Jan. 31, 2012 | The Eden Township Healthcare District waited until the last moment before formally petitioning the State Supreme Court Monday to settle its on-going legal fight with Sutter Health over ownership of San Leandro Hospital. At odds is whether two officials maintained conflicts of interest when negotiating the agreement at the center of the fight to save the community hospital

The supreme court is mandated to notify the parties of their interest in the case within the next 60-90 days. Either way, as the court of last resort, the state supreme court is the end of the legal line for the District and San Leandro Hospital.

Counsel for the District petitioned the state’s high court on the legal question of whether Dr. Francisco Rico, a former District board member, and Eden Medical Center CEO George Bischalany maintained a conflict of interest under Government Code 1090 when they helped negotiate the 2008 memorandum of understanding. The agreement ultimately led to the $300 million reconstruction of Eden Medical Center in Castro Valley and the potential for San Leandro Hospital to be closed after two years.

Bischalaney, the petition notes held the position of CEO concurrently for both the District and the Sutter Health-run Eden Medical Center during the time of the negotiations.

“Although he had recused himself from participating on behalf of the District and acknowledged he was prohibited from attending closed-session meetings of the District board and other internal meetings where the negotiations were discussed and considered,” notes the petition. “Mr. Bischalaney nonetheless was a significant participant in the District’s negotiating effort.”

The petition also states Bischalaney participated in internal, District-only strategy discussions and closed session meetings.

An anesthesiology practice including Rico as a shareholder held exclusive contracts for services at both San Leandro Hospital and Eden Medical Center, according to the petition. It states Rico had a financial interest in continuing acute care services at San Leandro Hospital or risk losing a quarter of its revenue and potentially the financial viability of the practice.

The District’s allegation is a similar assertion that has failed in two lower courts. An Alameda County Superior Court judge ruled in favor of Sutter’s claim of title to San Leandro Hospital in late 2010. The case was also denied late last year by the state court of appeals.

Despite the petition, sources with knowledge of Sutter’s position tell The Citizen it has offered the District a settlement. Without knowledge of the details, it is likely to be less than palatable to the board or residents, many of whom, expect nothing less than the hospital continuing as a full-service hospital with 24-hour emergency room services.