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San Benito Health Alliance-Ovation Healthcare has removed its proposal to manage Hazel Hawkins Memorial Hospital from consideration, Richard Peil announced April 25. The San Benito Health Care District has received four proposals to either lease, purchase or manage the hospital. The other interested parties are Insight, America Advanced Management (AAM) and San Benito County’s Joint Powers Authority.
Peil, a consultant with financial advisor firm B. Riley, said the group notified San Benito Health Care District, which governs the hospital, in a letter dated April 24. In the letter it said, “Our inability to glean the information needed to present a credible presentation has led us to approach the district in a different direction as we move forward.”
“They didn’t want to waste anybody’s time by saying they needed more information,” J.P. Smith, a spokesperson for the Alliance-Ovation group, told the San Benito Health Care District board of directors. “They know you’ve gone through a long and exhaustive process and didn’t wish to go ahead and prolong it any longer.”
While Peil said San Benito Health Alliance-Ovation was “no longer a candidate for a potential transaction or affiliation with the district,” Smith said the group is still pursuing helping the hospital in an alternative manner.
“It hasn’t been fully disclosed yet,” Smith told the San Benito Health Care District Board. He said the group is meeting with Hazel Hawkins CEO Mary Casillas in the coming weeks to discuss options and those would be shared with the board once those options are reviewed and vetted.
“They are still very interested in working with the board and coming up with an alternative solution to saving the hospital,” Smith said.
Hazel Hawkins is among 200 hospitals in the state in fiscal trouble. The San Benito Health Care District declared a fiscal emergency in November 2022 and is now appealing the decision by a bankruptcy court to dismiss its bankruptcy filing.
Health care district Spokesperson Marcus Young told BenitoLink the case could take up to a year for the appellate court to reach a decision, though the district asked for the case to be expedited.
Regarding the other suitors, Peil said he didn’t expect America Advanced Management (AAM) to make any modifications to its lease-purchase proposal. However, he hinted AAM might not pursue its proposal as they recently purchased Madera Hospital, which was closed in December 2022.
“I’ve been told that that has stretched many of their resources, both financial and time resources,” Peil told the district board. “I’m not really sure going forward if they are in a position to take on another transaction.”
The other two proposals, San Benito County’s Joint Powers Authority and Insight are expected to submit their final proposals by April 29. Peil said Insight is working on a draft asset purchase agreement and their letter of intent is still consistent with the assessments done by HealthCare Appraisers. According to its website Insight is “charitable, religious 501c3, based upon universal Islamic teachings.”
Fair market value assessment
Though the original deadline to submit revised proposals was April 22, it was extended seven days to provide the four interested parties an opportunity to review an updated fair market value assessment of the district’s assets by HealthCare Appraisers. The report was expected by April 19 but was submitted April 24, Peil said.
The updated assessment, Peil reported, increased the assessed value range from $54.7 million to $60.5 million to $59.3 million to $65.6 million.
“Overall it’s not a big, meaningful change in the fair market value of the district’s assets between the two reports,” Peil said.
Peil said the primary reason for the change was the upward shift in the net working capital balance between the times—November 2023 and February 2024—the assessments were made. According to Corporate Finance Institute, net working capital is the difference between a company’s current assets and current liabilities.
The new appraisal is lower than one done in 2014 by American Appraisal, which concluded the health care district was worth $74.2 million.
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