Five months after Hazel Hawkins Memorial Hospital CEO Steve Hannah announced plans for a new $250 million hospital, and only 25 days after he was terminated, the Board of Directors of the San Benito Health District announced a fiscal emergency and authorized the filing of a Chapter 9 bankruptcy petition.
Under Section 32104 of the California Health and Safety Code, the board said the district will not be able to pay its obligations within the next 60 days and determined it is in the best interest of the district, its patients, creditors, citizens, taxpayers and employees to file the petition.
The board voted unanimously to give notice that the district declared a fiscal emergency and adopted a resolution which declared that the financial state of hospital jeopardizes the health, safety, or well-being of the residents of the district’s service area, absent the protections of Chapter 9, Title 11, of the United States Bankruptcy Code.
The board determined the district is insolvent on a cash flow basis in the current fiscal year, and will be insolvent in the following fiscal year, as well.
It delegated Mark Robinson, chief financial officer, the authority to execute and file the Chapter 9 petition with the U.S. Bankruptcy Court for the Northern District of California by Dec. 31, and to continue negotiations with creditors. Robinson told the board that Medicare had determined the hospital was overpaid $5.2 million and would have to pay it back over the next year. Medicare also informed the hospital it would be reducing payments for both in- and out-patient care for another $5.2 million.
According to the meeting agenda packet, “Despite the efforts over the past several years of the district’s management and board to take significant steps to reduce expenses, uncontrollable inflationary increases combined with reimbursement declines have created an operating gap and cash flow deficit threatening the district’s fiscal viability and, if allowed to continue, could threaten patient care and patient safety.”
On Oct. 21, BenitoLink filed a public records request with the hospital asking for specific financial information and about potential bankruptcy. According to their website, Hazel Hawkins Memorial Hospital has approximately 578 staff and 136 physicians.
Under California law the district was required to give 48 hours notice to the public and media prior to a special meeting. According to Frankie Gallagher, director of marketing and community relations, the notice was posted on the hospital’s website at 3:30 p.m. on Nov. 3, barely 24 hours prior to the meeting. Several in the room who spoke to the board said they had only heard about the meeting the day before. Some said they were stunned to learn of the bankruptcy considering millions of dollars having been spent on recent renovations, a new building across town to relocate services, and plans for a new hospital.
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