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No bailout yet for Hazel Hawkins Hospital

Salinas Valley Memorial Healthcare System conducting forensic accounting study to determine if partnership is possible.
Dr. Ariel Hurtado is the only doctor on the hospital board and said Underwood wants a deal with another hospital just to keep his job. Photo by John Chadwell.

This is the first in a series on Hazel Hawkins Hospital.

Ever since Hazel Hawkins Memorial Hospital Chief Executive Officer Ken Underwood disclosed that the community-owned hospital and the San Benito Health Care District were in deep financial trouble back in April, he has led an effort to save both by finding a healthcare partner. As of the end of August, that has not happened.

During an April 18 town hall meeting, Underwood and Chief Financial Officer Mark Robinson outlined how hospital expenses were far exceeding revenues. Robinson said at the time that Medicare pays less each year, amounting to $5 million annually. He said the decline in patients represented a $2 million loss in revenue.

Underwood said the hospital had requested proposals from 10 healthcare organizations (Stanford Health Care, Salinas Valley Memorial 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 Peninsula) in an attempt to form a partnership to save it. He said at that time none had responded positively.

After being turned down by Stanford Health Care, Underwood said he was still holding out hope that Salinas Valley Memorial Healthcare System (SVMHS) would take the offer seriously.

On May 3, SVMHS issued a press release stating that it was exploring opportunities to partner with Hazel Hawkins Hospital.

“This is a time of collaboration and partnerships in health care and Salinas Valley Memorial Healthcare System is exploring all opportunities to better serve the health and wellness needs of families living in our region,” SVMHS President and CEO Pete Delgado said in the news release. “We are in the early phase of discussing how we might be able to collaborate with Hazel Hawkins Memorial Hospital and look forward to those conversations in the weeks and months to come.”

The release went on to say over the next few months that SVMHS leadership and publicly elected board of directors would review strategies, processes and new services that have the potential to benefit healthcare for people in the Central Coast region, and would determine if there is a path forward for the two organizations to collaborate or affiliate.

SMHS has yet to finalize an agreement for a 90-day window of investigation (the 90-day timeframe has already expired).

SVMHS spokeswoman Karina Rusk explained to BenitoLink on Aug. 21 where the investigation, which she described as a forensic accounting process, currently stands. She said the SVMHS board is still waiting for the consultants’ report, before determining how it will proceed.

“We wanted an independent third party to look under the hood,” Rusk said. “We are supporting Hazel Hawkins in a couple of ways and when we get the report back that’s when our administration will comb over the information.”

Rusk said the consultants are not only looking at Hazel Hawkins’ finances, but how it might complement Salinas Valley Memorial Healthcare Systems’ mission of providing health and wellness for the community.

“Yes, the bookkeepers are doing a forensic scrub, which is a very important part of any decision, but it’s much more than that,” Rusk said. “We’ve already extended some ways of helping Hazel Hawkins. We’ve extended our purchasing clout to them for supplies to reduce those costs to allow for them to piggyback on our agreement with vendors. We also extended the benefits of our healthcare plan to Hazel Hawkins employees.”

She explained Hazel Hawkins’ nurses and employees qualify to use Salinas’ tiered healthcare system. She wasn’t positive how this affected the current options, but was sure under SVMHS they would be able to go to more hospitals to receive care than they previously could. She said it was too soon in the vetting process to state definitively how the relationship would look.

“It will be the board’s decision after studying the report to determine the best plan moving forward that works for the community, for Hazel Hawkins, and for us,” she said.

Rusk wouldn’t speculate what was holding up delivery of the report. Meanwhile, she said both hospitals will continue to update the community as information becomes available.

“I don’t think there has been anything lately because nothing fundamentally has changed from when we first started discussions,” she said.

Underwood said the financial picture at Hazel Hawkins has somewhat improved, with fiscal 2018 finances ending June 30 with a surplus.

“However, this surplus included prior year payments that totaled $6 million,” he said. “While we ended with a surplus, it is still in the district’s best interest to collaborate with another entity to be able to enhance healthcare services and bring more specialists to the community.”

Ariel Hurtado, the sole physician on Hazel Hawkins’ board of directors and the sole opponent of partnering with another hospital, said the board has been kept completely in the dark during the entire time regarding negotiations and the forensic analysis.

