On May 22, the San Benito Health Care District unanimously approved two measures: the first to file for Chapter 9 bankruptcy in a further attempt to keep the doors open at Hazel Hawkins Memorial Hospital, which has been facing closure since first announcing the possibility of bankruptcy last November. The second measure would set in motion a “pendency plan” that will “serve as the district’s budget, and guide financial decision-making and policy during the Chapter 9,” according to the meeting agenda.
More than 100 nurses and doctors were drawn to the meeting over their concerns of the pending bankruptcy announcement. Because the room was filled to capacity, over half were told they had to leave and stand in the hall.
“This option has been on the table since November of last year,” said Marcus Young, spokesperson for the district in a news release that was distributed within minutes of the meeting ending. “For the past several months we have done all we can to shore up our finances, cut costs and collect advance payments where we can, but this decision allows us to deal with larger issues we just can’t tackle outside of Chapter 9.”
When the district declared a fiscal emergency in November, the hospital’s Chief Finance Officer Mark Robinson told its board of directors that several factors have led the hospital to potentially file for bankruptcy, which include returning over $12 million to the state this fiscal year, the Anthem Blue Cross reimbursement dispute, and the delay of supplemental payments totaling $13 million to the hospital from the state.
Since then, the hospital and Anthem Blue Cross reached a new agreement, though the details were not disclosed.
According to the USCourts.gov website, “The purpose of chapter 9 is to provide a financially-distressed municipality protection from its creditors while it develops and negotiates a plan for adjusting its debts. Reorganization of the debts of a municipality is typically accomplished either by extending debt maturities, reducing the amount of principal or interest, or refinancing the debt by obtaining a new loan.”
Speaking via Zoom, Carol Fox, senior managing director at B. Riley Advisory Services, who has been advising the district since November, said the district has 21 days’ cash on hand, which fluctuates daily depending on intake and expenses.
“A good number for cash on hand is not in the 10s, it’s in the hundreds and it’s basically above 200 days of cash on hand,” she said. “That’s sufficient capital to not only meet an organization’s operating cash flow, but also to meet its capital needs.”
She outlined some of the maneuvers the district has taken to push the date of bankruptcy beyond last December, including a plan that former CEO Steve Hannah told BenitoLink included building a $250 million hospital while the present hospital underwent seismic retrofitting. Hannah was terminated four months after talking to BenitoLink.
The plans for the second hospital “cost in the hundreds of millions of dollars and they take a lot of time, and those are two things that we don’t have either of right now,” Fox said. “We don’t have hundreds of millions of dollars right now, and we don’t have time. That doesn’t mean it’s not a good idea down the road. What it means is it’s not a good idea now.”
She said the hospital cannot sit back and hope things get better because it does not have supplemental cash coming in.
“Supplemental cash is very necessary to bridge the gap between the routine patient cash receipts and the routine operating expenses,” she said.
Fox returned to the strategy, which has so far not panned out, of partnering with a larger hospital. She added the proviso that the stumbling block to a strategic partnership is that “the district has got some financial problems that the strategic partner would like to see addressed. That’s something we need to do.”
Board Chair Jerry Hernandez asked those in attendance to “remain calm and treat others with respect.”
However, after a few minutes the attendees in the hall defied the order to stay outside and entered quietly, sitting together to applaud those who spoke of their concerns over the pending bankruptcy. Hernandez repeatedly warned them to stop applauding or she would clear the room.
Addressing the board, one nurse said that another nurse had been taken away and escorted to human resources. Frankie Gallagher, Hazel Hawkins director of marketing/public relations, told BenitoLink the nurses’ claim was incorrect.
“The interaction is misinterpreted and taken out of context,” Gallagher said. “The HR director asked an employee to step into the hallway for a quick conversation. That was it.”
Dr. Nick Gabriel, a general surgeon at the hospital, said because he was “invested in this community” he announced that he had formed the coalition San Benito Healthcare Alliance, composed of himself and other area doctors who work at the hospital.
“We were formed to ensure the sustainability of primary, specialty and acute care services to the residents of San Benito County,” he told the board. “We are a not-for-profit organization without any interest at all in buying or owning the hospital in order to resolve it. In fact, as a healthcare alliance, we are poised to align with all healthcare workers, including, but not limited to physicians and nurses.”
He added the alliance has and will continue to reach out to county leaders and healthcare workers at St. Louise Regional Hospital in Gilroy.
Diane Beck, a registered nurse who has worked at the hospital for 12 years, told Benitolink: “The message we’re trying to get to the public is we definitely need our hospital to stay open and we need the community to stand with the nurses in order for us to get that implemented. I know they said they were going to remain open but we have lost all faith in the administration.”
San Benito Health Care District Director Josie Sanchez asked if there is no partnership or sale to another hospital would that mean “all contracts would be terminated?”
“Yes,” replied Mary Casillas, interim Hazel Hawkins CEO.
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