Appellate Court Sides With Sutter Over Ownership Of San Leandro Hospital

BREAKING

Dec. 21, 2011 | The end of San Leandro Hospital as a general acute care hospital with emergency room services may be near.

A state appellate court ruled Wednesday in favor of Sutter Health’s right to secure title to the San Leandro community hospital. The opinion affirmed a similar decision issued bt an Alameda County Superior Court judge in November 2010.

The unfavorable ruling for the Eden Township Healthcare District represents a third legal defeat in its bid to maintain services at San Leandro Hospital. An arbitrator handed down a similar decision also in 2010.

The three-judge appellate court found former members of the District in 2008 did not possess a financial interest in the controversial agreement that paved the way for the current legal entanglement.

The court agreed the current adminsitrator at Sutter’s Eden Medical Center in Castro Valley did not possess a financial conflict of interest under state law. Bischalaney concurrently held the same position at the District from 1998 to 2008.

“The District has not shown that the contracts at issue here have any direct or indirect nexus to Bischalaney’s compensation,” said the appellate opinion.

Similarly, former District board member Dr. Francisco Rico, the court found, did not stand to benefit from the agreement. The District had asserted Rico’s stake in a doctor’s group that provides exclusive anesthesiology services to both Eden and San Leandro Hospital also did not violate the same government code.

The District had hoped a violation of Government Code 1098 would invalidate the 2008 agreement that, in hindsight, chose a rebuilt Eden Medical Center over a tenuous future at San Leandro Hospital.

The ruling also disputed the District’s contention the ongoing dispute with Sutter centered around the alleged conflicts of Bischalaney and Rico. Instead, they found it actually revolves around community fears of losing access to emergency services in San Leandro.

“Sutter was not seeking to render services to the District, nor to secure any public money or benefit,” it reads. “The District does not claim it will be adversely affected, from a financial standpoint, if the SLH sale is completed. Indeed, as best as we can discern,, the District’s main issue with the transaction is based on public policy concerns regarding the loss of emergency room, and not public finances.”

An amicus brief filed by Attorney General Kamala Harris’s office supporting the District’s argument also did not sway the judges. They faulted the attorney general’s broad view of the government conflict of interest code, while referring to their argument as “not persuasive.”

The court also found an addition amicus brief filed by the City of San Leandro supporting the District did not contain materials decided by the earlier superior court case and “irrelevant to the specific issues on appeal.”

What happens next in the over three year fight to keep San Leandro Hospital is unclear. Once Sutter gains title to San Leandro Hospital it could enter talks with the District and county on how to proceed or, more likely, maintain its initial plan to convert the facility to an acute rehabilitation center without an emergency room and other services currently provided at San Leandro Hospital. Sutter would then allow the Alameda County Medical Center to run the reconfigured facility.

Although, the appellate court referenced Sutter’s acceptance for paying for the hospital, the exact price tag, according to the county, would be zero. Through capital improvements made to building along with equipment upgrades, Sutter was able to deduct the sale price down to where technically the county would owe Sutter for taking the hospital off its hands.

As the county continues to lose an alarming number of hospital beds along with higher numbers of residents demanding more social services amid a stubbornly stagnant economy, the loss of San Leandro Hospital would put further strain to the system, according to health officials.

Although a vocal group of community activists in San Leandro have long fought hard to keep the facility open despite Sutter’s stated plans, the dilemma is actually a regional problem likely to hurt the indigent and uninsured in surrounding cities. According to the hospital’s census, a majority of patients come not from San Leandro, but poorer sections of neighboring Oakland.

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