Hurtado has been with the hospital for five years and a board member for the last two. He said he is not aware of how the data will be shared with the board or the hospital administration, if at all.

“It was presented to us as an exclusive, nondisclosure negotiating contract,” he said. “They said they would come in, do the study to see if it’s feasible for [Salinas] to partner up with you, or whatever it is they want to do. The administration was trying to say [Salinas] were doing us a favor by going through our stuff. I don’t see it as doing us a favor.”

Hurtado explained a forensic audit is different than a study that gives recommendations on changes in business practices. He said the study only benefits Salinas and they will use it as the basis of any proposal they come up with and it prevents Hazel Hawkins from negotiating with any other entity while the forensic analysis is being conducted for approximately three months.

“I was the only board member who voted against it because it ruins negotiation power if you can’t talk to anyone else,” he said. “They’ve made zero effort to come out and contact the board.”

Hurtado underlined the importance of a possible merger of two district hospitals. He said hundreds of millions of dollars are at stake and the future development of not only Hazel Hawkins Hospital but Hollister itself is in jeopardy. He said other options need to be explored because the hospital is not in any immediate financial danger.

“If Salinas wants a take-it-or-leave it, used car salesman type of offer, that’s not what we should do,” he said. “I just don’t get much support for people wanting to go to Salinas for their healthcare. I’ve been told people avoid Salinas because of its high crime rate. Most go toward San Jose. Only about five percent of those who go to Salinas Valley Hospital come from Hollister. You can’t force people to go someplace they don’t want to go.”

Regarding who has the final say about a possible merger, Hurtado said the voters should have it. He said people should use the November elections as a referendum for the hospital. He said he’s hoping one of the local candidates will take up the cause.

“More importantly,” he said, “people need to contact their district supervisor for the hospital and let them know how they feel about what they want for the hospital.”

In addition to contacting him, Dr. Hurtado said the public can contact the other Hazel Hawkins board members: Mary McCullough, Josie Sanchez, Jeri Hernandez and Angie De La Cruz.



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John Chadwell's picture
John Chadwell (John Chadwell)

John Chadwell is an investigative reporter for BenitoLink. He has many years experience as a freelance photojournalist, copywriter, ghostwriter, scriptwriter and novelist. He is a former U.S. Navy Combat Photojournalist and is an award-winning writer who has worked for magazine, newspapers, radio and television. He has a BA in Journalism and Mass Communications from Chapman University and underwent graduate studies at USC Cinema School. John has worked as a script doctor and his own script, God's Club, was released as a motion picture in 2016. He has also written eight novels, ranging from science fiction to true crime that are sold on Amazon. To contact John Chadwell, send an email to:


Submitted by (Martin M Bress MD) on

If it's good for Salinas it won't be good for Hollister. The hospital's situation is due to poor management and community involvement. Dr Hurtado is the only competent member of the hospital board. The hospital is paying the nursing union members the 3rd highest rate in the state for district hospitals. They have alienated the local physicians by their disrespectful approach. The current board needs to be replaced. They lack the insight and experience to ask the right questions and demand answers. The hospital is an essential community service and needs to be locally managed by competent people. I served on the hospital board for 8 years in the past and we were able to meet many challenges including the upgrading of the physical plant financed by voter approved bonds.

Submitted by (Frank Barragan) on

I’m in full agreement with Dr. Hurtado, that selling our hospital will not benefit our community. I also agree with the premise that Mr. Underwood (CEO) is under tremendous pressure to sell, because hospital is underperforming to serve our community. For example, the national average for a hospital profitability is 10-17%, while Hazel Hawkins is only at 3.3%. Per their 2017 financials. Selling or partnering will not result in better services or lower cost, in fact we risk the opposite. Based on hospital data a significant percentage of our community are forced to seek health care services north of San Benito County. A mere change in management can steer our hospital in the right direction to serve our community. When I’m elected to the Hospital board I will lead the charge for change. I would like to see that all insurances are accepted at the hospital providing full access to local service at affordable cost to everyone in our community, especially the elderly. As stated by Dr. Bress “if its good for Salinas it won’t be good for Hollister.” Let’s keep local control and work together for change.

