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At a special meeting on January 9, The San Benito Health Care District board of directors approved a letter of intent from the company after an official from the Michigan-based nonprofit Insight Foundation made a presentation to the board. The vote passed 4-0; director Bill Johnson was absent.
This is the second letter of intent approved by the district to acquire Hazel Hawkins Memorial Hospital. The board approved a letter of intent from American Advanced Management in August, which remains under consideration. San Benito County has also submitted a letter of intent to form a joint powers authority but has not submitted a proposal outlining the terms.
Insight is seeking to acquire all of the hospital’s assets, including real estate, buildings, working capital and equipment, said Richard Peil of B. Riley Financial Inc, the district’s financial adviser. He said the estimated purchase price is estimated to be between $59.5 million and $65 million, depending on the final valuation and appraisal of the assets in the area.
“As with any bankruptcy sale, this will be a pure asset sale, free of any liens and liabilities,” he said.
According to its website, Insight’s primary focus in growing its institution is neuroscience, medicine, and ethics.
In his presentation to the board of directors, Insight’s Chief Strategy Officer Atif Bawahab provided a brief background on the company, which was founded by Dr. Jawad Shah. Insight acquired the former General Motors headquarters in Flint, Mich., in 2008 and transformed it into an interdisciplinary health care center that offers neurosurgery, pain management, orthopedics and chiropractic, among other services, Bawahab said.
In 2019, it acquired Insight Surgical Hospital, which offers spinal neurosurgery, neck and back surgery, neurovascular oncology, vascular access surgery, orthopedic surgery and surgical oncology.
It acquired Insight Chicago in 2021, which provides services in the areas of allergy/immunology, behavioral health and addiction medicine, cardiology, oncology, orthopedic surgery and gastroenterology. Recently acquired, Insight Dearborn provides services in orthopedics and sports medicine, neurosurgery, neurology and behavioral health.
Bawahab told the board Insight’s goal “is to be complementary to Hazel Hawkins.” He said that while his company hoped to continue Hazel Hawkins as a community hospital, “it’s clear that’s not going well.”
“A lot of health care services are also leaving the area,” he said. “It’s affected by high Medicare payment rates, and unfortunately a lot of the medical staff here are not internalized and employed by the hospitals themselves.”
Bawahab said Insight believes it can help update Hazel Hawkins’ emergency room, expand services to develop a larger, more robust health care network, offset high Medicaid percentages and create a more integrated physician network.
“We’re not trying to reinvent the wheel, but we’re trying to provide high-end professional services to this community,” he said.
Pell said current hospital bonds, revenue bonds and general obligation bonds would remain with the district as part of the proposed deal.
San Benito County Auditor-Comptroller Joe Paul Gonzalez previously told BenitoLink that “the revenue bonds are repaid out of the hospital districts’ respective obligation revenue streams.”
Peil said he expects the hospital’s revenue bonds will be $8.3 million and that the hospital will have enough proceeds to pay them back. However, the $23 million in general obligation bonds are expected to remain in place and be paid off through property taxes received by the district.
Resident Robert Bernosky said at the meeting it would be “unacceptable” for taxpayers to be left with a general obligation bond if the area was sold.
“If we didn’t own the hospital, we wouldn’t be able to pay off the bond,” Bernoski said.
He wanted clarification from the board about where the revenue funds were going, but his request went unanswered.
Director Rick Shelton asked Pell how to handle a $10 million loan from the state of California when selling the hospital.
“There was discussion that the $10 million loan would be a grant,” Shelton said. “We have $10 million [the purchase price]; Apparently, that’s $10 million less than net worth. Could we include any of these options as part of the final negotiations? What happens if the loan becomes a grant? Can it be added to the system? “
Pell said the loan had not been discussed but it was “an issue that will come up after due diligence.”
A letter of intent is a commitment by both parties to work together to enter into an exclusive contract with the school district. If a deal is reached, the board would need to vote to approve the agreement before submitting it to voters for final approval later this year.
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