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The San Benito Health Care District will not continue to pursue bankruptcy protection following an appellate court’s March 21 decision to uphold the dismissal of its petition. District board president Bill Johnson said the process has run its course, for now, and that Chapter 9 protection had allowed the district to ensure solvency, and given it time to look at a potential sale.
Health Care District Board Director Devon Pack told BenitoLink the board reached a consensus that unless there is “substantial change” in the case, the district will not bring its case to the U.S. Court of Appeals, the next legal step if it were to pursue its bankruptcy claim.
Johnson said the health care district has 30 days from the appellate court’s decision to file with the federal court. “If nothing happens, it’ll be the end of it,” Johnson said, adding that the district will now focus on its due diligence to secure a partner to take over management of the hospital.
Meanwhile, on March 28, a day after the board met in closed session to discuss next steps on the bankruptcy filing, Insight Health System—the only buyer the district is considering—announced that it was laying off all of the 143 employees at a rehabilitation hospital in Warren, Ohio, that it acquired in November, 2024, and temporarily shuttering operations.
Some community members have criticized the Insight deal with Hazel Hawkins, saying it does not meet the criteria the health care district set for a potential partner. These criteria state that whatever organization takes over the hospital “demonstrates the financial stability to both acquire the hospital and maintain current service levels,” and “shows a proven ability to support rural healthcare institutions,” according to a January Health Care District news release.
According to the notice, required by the Worker Adjustment and Retaining Notification (WARN) Act, Insight filed with the Ohio Department of Job & Family Services, the organization hopes the suspension of services at the facility to last “less than six months.”
It said the decision was made because Steward Health Care, the previous owner of the bankrupt facility, discontinued payments to Insight.
Insight provided a statement to BenitoLink saying Steward imposed significant costs and withheld revenue, and sold its management functions to a third party without Insight’s consent.
“The difficult decision to move to diversion followed continued disruption and financial strain from Steward’s actions, and patient and staff safety had to be prioritized,” Insight’s statement reads. “Patients were safely transferred, and future appointments have been cancelled.”
The statement noted Insight has maintained a consistent level of service and employees at its Coldwater, Michigan facility, which it acquired in December of last year.
“Similarly, Insight has the capacity to be a partner with Hazel Hawkins Memorial Hospital to complete the transaction to become a nonprofit organization with expanded physician recruitment and service lines,” Insight said.
Organizations are required to file WARN notices at least 60 days before mass layoffs begin. However, there are three exemptions to the requirement including a company is seeking capital, unforeseeable business circumstances and when layoffs are a result of a natural disaster.
Insight is proposing to buy the district’s assets, such as medical equipment, and lease the property for five years. Insight would have the option to buy the hospital after the lease term. The two parties have agreed on initial terms but are still in negotiations, which require approval by the board of directors.
Asked if the dismissal of the Ohio employees affects the potential Hazel Hawkins transaction, Pack said the district has a term sheet in place that requires Insight to retain staff levels and existing service lines.
District spokesperson Marcus Young said the situation involving Steward health is not reflective of its experience with Insight.
“Since starting the search for a potential partner, our board has taken a thorough and responsible approach to the process,” he said. “As part of our due diligence, the board will continue to require that Insight demonstrate its financial capacity to fulfill the terms of the lease-to-purchase agreement, including the significant investments needed to expand and strengthen service lines.”
He said the district’s priority is a sustainable future for healthcare in the community.
In December, Insight was a focus of an American Prospect magazine investigation that claimed it participated in questionable practices to defraud insurance companies and sell patients unneeded services. Insight denied the allegations.
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