This community opinion was contributed by Rob Bernosky. The opinions expressed do not necessarily represent BenitoLink or other affiliated contributors. Lea este artículo en español aquí.
It has been awhile since I wrote about what is going on with our Hazel Hawkins Hospital from the perspective of a resident. The San Benito Health Care District Board met on January 23, 2025 and reviewed the potential sale to Insight, and it is still bad for the residents. Readers always need to remember, this is not a simple real estate transaction. This is “mergers & acquisitions” where details matter and there are volumes and volumes of fine print that more gotchas than a time share purchase or car lease times 100. A summary of what’s below:
- Hazel Hawkins Hospital is doing great.
- The San Benito Health Care District has $29.8 million of cash right now, but after the transaction would have only $13.9 million.
- At its current rate, the hospital is earning $20.5 million per year, yet the District’s financial advisors think it is only worth $24.7 million. That’s like saying the house you rent for $2,500 a month is only worth $36,000.
- That is the deal of the century for Insight, especially when the $20.5 is lower than it should be because of the legal and financial advisory fees incurred by the hospital.
- The “rents” they are intend to collect in the first 5 years are about 3.6% of net revenues of the hospital. That’s a horribly low rate that Insight is willing to pay.
- The hospital board continues to rely on weasel words for important terms that should be set in stone before marketing the transaction as something that is good for us.
- The CEO continues to make decisions that lower the value of the hospital, like getting rid of the top surgeon that generated highly profitable procedures and increased the reputation of Hazel Hawkins.
Hazel Hawkins Hospital is doing great financially! Since the crisis was outed, roughly about the same time as the release of the October 2022 financials, the hospital has earned $33.6 million.
At its most recent meeting, the board heard from its financial advisors (who are incentivized to sell the hospital) that provided some color – but not the nuts and bolts – to the anticipated to transaction. In a nutshell, what they show is whereas the hospital has $29.8 million in cash today, immediately afterward, the District ends up with only $13.9 million afterward.
What is even more atrocious is that the financial advisors’ schedule reflects the cash from the sale of the assets is only $24.7 million. Yet in the last 12 months, the hospital has earned $20.5 million. What a great deal for Insight! They would make back their purchase price in just 15 months at that rate.
Keep in mind, the Hazel Hawkins Hospital financial results also include millions of dollars in legal and financial advisory fees that are not normally incurred and will cease post transaction, so the payback period is probably less than a year. This is an incredible deal for the buyer and makes us, the residents of Hollister suckers if it goes through. Even worse, if you listen to the presentation the financial advisors to the board make statements like “The $30 million we have in the bank remains
Our current plan to keep our hospital local or at least get a better deal or bring in a partner that is more successful, more stable, and more committed to San Benito County is to place any transaction on a ballot for the residents to approve. Readers may recall that Measure B passed overwhelmingly at 73.1% of 26,653 votes to keep Hazel Hawkins Hospital local (Measure X passed by just 728 out of 25,814 votes to sell to Insight).
If any individual or board member of the San Benito Health Care District can explain why we should sell Hazel Hawkins Hospital at such a ridiculously low price, clearly against the will of the people, then please do! Certain board members have always claimed that there is a state-mandated seismic upgrade that is going to sink the financials of Hazel Hawkins Hospital, so we have to sell it. But wait! Insight is only leasing the real estate…if the seismic upgrade has to be done (unlikely) and they cannot afford it, they simply bail in 5 years. They will have made back 500% of their investment and can afford to walk away. Without getting too wonky, this is what my employer at the time did during the S&L crisis at the beginning of my career. The government sold them sick savings & loan banks on the cheap. My employer ran them for awhile, and then when the government increased their costs (through regulations), Bill Simon & Sons wisely handed them back to the government by letting the institution to fail.
The nature of the transaction with Insight is it is “buying” the operations, but leasing the real estate for 5 years, allegedly at a fair market value (always a subjective endeavor). But because the current management team does not market services at the hospital and limits the number of procedures that can be done, revenues are suppressed. The market value is suppressed as a result. And one more thing: It looks like the “rent” payments will get deducted from any sale proceeds if Insight should choose to purchase the real estate at the end of 5 years. Great deal for them, not so much for us.
Why is this important? It’s the investment we have in a building that would cost $300 million to replace.
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The post COMMUNITY OPINION: Update on Hazel Hawkins Hospital sale – Still bad for us appeared first on BenitoLink.