’” Bernosky said.
Another major stakeholder in the future of HHMH is the California Nurses Association (CNA). The union represents over 100 nurses employed at HHMH and has been critical of hospital administration’s decision to file for Chapter Nine bankruptcy in May 2023. CNA has repeatedly stated that it wants the hospital to remain publicly-held and not be sold to a for-profit corporation.
“We are encouraged that another potential partner has expressed interest in Hazel Hawkins Memorial Hospital. The nurses have always recognized the importance of our hospital in providing care to our community and we are pleased to see others who clearly recognize the potential of Hazel Hawkins Memorial Hospital. As always, we want what is best to ensure the long term health and well-being of our hospital, the staff, and our patients. Our goal is to keep Hazel Hawkins a public asset, where the focus is on our community’s well-being and where those who live in the San Benito County Health Care District have the ultimate power to decide the future course of the hospital.” said Sonia Duran, a registered nurse at HHMH in an email statement.
The SBHCD is required to bring any final decision on a buyout to a public vote, which would apply to a potential deal with Insight.