Hospital admin doubts feasibility of local takeover offers

After a preliminary evaluation of the four proposals submitted to the San Benito Health Care District seeking to take over Hazel Hawkins Memorial Hospital, the two letters of intent submitted by local entities “still lack significant financial information.”

That was the conclusion B. Riley Advisory Services, a consultant for SBHCD and Hazel Hawkins Memorial Hospital (HHMH), brought to a district board meeting last month. Richard Piel, senior managing director for B. Riley said at the meeting that the two proposals were not yet “feasible options.”

The County of San Benito and the San Benito Health Care Alliance (SBHCA) both submitted letters of intent (LOI) to the district board in the past months in hopes of keeping HHMH under local control. However, the district’s consultants said that they need more information to evaluate these.

The two local proposals differ in their approach to a solution for the hospital. The county is seeking to form a public Joint Powers Authority (JPA), which would bring together local governments and stakeholders to publicly oversee the hospital. 

The SBHCA is proposing a “collaboration” with Tennessee-based private healthcare consultant Ovation Healthcare. Ovation  runs 45 facilities across the U.S., including 27 critical access hospitals.

The SBHCA is a nonprofit founded by physicians at HHMH who are seeking alternatives for the future of the hospital. The organization had previously joined up with Salinas Valley Memorial Hospital administration to engage in talks with HHMH administration to discuss a potential offer. Since then, Salinas Valley pulled out and Ovation stepped in.

The county recently expanded its original proposal to the SBHCD from October 2023, and added a detailed business plan to the offer in early February of this year. The revised LOI includes financial projections 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.

Despite the county’s plan, the district said that two other offers from American Advanced Management (AAM) and Insight Foundation of America, respectively, have “the most clarity regarding the financial terms, commitments to maintaining the acute care resources for at least 10 years and the promise of an expansion of services for future growth and profitability,” according to the press release.

AAM, a Madera-based private healthcare company, is proposing a lease-to-own scenario which would be evaluated after 10 years. The district is still in discussions with AAM, and is working out details regarding the hospital’s $34 million pension plan and the sale of its assets.

Insight has made a cash offer—the only one of the four entities to do so— for between $59-$65 million. The Michigan-based company, which currently has no presence in California, would form a nonprofit to purchase the hospital in order to avoid some legal hurdles. The company also offered to allot $50 million over 10 years to expand services at HHMH.

Both the county and the SBHCA disagree with Piel’s assessment of their respective LOIs.

Cecilia Montalvo, a consultant for the county, said in an email that its proposal is sound.

“The County of San Benito submitted the most comprehensive set of materials that the hospital has received to date. These materials included a Letter of Intent outlining the proposal, a draft form of JPA Agreement to serve as a starting point for negotiations, a detailed business plan that included a current assessment of the hospital’s financial issues, and a financial plan with a 10-year forecast,” Montalvo said. “Given the work that the County has done to develop its proposal, it is our hope that the hospital will examine the material in more detail.” 

JP Smith, a facilitator of the SBHCA/Ovation proposal, said in a phone call that Piel’s evaluation of the county and SBHCA LOIs is due to his favoring of a private sale of the hospital.

“[Piel] purposely jaded both of the proposals because he wants to sell, because he gets a commission if he goes ahead and sells the hospital,” Smith said. “Both the county’s and our LOI were very clear, and the county has even actually presented a business plan. He’s doing everything he can to dismiss it, so that a sale goes through that nobody in the county wants.”

The Free Lance reached out to Piel via phone for a response to these allegations.

“I guess I would respond that I completely disagree with the comment and the assertion behind the comment. I have no role in the decision making of what the district is going to do. And I haven’t expressed my opinion on what the district should do. So I categorically dismiss this person’s comment,” Piel said in response to Smith’s allegation that he would profit from a private sale.

He said that he stands by his assessments to the board and would not comment further.

“Clearly we still have work to do here,” said HHMH CEO Mary Casillas in a press release following the meeting. “What we have right now is an amazing starting point. We will continue to perform our due diligence and work with all of these parties to make sure that we put forward the best proposal to safeguard and expand healthcare options for our community.”