Monday, May 3, 2010

District's Lawsuit Forces Sutter to Pause

The Citizen 

SUTTER vs THE DISTRICT A county official with knowledge of the plan, told The Citizen, Sutter will continue the license to San Leandro Hospital until its legal battle with the Eden Township Healthcare District is resolved.

The intention to continue the lease may have been signaled earlier this month when Sutter did not announce the closing of the hospital, as anticipated. State law requires any closure to be announced 90 days in advance. An announcement around April 1 would have dovetailed nicely with June 30, which is also the end of Sutter's year-long window to purchase the facility.

"The reason we didn’t give 90-day notice is because we’re waiting for the outcome of the pending litigation," said Sutter spokesperson Stacey Wells,  who added,"could take some time to resolve."

Regardless of the outcome of the competing lawsuits between Sutter Health and the District, there has been the immediate question of what happens to San Leandro Hospital after  June 30?

The question has always been in the background and has beguiled the Alameda County Health Services agency for months as they attempt to prepare a plan for such an event.  Any lapse of the hospital's state license would be near catastrophic since a renewal after the fact could cost tens of millions of dollars; a figure likely to be attached to any possible offer for the hospital and possibly making it far too exorbitant for any potential investor.

A county official said earlier this year there are ways around extending the license without it lapsing, but those conversations revolved around a change of operator while the situation today with Sutter and the District suing each other presents sort of a cease-fire awaiting an amicable or legal solution that could run far past June 30.

There is a sense among many with knowledge of the legal situation that the District's March 10 countersuit hoping to void the 2007 agreements caused Sutter to "stand down," as one source described it. The District's suit contends three members of the board in 2007--Dr. Rajendra Ratnesar, Dr. Francisco Rico and current Eden Medical Center CEO George Bischalaney--had financial conflicts of interests in signing of the deal.

The District's countersuit, legal experts says, has elevated the stakes of the conflict since any finding against Sutter on the allegation would negate the 2007 agreements in its entirety. Such an outcome would allow the District to revert back to the more favorable 2004 agreements that held Sutter responsible for operating San Leandro Hospital for 20 years along with rebuilding Eden Medical Center, which is already underway.

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