Health care district approves new letter of intent

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In a special meeting on Jan. 9, the San Benito Health Care District Board of Directors approved a letter of intent from Insight Foundation, a Michigan nonprofit, after an officer from the company made a presentation to the board. The vote was approved 4-0; Director Bill Johnson was absent. 

This is the second letter of intent approved by the district concerning the takeover of Hazel Hawkins Memorial Hospital. The board approved a letter of intent from American Advanced Management Inc. in August which is still under consideration. San Benito County also submitted a letter of intent to form a Joint Powers Authority, but has yet to submit a proposal outlining the terms.

The district’s financial consultant, Richard Peil with B. Riley Financial Inc, said Insight requests the acquisition of all the hospital’s assets, including real estate, buildings, working capital and equipment. He said the estimated valuation for purchase price ranges from $59.5 million to $65 million, subject to final valuation and appraisal of the district’s assets. 

“As any bankruptcy sale, it would be a pure asset sale, free and clear of all liens and liabilities,” he said. 

According to its website, Insight’s primary focus in growing its institutions is on neurosciences, medicine and ethics. 

In his presentation to the board, Insight’s Chief Strategy Officer Atif Bawahab provided a brief background of the corporation, which was founded by Dr. Jawad Shah. Bawahab said Insight acquired the former General Motors Headquarters in Flint, Michigan, in 2008 and converted it into an interdisciplinary health care center with services such as neurosurgery, pain management, orthopedics and chiro-massage therapy.  

In 2019, it acquired Insight Surgical Hospital, which offers spinal neurological surgery, neck and back surgery, neurovascular oncology, vascular access surgery, orthopedic surgery, and surgical oncology.

It acquired Insight Chicago in 2021, offering services in allergy/immunology, behavioral health and addiction medicine, cardiology, oncology, orthopedic surgery and gastroenterology. Insight Dearborn was recently acquired, offering services in orthopedics and sports medicine, neurosurgery, neurology, and behavioral health. 

Bawahab told the board Insight’s goal “is to be an additive” to Hazel Hawkins. He said that though his company hopes to continue Hazel Hawkins as a community hospital, “it’s been evident it isn’t going very well.” 

“There’s a lot of migration of health care services leaving this area as well,” he said. “It suffers from the high medicare payer rates and unfortunately a lot of the medical staff here is not internalized and employed by the hospital itself.”

Bawahab said Insight believes it can help with updating Hazel Hawkins’ emergency room, extending services to develop a larger and more robust healthcare network, offset high medicaid percentage rates and create a more integrated network of physicians.

“We’re not looking to come in and reinvent the wheel, but offer high-end specialty services to this community,” he said. 

Peil said, as part of the proposed transaction, the current hospital bonds, a revenue and a general obligation bond, would remain with the district.

San Benito County Auditor-Controller Joe Paul Gonzalez previously told BenitoLink “revenue bonds are repaid from the respective obligated revenue streams of the hospital district.”

Peil said he expects the hospital’s revenue bond to be $8.3 million and that the hospital would have sufficient proceeds to pay it off. However, the general obligation bond of $23 million is anticipated to remain in place, and be paid off by the property tax received by the district. 

Resident Robert Bernosky said at the meeting that it is “unacceptable” for tax payers to be left with the general obligation bond should the district be sold. 

“If we don’t own the hospital, we cannot be paying the bonds off,” Bernosky said. 

He wanted clarification from the board as to where these revenue funds are going but his request went unanswered.

Director Rick Shelton asked Peil about how the $10 million loan from the state of California would be handled in the sale of the hospital. 

“There’s been some discussion that this $10 million loan will become a grant,” Shelton said. “We have $10 million against [the purchase price]; obviously that’s $10 million less of net value. Is there a way we can include either option as part of the final negotiations? What happens if that loan becomes a grant? Could that be added into the system?”

Peil said there has been no discussion of the loan, however it is “an issue that would come out of due diligence.” 

The letter of intent serves as a commitment by both parties to work together with the goal of entering into an exclusive contract with the district. If an agreement is reached, the Board will need to vote on approval of that agreement and then submit it to voters for a final ratification later this year.

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