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Another group vying to take over ownership or management of Hazel Hawkins Memorial Hospital has dropped out, leaving the hospital with two suitors.
According to the agenda, the health care district’s board of directors will hold a special meeting May 20 at 5 p.m. to review the two remaining proposals and provide direction to staff.
American Advanced Management (AAM) withdrew its letter of intent last week, San Benito Health Care District spokesperson Marcus Young told BenitoLink on May 15. San Benito Health Alliance-Ovation Healthcare removed its proposal at the end of April.
That leaves two possible entities to purchase or manage the hospital: Insight Health Systems and San Benito County. Only the county submitted revisions to its nonbinding letter of intent, ahead of the health care district’s April 22 deadline to receive new or updated proposals.
On August 7, 2023, the health care district’s board of directors unanimously approved AAM’s proposal to lease-to-own the hospital’s assets prior to a purchase.
When asked why AAM withdrew, Young said: “I’m not sure, but we assume it’s because they are pretty busy with Madera.” In February, a bankruptcy judge approved AAM’s plan to reopen Madera Community Hospital following its closure in 2023.
San Benito Health Care District, the governing body of Hazel Hawkins, filed for Chapter 9 bankruptcy in May 2023. A San Jose judge dismissed the hospital’s bankruptcy petition, which led the district to appeal the ruling eight days later. A decision about the appeal has not yet been made.
The letter submitted to the health care district by county officials states that the county’s goal is to oversee hospital management and operations by setting up a Joint Powers Authority (JPA) to serve as a new governance structure. The JPA would include nine to 14 members:
- Two members appointed by the county
- Two members appointed by the hospital district
- No less than five and no more than 10 community members appointed by the county and health care district members
Each member will hold a two-year term, with some exceptions: board-appointed members can be removed and replaced at any time with board approval, while community members can be removed and replaced by the county or district, the letter said.
The board will manage the hospital’s assets and liabilities, its skilled nursing facilities and physician clinics. The district will manage a $500,000 per year fund to further the “wellness and preventative care for residents in the region,” the letter states.
The health care district will need to approve the following actions by the new board:
- Adopting the board’s annual business plan
- Approving unbudgeted hospital expenditures in excess of $5 million
- Any partnership agreements with third party health systems
- Discontinuation of any hospital service
Also, according to the revised letter of intent:
- The county will provide the hospital with $5 million of initial capital and a line of credit not to exceed $10 million.
- Tax payments, grants, income and payments from government programs that provide funding to hospitals that serve Medi-Cal and uninsured patients will be managed by the newly appointed board.
- Within the first 10 years of the county’s involvement, the hospital district will annually contribute about $3.1 million to the district’s employee pension fund. The required funding figures come from the county’s business plan estimates.
- The agreement can be terminated at any time. If either agency chooses to terminate the agreement, written notice must be given to the board no more than 18 months before the start of the fiscal year of termination. The agency terminating the agreement will pay the transfer expenses of responsibilities to the hospital.
- If terminated, the district will take responsibility for board expenses.
While the county is considered a strategic partner, Insight’s proposal includes purchasing the hospital and its assets.
Young said there was no change to Insight’s proposal.
BenitoLink previously compared the proposals.
Insight’s letter of intent estimates the purchase price of the hospital’s assets between $59 million and $65 million. The assets would include real estate, buildings, working capital and equipment. A revised capital fair market value assessment of the hospital done by HealthCare Appraisers estimated it is worth between $59.3 million to $65.6 million.
Insight Founder Dr. Jawad Shah said during a March town hall it would keep hospital staff and physicians with “no intention of disrupting staff” if Insight was selected to take over ownership.
Shah said the hospital’s executive team would stay, noting he was “fond” of them. Community members would be included on the board along with Insight staff.
“We’ve seen it work best when there’s a mixture of Insight core people with the community,” he said at the town hall.
If Insight is selected by the board, voters will decide in a Nov. 5 ballot measure whether to approve or deny the sale, Young said. If the board selects the county, voter approval is not necessary.
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