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For months, the San Benito County Board of Supervisors and the San Benito Healthcare District have clashed over the future of Hazel Hawkins Memorial Hospital. While the supervisors push to keep the county’s only hospital under local control, the hospital’s board is moving to lease, and potentially sell it to Michigan-based Insight Healthcare Group.
At the heart of this dispute is the question of whether San Benito County’s voters would need to pass a bond to save the hospital. Hazel Hawkins filed for bankruptcy in May 2023, but in June 2024 a federal judge denied its attempt to receive bankruptcy protections.
Health care district spokesperson Marcus Young told BenitoLink that public funding for hospital improvements, which both sides want, would require that voters approve at least one bond. “We would need a bond measure just for operating the hospital as it is,” he said. And, he said, there is no way voters will approve even one bond.
The supervisors and their consultants argue that no bond is needed to pay doctors’ salaries, upgrade medical equipment and maintain regular services.
To make things more complicated, both sides say they can point to ballot measures that support their claims. Last year, voters approved Measure X, which allowed the health care district to move forward with leasing the hospital. But at the same time, they approved Measure B, an advisory vote placed on the ballot by the Board of Supervisors asking voters if they supported keeping the hospital local by creating a new entity to operate it.
Believing that county residents are on their side, the supervisors have created an alternative to leasing the hospital’s assets to Insight.
The strategy
Since the hospital’s bankruptcy filing, the supervisors have said that the way for the hospital to remain under local control is through the creation of a joint powers agreement (JPA).
Angela Curro, one of the supervisors designated to negotiate with the hospital board, told BenitoLink the JPA’s goal would be to manage the hospital’s “day-to-day operation.” The proposed JPA would include San Benito County and the health care district, and the board hopes that the cities of Hollister and San Juan Bautista might also join the effort.
“We have successful JPAs in the county,” Curro said. “You need collaboration to define powers and write an agreement with what it would look like.” She pointed to the San Benito Council of Governments, which deals with transportation issues, as an example.
To finance the JPA, the supervisors plan to invest $5 million and, if needed, request $7 million to $12 million in a capital line of credit—a short-term loan to pay daily expenses. In the meantime, with that money, the JPA will invest in forming a medical group, led by 25 to 30 physicians, whose main goal would be to bring more doctors, provide more services and thus produce more revenue.
According to a presentation by consultants Cecilia Montalvo and ECG Management, 57% of San Benito County residents receive treatment in other counties.
“If we provided those services, instead of referring them, we would increase revenue,” Curro said.
For this to work, Montalvo told BenitoLink, it is crucial that the medical group be made up of physicians committed to San Benito County who “can attract and recruit young doctors who want to move.”
“The best way to bring doctors is through other doctors,” she said.
At the same time, Montalvo said, the JPA would seek partnerships with regional academic centers and health care systems to support specialty care and technology. This strategy, according to the presentation shown to the supervisors, will provide the hospital with $111 million in cash over the next 10 years which can be invested in more services to further boost the hospital’s revenue.
“This business plan can be implemented without a bond,” Montalvo told BenitoLink.
But, according to Hazel Hawkins’ board, the hospital doesn’t even have the money to create such a plan.
“There is no real money to start a JPA,” said Young, the health care district spokesperson. “You need money to attract doctors. They don’t come with a truck with all their equipment. We first need capital to invest in equipment.”
Young also said that in 2021, the hospital hired consultants to study how Hazel Hawkins could be sustainable, and the JPA strategy was dismissed as unworkable.
Bond problem
In summer 2024, the health care district conducted a poll of around 1,700 residents across all age groups to learn their thoughts regarding the hospital. The pollsters asked respondents to vote yes or no on the following statement: “The San Benito County Board of Supervisors sued to take this measure (Measure X) off the ballot and want the county to take over the hospital. Their proposal would require increasing taxes to keep the hospital open and running.”
Young told BenitoLink that 67% of those polled rejected the question. The hospital board took this as a signal that voters would not approve a bond to fund Hazel Hawkins.
Montalvo criticized the poll’s wording and said that it induced an answer. “Let’s look at the election results. Over 70% of the county supports the JPA,” she said, referring to Measure B.
And while she said a bond would not be necessary, she says a JPA is capable of submitting one in the future if it requires it.
Past and future negotiations
Both sides of the hospital dispute draw lessons from a similar situation in Watsonville, where the local hospital declared bankruptcy in 2021. After a campaign that raised more than $60 million, Santa Cruz County voters approved keeping it under public control by creating a health care district that today owns and operates the hospital.
Last year, the district controlling Watsonville Community Hospital issued a bond measure to buy the property on which the hospital sits and to finance its operations. Although Santa Cruz County voters approved the initiative, to Young, this is proof that a “bond is inevitable” in San Benito County.
Young points to the fact that in November, voters here rejected two ballot measures to help finance the construction of a new high school. “Nobody wants to vote for anything related to a bond in the county,” he said.
That is why, to the hospital’s board of directors, leasing and possibly selling all of its assets to Insight, which has promised to invest $50 million over the next decade to improve hospital operations and facilities, is the best choice.
In a Jan. 14 press release, the health care district said Insight was the organization “best equipped” to “pay fair market value for the district’s assets” and has demonstrated “the financial stability to both acquire the hospital and maintain current service levels.” It also said the Michigan-based company has a “proven ability to support rural healthcare institutions like Hazel Hawkins,” despite recent allegations that it engages in questionable practices and that it buys troubled hospitals with false promises.
To discuss what would happen to Hazel Hawkins, the health care district’s directors and the supervisors have each created committees. “The [hospital] board is happy to meet with supervisors and find common ground,” Young said.
“Our goal is sustainable health in the county,” said Curro. “Our biggest concern is not being able to achieve it if we sell and it doesn’t work out.”
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