An appellate court has upheld a bankruptcy court’s decision dismissing Hazel Hawkins Memorial Hospital’s Chapter 9 bankruptcy filing, affirming that the San Benito Health Care District, which oversees the hospital, no longer meets the definition of insolvency.
“While we respectfully disagree with the ruling, we remain steadfastly focused on our plans to secure the hospital’s future,” Hazel Hawkins said in a March 25 statement. “Both the appeals court and bankruptcy court decisions observed that the district was financially distressed before bankruptcy and point to the success of the district’s turnaround efforts as the reason bankruptcy was no longer eligible.”
The decision comes one year after a judge ruled the hospital ineligible for Chapter 9 bankruptcy. Hollister, Calif.-based Hazel Hawkins appealed the ruling and sought to reenter Chapter 9 bankruptcy, arguing that the judge improperly tossed its case based on an “unduly narrow” view of insolvency tests while excluding its pension obligations from the analysis.
The district filed for Chapter 9 protection following a fiscal emergency declaration in November 2022. At the time, the public hospital warned it was days away from running out of cash and at risk of shutting down operations entirely.
While hospital leadership expressed disappointment in the ruling, they emphasized that the Chapter 9 process has already achieved its most critical objectives, including maintaining full operations, retaining staff, stabilizing its cash position, and extending the time needed to identify a long-term partner.
“We do not expect today’s ruling to impact the ongoing lease and purchase agreement negotiations with Insight [Health System],” according to a hospital statement. “Our focus remains on ensuring the long-term stability of Hazel Hawkins Memorial Hospital and maintaining access to high-quality, local healthcare for San Benito County residents.”
