Hospital's insurance contract in doubt over possible conflict of interest

Editor's note: This article was updated to include comments from Shelton Insurance owner Andrew Shelton.

The June 22 San Benito Health Care District Board of Directors meeting was a chaotic clash involving members of the public, board members and nurses from Hazel Hawkins Hospital. Nine community members, along with nurses and doctors, were often applauded by others in the room as they questioned the board's ability to govern and aired claims of conflict of interest and lack of transparency in the hiring of the hospital's interim CEO Mary Casillas and contractors.

The sharpest rhetoric occurred after Hazel Hawkins CFO Mark Robinson reported on the recommendation to renew a contract with Sun Life Stop-Loss Coverage for one year with an annual premium of $1.8 million. Robinson explained the hospital was self-insured and the policy would provide medical coverage for employees who become "acutely sick."

It was at that time that Director Richard Shelton recused himself and left the room because his company, Shelton Insurance, is the broker for the contract with Sun Life. What at first appeared to be a normal procedural move quickly became heated.

Resident Elia Salinas paraphrased a description from the California Code of Regulations, Title 2, subsection 87, on nepotism as, "any individual that sits on a board that gains financially is illegal."

"Any board member that so chooses to vote and approve that [another] board member financially gains is also subject to legal action," she claimed. "This is exactly what I just heard. Shelton has a conflict with this. How [is] he even allowed by the attorney [Heidi Quinn] to even submit a bid for this?"

After stating the board had to start over she said, "And mind you, go ahead and approve it, I dare you, because I will go after you."

Resident Rob Bernosky said he was shocked and urged two directors to tell Quinn to address "why it is legal for you guys to enter an agreement that directly benefits a director."

"If you don't do this, I will write a letter to the state attorney general and ask him to explain it," he said.

Registered Nurse Diane Beck, the California Nurses Association representative, agreed that Shelton being part of their insurance was a conflict of interest.

"We have to oppose that because he's on our board and he's going to benefit from that, and you guys want to take money away from our benefits," she said. "You all are benefiting from this staff that works every day taking care of our community and you're telling me right now that he's gonna benefit off of us. This is ridiculous."

Devon Pack, the board's newest director, asked Robinson how long Shelton's company had been involved with insuring the hospital.

"As long as I can remember," Robinson replied, adding that Shelton did not bring the contract with Sun Life to him personally, though the company, which is made up of himself and his son, did. He said the agreement was with Sun Life and not Shelton's company. He did not, however, address any commissions Shelton had received or would receive from the contract.

Shelton was elected to the board in November 2020. His term ends in 2024.

"I think this is a good deal," Robinson said. "This is what we do year in and year out and we do it to protect the district, but I will take your guidance wherever this goes."

Pack asked how many bids were submitted. Robinson said there were "five or six" that were too high, but added they all came through the same broker. Pack suggested having the board "look at the entirety of the bids."

"I think that would all be beneficial for the public transparency to see the full range of bids," Pack said.

Andrew Shelton told BenitoLink he bought the agency, which has had Hazel Hawkins as a customer for 15 years, from his father in January 2020. He added Rick does not deal with Hazel Hawkins nor does he benefit financially and that they had spoken to legal counsel on what Rick could and could not do before running for public office.

According to the Fair Political Practices Act, if a decision may have a financial impact or effect on any of the foregoing interests, an official is disqualified from governmental decision if the following two conditions are met:

* The financial impact or effect is foreseeable, and

* The financial impact or effect is significant enough to be considered material

"Generally, a financial impact or effect is presumed to be both foreseeable and material if the financial interest is 'explicitly' or directly involved in the decision," the FPPC states on its website. "A financial interest is explicitly involved in the decision whenever the interest is a named party in, or the subject of, a governmental decision before the official or the official's agency."

The meeting turned into a kerfuffle as board President Jeri Hernandez suggested deferring the resolution "for discussion at a later date." At this point Salinas interjected, saying Hernandez had to give "a certain date," and Bernosky said, "So you want a motion to table it, don't you."

Hernandez began to say there could be a special meeting and someone and called out, "You need a motion." Pack moved to table the resolution to the next regular meeting in July, but Robinson said the contract was due July 1.

Robinson said he would call the insurance company to see if he could get an extension but said it would be hard to do so, adding, "There's a chance we just go uncovered until we resolve this."

Ultimately, the board did not choose a date and Quinn said a decision had to be made before the next regular board meeting, which is scheduled for July 27.

"It needs to be sooner, so we'll be covered. Otherwise, we will not be covered," she said.

As of Jan. 28, Hazel Hawkins published an agenda for a June 29 special meeting at 10 a.m. The agenda can be found here.

Questions about transparency

Salinas said the hiring and promotion of Mary Casillas, first as Chief Operating Officer (COO) then as interim CEO is an example of a major lack of transparency and nepotism by the board.

She said Casillas, as a board member, was part of the panel that was interviewing candidates for the COO/ambulatory services position.

"Then, all of a sudden, Mary Casillas resigns and there is no public notice naming her on any agenda, other than in the minutes a month later after she'd already taken the position," Salinas said.

She continued: "That's nepotism, which is against the California Constitution. A board approving the position of a former board member within 30 days of having resigned as a director she was hired."

She said that happened again when Casillas was named interim CEO.

"On Oct. 27 at your regular board meeting that contract to hire Mary Casillas as the interim CEO is there again, without naming her," Salinas said. "Nor is the contract available for the public to see."

She continued, "What was the legal advice that was given to you to give Mary Casillas, a board member who interviewed candidates and then turns around and gives herself the job? You gave it to her. You don't question yourselves on your judgment and the actions?"

There was no response from the health care district before publication to BenitoLink's request for comments regarding Salinas' claims.

Also, Bernosky accused the board of hiding the amounts that have been paid to the consulting firm E. Riley, which the hospital hired to help with its financial emergency, under the guise of attorney-client privilege. He said when he received records he requested concerning the firm, they were heavily redacted.

Hospital board directs administration to enter into mediation with nurses union | BenitoLink

"You pay exorbitant fees to advisors and yourselves and you don't think the public's not going to notice?" Bernosky asked. "Stop treating us like you can just ignore us, because we're not going away."

The board of directors are not paid, according to its bylaws.

Registered nurse Ariana Sanchez referred to the BenitoLink article listing the top 10 highest paid employees at the hospital.

In that article, BenitoLink found that of the 120 nurses, 56 were paid from $200,826 to $366,808.

Sanchez noted the article stated that the third-highest paid employee was a staff nurse who received $388,717.

She said what was not included in the article is that this nurse worked 3,559 hours that year. Sanchez said a full-time nurse typically works 1,872 hours a year with no overtime or extra hours on three 12-hour shifts.

"This nurse worked almost the same amount of hours as two full-time employees," Sanchez said.

She continued, "Instead of praising this nurse, you chose to criticize and make the nurses look like their wages are too much or that it is their fault for putting a hospital in a financial crisis. Shame on all of you."

She added that the narrative implying the nurses earned too much from the administration is incorrect.

"Someone needs to hold the administration accountable," Sanchez said. "Hazel Hawkins nurses will not be silenced."

Related BenitoLink stories

Nurses union affirms vote of no confidence in San Benito Health Care District Board | BenitoLink

Nurses claim Hazel Hawkins' staffing levels put patients at risk | BenitoLink

Emotions run high as nurses strike; hospital denies charges of short-staffing | BenitoLink

Hazel Hawkins Hospital board approves letter to protect union nurses | BenitoLink

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