Full Notification

San Benito County: Prompted by concerns for the future of healthcare in its community, leaders from the County of San Benito (COSB) and Salinas Valley Health have submitted a joint proposal to the San Benito Healthcare District (SBHD) for the future governance, operation, and financing of Hazel Hawkins Memorial Hospital, its skilled nursing facilities, and physician clinics.  The proposal was delivered to the SBHD board in the form of a non-binding Letter of Intent (LOI).

The SBHD has been soliciting proposals from buyers or future partners since early this year after declaring a fiscal state of emergency. It has indicated that they are seeking a buyer or partner that can assure that District residents have access to healthcare services in a financially viable way for generations to come.

Specifically, the non-binding LOI submitted today proposes that the SBHD and the COSB (1) form a Joint Powers Authority (“JPA”) to capitalize, govern, and oversee the management of Hazel Hawkins Memorial Hospital (HHMH) and (2) the new JPA to enter into a management agreement with SALINAS VALLEY HEALTH to operate HHMH, the District’s rural clinics (and future physician services), the skilled nursing facilities, and other services as developed by the JPA.  The City of Hollister and the City of San Juan would be offered the opportunity to participate in the JPA.

JPAs are authorized under California Government Code § 6500, et seq., and provide a mechanism for one or more public agencies to jointly exercise powers in common to the members. In the formation of the JPA, a specific purpose is established, which in this case would be focused on the operation and financing of healthcare services. JPA’s have the authority to issue bonds or to enter into contracts with outside agencies, such as SALINAS VALLEY HEALTH, to ensure fulfillment of stated goals.

The proposed governance of the JPA would be structured to include representation by each member of the JPA. Additionally, the JPA’s governing board would include 3-5 additional members, such as healthcare experts, community members with needed skills, and physicians.

COSB and SALINAS VALLEY HEALTH also proposed that JPA enter into a Management Agreement with SALINAS VALLEY HEALTH through which:

In order to satisfy the SBHD’s goals of increasing capital availability to the hospital, under the proposal, COSB (and the City of Hollister and/or the City of San Juan Bautista if they chose) would adopt new commercial and residential development impact fees and assessments, offering a new revenue stream for the hospital. Target capitalization levels would be based on yet-to-be-completed work with the SBHD, which could be completed prior to the execution of any definitive agreements.  COSB consultants have also confirmed that the financial benefits of developing new programs and services could add needed capital to the organization.

“The assessment performed by the nationally recognized consulting firm of ECG demonstrated that our County would have increasing demands for health care services.  To meet these needs, it is critical that the hospital remain viable and under local control” said Ray Espinosa, San Benito County Administrator. “The County is proposing that we continue to develop more detailed business plans. We believe that it is possible to maintain the hospital through the proposal outlined in the LOI, and that this is what our community deserves,” said Espinosa.

“Salinas Valley Health is dedicated to our communities and recognizes that we are a part of the larger healthcare ecosystem of Monterey, Santa Cruz, and San Benito Counties,” said Pete Delgado, President/Chief Executive Officer of Salinas Valley Health. “We are happy to work with the County of San Benito and Hazel Hawkins Memorial Hospital in identifying potential opportunities to ensure Hazel Hawkins can continue providing life-saving care to the community,” said Delgado.  

“The County is hopeful that the hospital will receive this proposal favorably and will continue to work with the County and Salinas Valley Health,” said Espinosa.  “We believe that by working together, we can solve the hospital’s difficulties without losing control or selling the facilities to a for-profit company,” said Espinosa.

The submission of the LOI by COSB and SALINAS VALLEY HEALTH does not preclude or discourage the submission of proposals from other organizations.  To date, the SBHD has received one other LOI from a prospective buyer.  This LOI was submitted by a small, for-profit company headquartered in the Central Valley.

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The County Government of San Benito County (pop.62,808) serves a diverse rural area with two incorporated cities and three unincorporated towns. The County encompasses almost 1,400 square miles and was formed from parts of Monterey County in 1874.