The list of potential partners for Hazel Hawkins Memorial Hospital is down to two, with the future of the hospital and the San Benito Health Care District at a crossroads between a public and private option.
At a special May 20 meeting of the district board, representatives of San Benito County presented their proposal for HHMH to continue to be publicly held through a Joint Powers Agreement. Michigan-based Insight Foundation of America also made their case to the board, proposing to purchase the Hollister hospital’s assets and absorb Hazel Hawkins into its multi-state operation.
In a meeting packed with attendees in person and on teleconference, Los Angeles-based SBHCD consultant B. Riley explained that the list of proposals was whittled down from four just months ago, to two.
The meeting set the stage for the district’s May 23 session, where the board is scheduled to vote on one of the two suitors.
According to Richard Peill, Senior Managing Director for B. Riley, an earlier offer by American Advanced Management (AAM) to purchase the hospital assets was not financially “credible.” San Benito Health Care Alliance (SBHCA) and Ovation Health withdrew their proposal in April after negotiations with the district stalled.
And then there were two.
San Benito County District 4 Supervisor and Board Chair Angela Curro, alongside District 2 Supervisor Kollin Kosmicki and county consultants, presented their final proposal to the board at the special meeting.
“I want to make it very clear we are not wanting to be in the hospital business. We do have a goal to keep a hospital run locally,” Curro said, addressing the district board and attendees.
Their proposal would establish a JPA agreement between San Benito County and the SBHCD. 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 proposal commits the county to contributing $5 million to the JPA at the outset, and “will provide a guarantee for a $7-12 million working capital line of credit if needed to support growth and liquidity,” according to the presentation.
The plan outlines six “key terms” that make up the proposal: development of a JPA; the creation of an operating governance board; investment in capital; the creation of a physician group; partnering with local health systems; and expanding hospital services.
The creation of an operating governance board would change the way the current district board operates. The proposal calls for a new board to include two representatives each from the SBHCD and the County of San Benito, with an additional five expert members, such as physicians and financial professionals.
Tensions regarding the potential overhaul of the existing board flared during the May 20 meeting between the SBHCD board members and county officials.
Kosmicki questioned the board members about what he alleged was a preference to sell the hospital rather than keep it in local hands. He added that, unlike the county’s proposal, Insight had not provided a detailed business plan, but instead had “thrown out numbers” arbitrarily.
“None of that matters. Because once you hand the keys over to this hospital, guess what happens? You lose all control,” Kosmicki said, addressing the hospital board. “That private entity can do what they want. They can choose which services to close, they can ultimately decide to close Hazel Hawkins and nothing will stop them—not us as a community and not the board that’s being maintained that will have basically no power.”
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.
In March, the The U.S. Bankruptcy Court struck down the Chapter 9 filing by the SBHCD, refuting its claims that HHMH is insolvent. The court also brought into question the methods of the district consultant B. Riley, and highlighted errors in their financial forecasts for the hospital.
Since then, hospital administration and the district board have reported an improved financial situation for HHMH.
Kosmicki asked the board to question the consideration of a private sale given the current circumstances.
“Ask yourself, why would we roll the dice now? Why would we do that?” Kosmicki said.
SBHCD board member Josie Sanchez tacitly placed blame on the county for some of the hospital’s financial issues. Kosmicki fired back and asked why she is “so intent on selling to a private entity when it is not necessary at this point.”
“I’m going to wait to hear Insight’s proposal before I [answer],” Sanchez responded.
Getting Insight
Insight Foundation of America founder Dr. Jawad Shah and Chief Strategic Officer and CEO Atif Bawahab were in attendance at the May 20 meeting via teleconference to present their proposal. Bawahab acknowledged San Benito County’s presentation, praising some aspects of the proposal, but highlighted the difference between the two entities.
“I think the fundamental difference that we have is that we’re actually [hospital] operators and we actually have the expertise and we have the knowledge in terms of healthcare,” Bawahab said.
Insight’s presentation focused on its achievements in other markets, including Chicago and Michigan. Bawahab touted the high volume of patients in facilities spanning a total of six acute care hospitals with 1,344 beds; 4,200 employees, including 580 physicians; and 10 labor unions.
Additionally, it underscored that no employees had been terminated in its takeover of facilities in Chicago and New Jersey.
According to its website, Insight is a “charitable, religious 501c3, based upon universal Islamic teachings that are inclusive, respectful and inviting of all faiths and non-faith communities.”
The presentation also alluded to the intent to grow hospital services and attract physicians to help expand these.
However, the presentation did not include a detailed business plan. When asked by the district board a projected timeline for hiring physicians for HHMH, Dr. Shah said any plans for that would only be made after the acquisition.
“It’s a matter of doing a bit of a strategic planning and acclimating ourselves to the team, but within two to four weeks, we should have written plans as to what we would like, it would be presumptuous of me, and all of us, to come in and say we want A, B or C,” Shah said.
The district board was less scrutinizing of Insight’s presentation, compared to the contentious exchanges during the presentation by San Benito County. Some attendees accused the district board of favoring Insight.
“The fix is for Insight,” Rob Bernosky said during the public comment period after the presentations. “The animosity that you showed toward the county, the in-depth questions, like about recruiting, just for example, you drilled and drilled and drilled, but then when [you] asked Insight, oh it’s not a problem,” Bernosky said.
Other attendees welcomed Insight’s proposal, including former longtime SBHCD board member Mary McCullough.
“I think it’s time that we go back and bring in some outside experts that know what they’re doing and will consider the thoughts and reasoning of the community, and I’m all for supporting Insight to come help us out.”
