No bailout yet for Hazel Hawkins Hospital

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.