San Benito Health Care District, the board overseeing Hollister, Calif.-based Hazel Hawkins Memorial Hospital, voted May 22 to file for Chapter 9 bankruptcy, which it said will pave the way to "tackle the systemic challenges it continues to face."
Hazel Hawkins will remain open and "fully committed to delivering quality patient care for the greater community while leadership looks for a strategic partner or buyer," according to a May 22 news release from the hospital.
Chapter 9 allows financially distressed cities, hospital districts and other public entities protection from its creditors while it develops and negotiates a plan for adjusting its debt, according to the federal courts website.
A November fiscal emergency declaration by the board authorized a Chapter 9 filing, but the hospital district decided to focus on short-term financial stabilization and creditor negotiations. In the last six months, it has recorded more than $11 million in cost savings, loans and prepayments to support the district through summer. A hospital spokesperson said in the release the filing will allow it to "deal with larger issues we just can't tackle outside of Chapter 9."
The hospital said the Chapter 9 process has four key components:
- It will help resolve contract issues relating to its self-insured status for healthcare. benefits for employees, which is costing the district more than $15 million annually and is "not in alignment with other similar sized institutions."
- It allows the hospital to remain fully operational during the process.
- It can accelerate the search for a partner or buyer.
- The court can appoint an ombudsman to ensure quality of care provided.