The factors that led a California hospital to a financial emergency

Hazel Hawkins Memorial Hospital CFO Mark Robinson told the hospital's board of directors several key factors led the Hollister, Calif.-based facility to a financial emergency, BenitoLink reported Nov. 14.

Mr. Robinson outlined the issues in a Nov. 4 meeting with the board, according to the report. At the meeting, the board granted a resolution providing administrators the authority to file a Chapter 9 bankruptcy petition — which would allow the district to restructure its finances — when they deem appropriate.

He said Medicare determined the hospital was overpaid for the fiscal year ending June 30, according to the report. 

"They initiated, within a two-week period, a takeback of $5.2 million," Mr. Robinson said, according to the report. "That money will be clawed back over the next year. Compounding that, we were also told going forward they were going to reduce our payments the same volume by $5.2 million. That’s a 20 percent reduction of reimbursement of in-patient care and a 13 percent reduction of reimbursement of outpatient care."

He said Hazel Hawkins cannot appeal the decision, but he is trying to negotiate a better payment schedule. 

Another key factor was a contract dispute with Anthem Blue Cross. The contract was terminated in September, but Mr. Robinson said the decision to go out of network began more than a year ago, according to the report. He said that in the 22 years he has been with Hazel Hawkins, the hospital has not received a fair reimbursement rate from the insurer. He alleged that in many cases Anthem has "just stopped paying us." He said there are more than $4 million in claims that are being withheld since Aug. 11 and Anthem allegedly has not explained why. 

The hospital also needed to pay back a $6.9 million loan in COVID-19 funding to the state, a $2.85 million loan to Blue Shield and a $1.2 million FICA tax withholding program that was paid off in December, according to the report. 

Mr. Robinson said the hospital also lost $9.6 million providing care for COVID-19 patients. He said the government still owes the hospital money, "but it could take years before they reconcile." 

Michael Sweet, the hospital's special counsel, said a bankruptcy filing is "not about closing the hospital," according to the report. 

"It's not about laying off the employees, it's not about terminating care; it's about finding a way to address the financial shortfalls that the district is experiencing and the cash flow issues that are on the near-term horizon," he said. 

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