CENTER THREATENS LITIGATION IN HOPES OF EXPEDITING SALE; LEGAL BILLS HIT $1.5 MILLION
By Steven Tavares
The San Leandro Surgery Center has become the neglected child in the long-running custody battle between Sutter Health and the Eden Township Healthcare District over the fate of San Leandro Hospital.
Before tensions between the two entities increased earlier in the year as the District countersued Sutter’s attempt to takeover the hospital, administrators at the East 14th Street center believed a deal was set.
In late January, Sutter was set to purchase the District’s interests in the facility for just over $1 million, but activists rose in opposition to any further financial transactions with Sutter while the two sides battled in court. The board eventually put off approval of the sale for the next two monthly sessions with mistrust over Sutter’s intentions for the small surgery center prevailing.
In the meantime, administrators at the surgery center have become increasingly antsy for a resolution. Their anxiety became so high that they have now threatened the District with litigation. A letter earlier this month from the surgery center called for the District to move forward on the sale, effectively saying, “Or else!”
Despite the threat of legal action, the District’s plans for the surgery center remain in a holding pattern in regards to any deal with Sutter until their legal disputes are settled. When that could be is anybody’s guess.
LEGAL BILLS MOUNTING? A staffer for the Eden Township reported last week the hospital district has spent nearly $1.5 million in legal bills since the beginning of litigation with Sutter Health in November 2008. Included in the total is $190,000 for the month of August alone.
Sensing reporters might latch onto this rapidly increasing total, District Chair Carole Rogers, striking a rallying chord, said the outlay of monies won’t matter once they are victorious in court. “We when prevail, Sutter will reimburse these fees,” she said.
On the legal front, movement between Sutter and the District may be coming to a head by the end of the year. Lawyers for the District filed a lengthy motion Sept. 15 for summary adjudication. In the meantime, San Leandro Hospital is nearing one year on so-called borrowed by virtue of their legal maneuvering. Sutter had announced last year they would close the hospital Sept. 30, 2009, but that never occurred. One county official, spun the rising legal costs for the District this way: it would have cost them between $6-9 million in subsidies to keep the hospital open, according to many estimates. By spending $1.5 million in legal fees and getting their desired result–keeping the hospital open–the District is actually saving money.
NO HEALTH CARE FOR DIRECTORS Chair Carole Rogers already has free health care, but she is worried about attracting the next generation of Eden Township directors, who might not be so lucky. Rogers recently pushed for offering health care benefits to future directors, hoping to bring new and younger voices to the board, but the she ultimately ended up in a minority of one.
“I’m not sure it would attract people,” said Director Dr. Vin Sawhney. “If they run, it’s because they want to be here, not for the benefits.”
Director Dr. Rajendra Ratnesar agreed and said he was not comfortable using District funds as an enhancement to an elected position. “I don’t think we can justify this,” said Ratnesar. “It may be a misuse of public funds.”
It is typical of most hospital districts to be populated by people with backgrounds in the medical field and Rogers and others have pushed for different voices, such as those with resumes in finance, to come forward. Three director’s seats are up for re-election this November. Director Dr. Bill West and Rogers are on the ballot, while Dr. Harry Dvorsky chose not to continue his decade-long stint on the board.
Attorney Lester Friedman and Susan Reisz, a nurse are also on the ballot. Friedman had interviewed last year to replace former member Dr. Walter Kran. That seat was given to West. Reisz recently received the endorsement of the local Democratic Party. Both are viewed as candidates sympathethic to the current board’s drive to save San Leandro Hospital through the courts.
ebcitizen.com 
The surgery center (SLSC) is a San Leandro institution that has been around for more than 40 years in one form or another… long before San Leandro Hospital started having the current round of financial problems.
It is unfair to blame the Surgery Center for the Hospital's problems. In addition, Surgery Center's can only perform specific and limited procedures on an out patient basis.
For the record… San Leandro Surgery Center is only one of several Surgery Centers area Doctors utilize… new centers continue open as less invasive medical technology evolves.
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The proposal was NOT for Sutter to buy the Surgicenter outright. It was for Sutter to become a partner with the existing partners and a third party and so Sutter would not have total control.
All of the good paying outpatient cases left SLH as soon as the Surgicenter opened years ago. At that time the doctors diverted them there just as the current District Director, Dr. Vin Sahney, has directed outpatient endoscopy from the hospital to his own endoscopy center in Hayward, thus exacerbating the losses at SLH. The only ones that remain at the hospital are the ones that do not pay well or the ones that are so sick they are not candidates for the Surgicenter.
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25,000+ ER patients a year, nearly 20,000 Inpatient days a year, and many other medical services. These seem “a very LARGE benefit to the citizens of the areas serviced.”
A Registered Nurse who works at San Leandro Hospital's Operating Room spoke to the District Board at one of the public meetings where this transaction was considered. The R.N. pointed out that if Sutter were allowed to purchase the Surgery Center, it would be likely that they would transfer the most lucrative surgeries from the Hospital to the Surgery Center, allowing them to make money at the Center while reporting “losses” at the Hospital.
This would serve their long campaign to close SLH, and would also fit the pattern they have established at Eden and San Leandro Hospitals, where massive reported profits at Eden more than make up for the relatively small losses reported at SLH.
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With regard to the SL Surgery Center (SLSC), it should be noted that the District DOES NOT own any shares in that entity. The shares are owned by the successors to Triad, the former owners of SLH that sold it to the District. The shares should have passed to the District at that time but it required the approval of the other partners in the SLSC and that approval was denied. The only interest that the District holds is a beneficial interest in any profits flowing from those shares that are passed through from the owners to the District.
Since the District does not own the shares it has no votes in the partnership. A majority vote of the partners allows them to buy out, sell, dissolve or otherwise manage the partnership without the District's approval; limited only by their equitable obligation to compensate the District for their beneficial interest.
Many months ago the District Directors voted to approve the transaction allowing SLSC to buy back the shares and to accept $1.1 million for the District's beneficial interest. SLSC, thinking they had a deal went forward with procedures to conclude the transaction at a cost of $900,000 in legal fees when subsequently the District reneged. While they did not offer a good reason for this reversal it's a good bet that it was primarily seen as an opportunity to obstruct Sutter's plans to partner with the SLSC and thus to use it as a bargaining chip in their dispute over SLH.
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If it costs a $6-9 million subsidy to keep SLH open, spending $1.5 million to keep it open still does not address where such a subsidy will come from if the District loses their lawsuit. The negotiations in 2007 leading to the 2008 Agreement sought to avoid litigation due to the time delay (deadline for quake compliance), costs and uncertainty as to outcome. Fortunately the new hospital construction is on schedule, but the litigation costs and uncertainty of outcome persist.
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Regarding health benefits for District directors: Normally the directors meet once a month for a couple of hours and receive $100 for that. Traditionally participation has been regarded as a community service closer to volunteering rather than employment. While it is true that in recent months the directors have been called upon to contribute additional hours due to the current controversies, once the disputes are resolved things should return to relative normalcy. Employment benefits are not appropriate for directors. It's not even a part time job!
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This who issue seems to have lost sight of the original purpose. The costs for Eden are extraordinary and there seems a very small benefit to the citizens of the areas serviced. The folks who bankrolled this do not appear to me to have served the public any better than Sutter. I am not so sure that this is worth fighting. What a waste.
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