San Benito County has one hospital and its main building is over 50 years old. Hazel Hawkins Memorial Hospital CEO Steven Hannah is searching for ways to build a new one but funding is elusive.
Operating at a breakeven or loss for decades, Hazel Hawkins has to make plans for how to survive and continue to serve county residents. Hannah said it is vital that it develop a plan for future growth. Earthquake safety is another important concern.
Structurally, Hazel Hawkins has expanded almost as much as it can at its present location. The only way it can continue to grow is to build on top of existing buildings or buy land elsewhere and establish a new facility or campus at a cost of $250 million, according to Hannah.
He said that since coming to the hospital in November 2020 he has been working with staff and the board to come up with a new master plan. The first step, he said, was to search for all possible data going back to when the hospital was built. A primary driving force for moving forward is that the main building is not seismically compliant. According to Hannah a hospital today would have to be built to survive an earthquake of 8.0 magnitude on the Richter scale. Under current state law it needs it to be compliant by 2030.
Surprisingly, it took until 2010 for Hazel Hawkins Memorial Hospital to begin writing a master plan to provide a roadmap. The first step was to conduct a medical needs assessment. “We inventoried all the medical providers in the community, the demographics and growth trends,” Hannah said.
The study resulted in three possible options to “right-size the organization for the community.” The first would be to rehabilitate or tear down and then rebuild the 1962-era main building. The second choice would be to expand the 11-year-old Women’s Center building. The third option would be to buy land and build a new campus from the ground up. It would then serve as a new inpatient hospital while the original site would be brought up to seismic standards to become an outpatient facility.
The first two options, Hannah said, are unrealistic because the present site would be under construction for at least five years, all but shutting down most services.
He said a decision needs to be made by 2025 whether or not to move forward with another campus. With an estimated price tag of $250 million, he said the funding mechanism is still unknown, and believes that because of the present economic environment a bond would not be possible. Other funding choices include philanthropy, state funding, which is highly unlikely, or aligning with another healthcare organization. He said no one likes to think about the third option.
“Our mindset is to remain independent,” Hannah said. “But what if we can’t? This would mean who’s going to put $200 million into this community? It would be a lease or sale in order for some entity to say they’re going to invest in our organization. Probably not Kaiser [which already serves up to 7,000 county residents] but there may be a system out there that sees this area as a benefit for them. They aren’t going to invest in a community unless they see there’s a need to. We’re a special healthcare district, a public entity. None of that would be possible unless the public supports it.”
Financial outlook
For the past 20 years the hospital has operated at a break-even or at a loss, Hannah said, adding the hospital has “survived, but we haven’t thrived.” He said to thrive there must be a profit margin, the percentage of profit versus loss. “Our balance sheet is weak compared to what it needs to be for a stand-alone, thriving hospital,” Hannah said. “Our latest earnings before interest depreciation and amortization (EBIDA) was just under 6%. The operating margin was about 3%. Those numbers need to be doubled or even tripled.”
He said it has yet to be determined if those higher numbers can be achieved. “We have to capture more market share, recruit more doctors, who are hard to find because everybody needs doctors,” he said.
Determining services
Hannah said the census-based study showed that the population is aging at both ends of the spectrum: those 65 and up, and 30-year-olds. “On the aging side we need those surgical services,” he said, adding that there are 90 fewer physicians than needed for the current population.
The hospital currently has more than 3,400 providers in its Electronic Health Record Medical Dictionary. “This means more than 3,400 physicians and advanced practice providers refer patients to our care or we have cared for the patients and discharged them to the care of their primary care physician,” said Sherrie Bakker, director of patient and community engagement.
Bakker said the hospital has 120 credentialed medical staff.
“We know what we have to do, but we don’t know how to get there yet, from a funding perspective,” Hannah said, adding that there remains another year or two of work to be done, primarily because of the unknown cost.
One cost that is not included in the $250 million is for more nursing homes. Hannah said nursing homes would add another $100 million or more. He said there is not enough margin at this point to fund nursing homes primarily because those patients use Medicare. “If there was a way to make it work financially, it would have been done by now,” he said. “It would take a publicly supported bond or grants might come along as our population ages.”
Moving forward
Hannah said his main criticism of the district is that it did not buy more land for future expansion. “It’s going to be expensive in today’s dollars to acquire land for a secondary campus,” he said.
Meanwhile, he said there is a need to make a series of moves he called the “enabling process,” to coordinate opening a new campus and upgrading the old campus. The first was to buy the Oasis Fitness building at 190 Maple St. near the Hollister Post Office for $1.9 million in cash. He estimates it will be open in a year. “We’re taking out our outpatient physical rehab service plus some imaging and relocating it to Maple Street. We’ll tear the building down and build more parking to decompress this campus over the next few years.”
The second enabling move is “bed optimization,” he said. As a critical access facility, it is limited to 25 inpatient beds. Because the hospital is still under the COVID space waiver it would have already lost its critical access designation because it often exceeds 25 inpatients. “By fall or winter we will no longer be eligible for critical care access. There’s a way to get the beds that were taken off the license back into being licensed.”
The third move would be to transform the vacant third floor of the Women’s Center. He explained only two floors were financed but the district added funding for the third floor for future extension. “Eleven years later, we believe the best use for it is as clinic space with 30 exam rooms. Then another small building would be demolished to accommodate another 30 parking spaces to serve the clinics.”