Wednesday, November 11, 2009

The History of San Leandro Hospital According to Rico

Former Eden Township Healthcare District Director Dr. Francisco Rico has been one the most polarizing figure over the possible loss of San Leandro Hospital. Critics have labeled him pro-Sutter by his numerous public comments and fear his return to the board a year after losing re-election could be the final nail in the hospital's coffin. Tuesday night, his interview with the District Board of Directors became a referendum on his tenure on the board when he was one of the key negotiators who essentially traded the stability of San Leandro Hospital for a new Eden Medical Center in Castro Valley. Here are highlights from Rico's opening statement and questions from the board:

For a period of 10 years the relationship between the District, Eden Hospital and Sutter was amicable. One of the major problems we were grappling with was SB 1953, which required that hospitals in California meet certain seismic requirements. There was a deadline for 2008, but they actually pushed it back to 2013 because many hospitals were having difficulty complying...A number of architectural studies were done, proposals were made even showing pictures and models and so forth. The big shocker came when Sutter announced publicly that they were not going to rebuild Eden and they would turn it into an urgent care facility and their primary interest was east of here in the 580/680 corridor in the Pleasanton area. All of us on the Eden board, which included all of you on the District board, were unanimous that we were not satisfied with that and quite unhappy about that and would do whatever we could to reverse that decision. After a long sequence of negotiations between the District board and Sutter Health where Dr. [Rajendra] Ratnesar was member of the negotiating committee as was I. Eventually, we were able to get Sutter to agree to rebuild Eden Hospital and after looking at a number of alternative sites within the District they determined even though the space on the current campus was limited it still made more sense to do it there. Some of the other sites they were looking at could not be purchased...As a part of those negotiations we also got a concession from them to continue to support San Leandro Hospital for an additional two years and work with the medical staff there to try and turn things around which unfortunately has not been successful...It pains me to see that it has declined fiscally that its existence is in jeopardy and the hybrid concept that Carole [Rogers] mentioned is very appealing. I would say that if that could be managed, it probably worth a look. However, it would have to be in such a way that it could be fiscally sustained.

DIRECTOR DR. HARRY DVORSKY: Would you run again in 2010?

RICO: I'm reluctant to say yes or no at this point. The reason being is that I don't know what is going to be happening in 2010. I'm not getting younger.

DVORSKY: When you say you don't know what's going to happen if you're on the board, what will happen will be in part from your contribution.

RICO: One would hope so.

DVORSKY: Again, so that is the question, why do you want to be on the board?

RICO: There were a couple of things of which I very much involved in the last six years that are still in a stage of not being completed and one of the things is the Dublin-Gateway property. We put a lot resources into it and it has the potential of developing into a very worthwhile enterprise. Hopefully, it generates enough revenue so the District can do more things for our community here. As you know, the new hospital in Castro Valley will not have psychiatry. Our policy on the District board has been to use resources to serve underserved segments of the community.

DIRECTOR CAROLE ROGERS: I know one of your mantras is a hospital has to be profitable to survive. Seeing Sutter Health, Eden Hospital and San Leandro Hospital are combined, their financial statements are one so they are one hospital system--a sister hospital--not competing. Together, they made a $20 million profit. Can you address how we can convince Sutter that San Leandro Hospital and Eden is one hospital and how can we bring some profitability to the negotiating table?

RICO: Hospital. When you say I supported the concept of a hospital generating profit. The word profit is actually inappropriate when you're talking about a non-profit organization. The better word would be surplus because profit suggests some way or another profits are distributed to shareholders. In a non-profit profits are distributed within the business entity...I can't promise that I have any magic formula to cause I'm not sure I can convince Sutter Health because that's one of the things we argued with them about a couple years ago when we were negotiating for the replacement of this hospital. Incidentally, if they did not replace it, it would not continue as an acute care hospital. Our first priority was to make sure that we had a hospital that was compliant with the earthquake recommendation. At the time, we argued quite a bit with them about sustaining San Leandro...

My main reluctance as far as Dublin is concern I go back to a meeting the Eden Board of Directors had where after Sutter had announced they would not be rebuilding the hospital in our district, we had the CEO and CFO of Sutter to come to our board meeting. All of the members questioned them and stated our objections, you know, that this hospital has been here 50 years serving this community and you're telling us you're going to close this hospital and build one on the other side of the hills. The community that is here is not going away. It's still going to need hospital services and you're telling us we're going to have to go over the hill. Dublin is not our community and his response was 'Well, you should start thinking of it as your community.' The property in Dublin was primarily a bargaining chip against Sutter moving to that area.

ROGERS: Let's see if you can remember, in 2003 you were on the board at the time. San Leandro Hospital was making at profit when Sutter leased it from the District and at that time in 2004 there was an MOU that I understand Sutter promised to rebuild Eden Hospital.

RICO: That is correct.

ROGERS: That's the point I wanted to make.

RICO: Several times over the years [Triad] had approached the administration at Eden Medical Center with proposals to sell it, but their asking price was always considered excessive. When it turned out they were willing to negotiate a reasonable purchase price, those of us on the district board said, 'Do we really want to buy San Leandro Hospital?' Our response was we weren't enthusiastic about doing this so we had to get some concession for us to sweeten the deal for us to shell out over $30 million, which was a sizable segment of our total assets. At the time, if we purchased San Leandro Hospital, Eden Medical Center with Sutter's backing would build a new hospital. Not necessarily on the same site, but in district, serving the district and they agreed to that. Afterwards it become evident as the deadline for compliance with SB 1953 approached that we were running out of time, At that point, with Dr. Ratnesar as the chair, he sent a letter to Sutter saying you haven't done anything. We anticipated they were going to be in breach of contract which would make them liable to legal action. The problem was there was a deadline for SB 1953 and legal action takes time. We might not be able to get through the legal action and still be within the deadline for SB 1953. All the time, understand the state might extend the deadline, but prudence dictates that we can't depend on the them to extend it and apply the law and get it done. We negotiated a settlement to get what we wanted.

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