Average National Profitability of Hospitals:

San Benito Health Care District 2017 Financials:

As a consumer of healthcare and community promoter I am very concerned.  The San Benito Healthcare District (Hazel Hawkins Hospital) provides many vital services to the community and although the two city councils and the county board of supervisors have no direct management authority over the district, it gets a piece of our property taxes and has also received significant bond funding and donations from county taxpayers.  It does not appear that the cities or county administrations are paying attention and have not even bothered to lay out some principles before considering the possible dilution of local control.   In my case we pay $128 a year in hospital bond funding and something over 2% of every property tax dollar in the county goes to the district.

My other concern is that according to an administration presentation, Salinas Valley Memorial Hospital  - whose clientele profile does not look anything like ours - was the only potential partner to show any interest.  This would indicate that we are negotiating from an extraordinarily weak position.  If this cannot be consummated to our satisfaction it does not appear that we have another plan.  Are we backing ourselves into a corner?

Without some competition we will have no offer for comparison.  I am not paranoid about partnering - healthcare is consolidating - but it has to be a deal that strengthens the district and it's mission to provide healthcare to the county residents, not just the only deal we could find.  Under those conditions you know we are not going to have any leverage.

Marty Richman


  My name is Ross Blasingame and I am a candidate for District 2 Hospital Board.  I am not in favor of a partnership with Salinas Valley Memorial Hospital.  What our Hospital needs is to recruit new Doctors that will bring with them new services to our community which in turn will bring income.  We need to contact Health Care providers and procure contracts with them allowing us to provide the health care services needed which in turn will generate income.  Also we spent a fortune building new structures at our Hospital and then continued to offer the same services as before.  We also need to recruit and retain the best Health Care staff possible.  Increase the quality of care, provide new services, listen to the heartbeat of our community and increase the profitability of our Hospital.

Thank you

Ross Blasingame RN

From the Gilroy Dispatch dated August 31, 2018 -

"The owners of Saint Louise Regional Hospital today filed for bankruptcy protection under Chapter 11 (bankruptcy) to “reorganize and facilitate an orderly and efficient sale process.”

Santa Clara County last month submitted an offer to buy two of the six Verity hospitals, Saint Louise Regional Hospital in Gilroy and O’Connor Hospital in San Jose, for an undisclosed price."

Will Hazel Hawkins be competing with a county hospital run by Santa Clara County, and if so what will be the impact?

A whole lot of significant things have gone on recently - the nurses went on strike and also negotiated to take their healthcare choices elsewhere.  During that strike they used the common tactic of claiming that HHH was unsafe - that surely did not help the hospital.

The hospital tried to end its relationship with the San Benito Medical Association and in retaliation the physicians referred more patients out of the county.

Now, everyone will be mad at me for saying this, but someone has to speak up - THERE IS MORE THAN ENOUGH BLAME TO GO AROUND.  Rather than everyone getting into the "it's not my fault" mode, how about listening to others and figuring out a strategy that has some options other than bankruptcy or the possibility of one low-ball offer from Salinas Valley Memorial Hospital.

I have reviewed the 2016-2017 financials for HHH, more than 75% of the patient days were Medi-cal Traditional, that is what was reported.  That means most of those with options are going elsewhere.  If that number is accurate we will not survive and there will be drastic changes and not for the better.

Marty Richman



Submitted by (Barbara T Steele) on

I heard Kaiser wanted to come to Hollister, a long time ago?  What happened?  I have lots of friends that live in Hollister and have Kaiser Insurance.  Since we have over 7,000 people already with Kaiser that live in Hollister it would help our Hazel Hawkins financially because we would get 7,000 more patients?  Does somebody know what happened to that deal?

Anyone who has spent any significant amount of time working at HHMC can see that the majority of the problems stem from incompetent and inefficient management. The administration signs below market value contracts with insurance companies and wonders why they cant break even. The administration alienates well respected and established physicians and then wonders why the patients don't come to the hospital. The administration uses outdated billing and coding mechanisms and doesnt have clue as to what in the hospital is profitable and unprofitable. The administration mismanages its workforce and wonders why its overtime expenses are outrageous. For the better part of 2 decades, the administration has made little effort into recruiting new providers who can expand the scope of practice at the hospital or at improving the public's perception of the hospital. They are simply a bunch of yes men patting each other on the back, trying to cash in on a bailout while letting the system crash and burn. 

A simple change of management is all that is needed to turn around the hospital.

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