California announces loan awards for distressed hospitals

A bankrupt California hospital will receive a $10 million loan from a new state program to aid troubled providers.

The loan would throw a lifeline to the San Benito Health Care District, which operates Hazel Hawkins Memorial Hospital in Hollister. San Benito filed for Chapter 9 bankruptcy in May as it faced waning cash and unfunded pension obligations. 

Hazel Hawkins is one of 17 facilities to receive a loan through the program, a state press release outlined on Thursday. The community hospitals will be awarded a combined total of close to $300 million of assistance. 

Hazel Hawkins Memorial Hospital, currently in Chapter 9 bankruptcy, is one of 17 facilities to receive a loan through a new state program for distressed hospitals.

San Benito Health Care District

“Across the country, community hospitals are experiencing financial stress like never before. These hospitals are often the only acute health care access point in their area,” Gov. Gavin Newsom said in the statement. “In partnership with the legislature, we are working to keep the doors open so Californians can access critical care close to home.”

Like hundreds of other ailing rural hospitals, Hazel Hawkins caters to poorer patients lacking private insurance, or any insurance at all. Meanwhile, US hospitals still contend with higher labor costs and staffing shortages exacerbated by the pandemic. Hazel Hawkins said it would exhaust its cash next year and needed to restructure its outstanding obligations as it sought a buyer or partner, according to court papers. 

The hospital continues to operate and this month announced that it had received a letter of intent to explore a strategic partnership from an operator of six other hospitals. 

California approved the interest-free loan program in May to help distressed hospitals in the wake of the closing of Madera Hospital in the Central Valley, the only provider for a region of 160,000 residents. Hazel Hawkins, which employed about 700 at the time of the filing, also operates clinics and nursing homes as well as the only emergency room in the county of approximately 64,000, according to court filings. 

California’s 76 healthcare districts, run by elected boards and with the ability to issue debt, are designed to support troubled hospitals in under-served, mostly rural areas. Financial problems at California healthcare facilities are widespread, with an April report from consultant Kaufman Hall designating about 20% of the state’s hospitals at risk of closing. 

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