April 12, 2012 | After over two years of legal maneuvering between the Eden Township Healthcare District and Sutter Health, the issue of who owns San Leandro Hospital is fact. The California State Supreme Court Wednesday denied the District’s petition to settle its dispute with Sutter over conflict of interests allegations stemming from a three-year-old agreement…

The high court’s decision is the end of the line for San Leandro Hospital–at least, in the court room. The District failed to convince two lower courts to unwind the 2008 agreement its then-board of directors signed with Sutter leveraging the $300 million reconstruction of Eden Medical Center in Castro Valley for an opportunity for San Leandro Hospital restore fiscal sustainability.

Two years later, Sutter moved to exercise an option to purchase the facility and lease it to the Alameda County Medical Center as an acute rehabilitation center. The District board of directors blocked the purchase option and the dispute headed to the courts in 2010.

Wednesday’s decision by the state supreme court represents the definitive end of the legal situation, but the fate of the hospital is not yet clear. Employees at San Leandro Hospital have reported over the past few months, the presence of county workers at the facility, measuring tape in hand. Management from Sutter two weeks ago urged employees to begin looking for other job opportunities and notifying them the hospital could be closed in the next 90 days. Both instances, whether real or scare tactics, have been used in the past, but with the legal case closed, the threats take on new meaning for hundreds of health care workers.

Carole Rogers, chair of the District board of directors, declined to comment on the denial of petition until issues surrounding legal fees potentially owed to Sutter are resolved. By some estimates, the legal bill could be as high as $25 million. A settlement that large could possibly bankrupt the health care district.

Most observers, including the director of Alameda County Healthcare Services, believe Sutter will return to the negotiating table with the county officials once the lawsuit is resolved. Sutter, Briscoe noted last month, is still a reliable business partner in various areas of the county health care system. The future of the facility may entail returning to the original plan brokered by Sutter and the county in 2010, making their business relationship even stronger.