This community opinion was contributed by George Fendler. The opinions expressed do not necessarily represent BenitoLink or other affiliated contributors. BenitoLink invites all community members to share their ideas and opinions. By registering as a BenitoLink user in the top right corner of our home page and agreeing to follow our Terms of Use, you can write counter opinions or share your insights on current issues.
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As many of you know, our precious hospital is in danger. The Board of Directors of the San Benito Health Care District (SBHCD) have been struggling with a cash flow crisis. They have considered many solutions. They narrowed down their choice to two possibilities:
- Sell the hospital to another company.
- Set up a Joint Powers Authority (JPA) with the San Benito County Board of Supervisors
The directors meet every fourth Thursday of each month. These options have been discussed ad nauseam at these meetings and special meetings that have been called when they felt like they were getting close to a solution. At each of these meetings, they allowed public comments. They heard from doctors, nurses and members of the general public. They rejected the county’s JPA proposal because they felt that it didn’t meet all of their criteria. That narrowed it down to a sale of the hospital to a company called Insight from Flint, Michigan.
During all the meetings that I attended, I heard public comments from our neighbors that were completely opposed to selling the hospital. (I believe one of the Zoom callers thought it would be a good idea.) In general, I listened to scores of people who took time out of their lives to attend these meetings to object to the sale of the hospital.
At one of the meetings Director Devon Pack, recognizing the community dissent, proposed what seems like a sensible alternative. He proposed leasing the facility to Insight on a trial basis to see if they could meet the objectives of maintaining and improving the health care available to our county. Pack presented this in the form of a motion, it was seconded and approved unanimously.
The Pack proposal was discussed and has morphed into an arrangement that looks like a “rent with option to buy” deal. At the end of 5 years (in about 2030), Insight would have the right to complete the purchase at the appraised value that was determined in April of 2022. The sale price would be adjusted to correct for inflation. The appraised value was around $55 million in April of 2022.
This cash-flow crisis began when at nearly the same time, two things happened:
- SBHCD was unable to negotiate the renewal of contracts with major insurance companies including Blue Cross
- Medicare realized that they had overpaid our hospital by $10 million and wanted it back.
These two events, coupled with low cash-on-hand, made operating the hospital very difficult. At the time this happened, we were just emerging from a world-wide pandemic. During the pandemic, operating costs skyrocketed. Personnel were under severe stress—working long hours with few breaks. To say that this was a difficult time for the hospital would seriously understate the situation.
The board’s initial response was to hire consulting firms to evaluate operations and make recommendations. The implementation of those recommendations has made a significant difference in the solvency of the hospital. In the beginning, there were only a few days of operating cash available. Today cash-flow is vastly improved and there are nearly 100 days of operating cash in the bank!
Fast forward to July 2024. A hospital that was appraised at $55M in April of ‘22 is now worth closer to $150M. Insight could end up getting it for the original price of $55M adjusted for inflation. To make matters worse, the sale will be for all the assets which includes the real estate, the equipment, the accounts receivable, supplies, etc… What is not included is the liabilities! That includes debt that must be paid back and the pension fund. This jeopardizes, among other things, the retirement funding that was promised to each employee at the time they were hired. The SBHCD would have to assume those obligations. But, there wouldn’t be a revenue stream to take care of that because the hospital (the only significant source of income) will have been sold. The district would actually be bankrupt!
The cynical me is wondering if this might have been a strategy all along. They tried to file bankruptcy in the beginning of this “crisis”. The bankruptcy court ultimately rejected the filing because the district is not insolvent. They have filed an appeal and are awaiting the verdict. Since the financial situation of the hospital has drastically improved, I see little likelihood that the district will prevail.
This tactic would be a way to get rid of the retirement plan obligations without accepting any blame for abandoning the retirees.
OK. I’m not that cynical. I believe that the directors are making an earnest attempt to resolve the situation. Each of them is an outstanding, long-time resident of our county. So, what’s going on?
I know that running a hospital is not a trivial task. I believe that as knowledgeable and well intentioned as the directors are they have simply run out of ideas.
One way to fix “running out of ideas” is to ask more people—people have ideas. The board meetings are required to follow parliamentary procedures. The Brown Act further restricts any private discussions among the directors. That makes coming to some kind of a consensus to present at the meetings a problem. Something that might work would be to have a series of town-hall style events where the directors could be present and be participants while bringing in other community members and recognized experts. This process might be able to come up with more possible solutions outside the constraints of Robert’s Rules of Order. Robert’s Rules are very helpful for solidifying decisions but don’t work well for brainstorming.
There will be an initiative on our November 5 ballots. I fully expect the vote on the Insight sale to go down in flames. I certainly hope that’s the case. If you agree with me, attend the meetings and talk to your neighbors. Remember that democracy is not a spectator sport!
-George Fender
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