Hazel Hawkins Hospital struggles to keep its doors open

The future appears grim for Hazel Hawkins Memorial Hospital.

That was the report at an April 18 town hall meeting concerning the future of Hazel Hawkins Hospital and the San Benito Health Care District. Top level staff did not attempt to put a spin on their report to staff members and the community that showed the community-owned hospital’s days could be numbered.

Even though Chief Executive Officer Ken Underwood described the district as a comprehensive network of services that had received numerous quality awards, the hospital has seen a decline in admissions over the last five years, now with fewer than 17 patients a day. Admitted patients stay fewer than three days and more people are being treated on an outpatient basis, according to the report.

The local health care district is not alone. The direction of health care has changed dramatically in an attempt to improve community health by providing efficiencies of scale to lower costs and provide reimbursements based on value rather than fee-for-services.

Underwood said rural hospitals cannot provide the same level of care as larger, urban hospitals. The CEO described Hazel Hawkins as a micro-hospital that focuses on outpatient care, amounting to 70 percent of the net revenue, or more than $100 million annually.

Chief Financial Officer Mark Robinson explained that the hospital’s expenses outpaced revenue. He said the difference between expenses and revenues is so close that simply staying in business is an issue.

“Each year, we’re being paid less and less by Medicare and that law has been extended twice and is in place until 2024,” Robinson said “We’re paid less than the cost of care to the tune of $5 million a year.”

The decline in the number of patients represents a $2 million loss in revenue, Robinson said. Thirty-nine percent of San Benito Health Care District acute services go to Medicare patients, whose reimbursement rate is the lowest of any insurer.

The CFO said Medicare would pay 101 percent of the cost of care, representing $4 million to $5 million for the district, if Hazel Hawkins could be designated as a critical access hospital. Unfortunately, he said, California ranks between 47 and 50 in what it pays for Medi-Cal recipients. One-third of county residents are covered by Medi-Cal.

“We’re a state that doesn’t like to put money into the Medi-Cal program,” Robinson said. “Thankfully, some relief has come from the Affordable Care Act.”

Fifteen percent of patients are covered by Anthem-Blue Cross, Robinson said, which has not given the district a raise in more than a year. The chief financial officer claimed the insurer considered the district too small to deal with and there is no lawful way to force it to do so. The San Benito Health Care District has no choice other than do business as usual, because without the company’s coverage it would lose $1.8 million a month.

“Although we’re underpaid, we can’t get rid of them,” Robinson said. “Every payer takes advantage of us. The government doesn’t have to negotiate with us. They dictate what they do, and so does Anthem-Blue Cross.”

There was a glimmer of hope in Robinson’s report. He said in February the state notified the hospital that it would pay retroactively, dating back to 2014, an expansion of Medi-Cal of $3.46 million. Even though it helped the hospital, it did nothing for ongoing service because it was a one-time reimbursement, he said.

“It doesn’t change the fact that we’re not making money on the small amount of people we are seeing,” Robinson said. “This is the situation we are in and it’s bringing us to the point we are having to see what we can do to maintain the service we are providing. So, we are actually looking for a partner, a big brother or sister, if you will. We are still looking at maintaining what the district does, but we are looking for financial help.”

Underwood explained further that Hazel Hawkins Hospital sent requests for proposals to 10 organizations with histories of providing good service to their communities, and even some who had partnered with the local health care district in the past for some services.

So far, the district has not received any proposals, according to Underwood. Yet it has received more than one response declining the offer.

One organization that Underwood claimed would have been an excellent partner is Stanford Health System, which turned down Hazel Hawkins stating it was already involved in building a new hospital. Other organizations include Salinas Valley Healthcare System, Dignity Health, El Camino Hospital, Adventist Health, UCSF Medical Center, Good Samaritan Hospital/HCA, Kaiser Foundation Health, Sutter Health, and Community Hospital of the Monterey County.

Of those, Underwood indicated that Salinas Valley Healthcare System would be a good fit. The district has yet to hear back from the neighboring health care district.

“At this point, the district is not inclined to sell or lease the hospital,” Underwood said. “The focus is on partnering with other groups to improve services locally.”