Sitting astride a lone office chair before the Eden Township Healthcare District Wednesday evening, the Director of Alameda County Healthcare Services Alex Briscoe did just that as time ticks away for various public entities to hash out a deal with Sutter Health allowing for transfer of San Leandro Hospital to Alameda Health System by a hard July 1 deadline. The deal reported two weeks ago, also includes a $22 million subsidy from Sutter Health to operate the hospital for one year.
Briscoe addressed the District’s skeptical Board of Directors urging them to contribute their own one-year, $20 million subsidy he and other county officials say will allow San Leandro Hospital’s emergency room to remain open, at least, another three years.
After years of legal wrangling and acrimony between the District and Sutter Health some of its board directors remain leery of returning to the bargaining table after so many false starts and breaches of trust among the groups now urging for a positive resolution to the hospital controversy.
District Board Director Lester Friedman was the most skeptical of the plan brought forth by Briscoe. In recent months, the District has grappled with a growing identity crisis following a court judgment that forced it to transfer title of the hospital to Sutter Health last year leaving the health care district without a facility to oversee. The District also provides millions in health-related subsidies to local non-profits. The struggling St. Rose Hospital in Hayward also rest within its jurisdiction. In one exchange Wednesday, Friedman said the proposal to contribute such a large expenditure would hinder its aid to both needy groups. “It would be over,” Friedman said of the District’s future.
“This is it. This is the moment to cut the deal,” said Briscoe adding, “I’m not sure they are there yet.”
The attorney for the District noted the request for subsidy from officials is far bigger than any other proposed deal over the past three years. “It’s a big, huge jump from where we were 6-8 months ago,” said Colin Coffey, the District’s attorney. Previous requests entailed a subsidy between $6-9 million annually to operate the hospital to a more amendable plan just six months ago calling for a 3-year, $3 million subsidy. Alameda County and the city of San Leandro also agreed to similar subsidy plans.
Briscoe, however, reiterated his concern the deal offered by Sutter is the best and last proposal remaining for the county and the community surrounding the hospital. “If this deal is not cut, we will be getting a closure notice,” Briscoe assured the board. “I truly believe that letter is written.”
When pressed by the board directors, Briscoe said the District is not part of the potential hospital deal and if they decline to contribute the $20 million subsidy, it could still be conceivably approved by Sutter Health and Alameda Health Systems. However, it also puts the likelihood of keeping open the emergency room in doubt. Alameda Health Systems also proposes using San Leandro Hospital as an acute rehabilitation center to replace the seismically-deficient Fairmont Hospital.
Later, while the District board was in closed session, Briscoe said of the deal, “This is it. This is the moment to cut the deal,” he said, but added, “I’m not sure they are there yet.”
Aside from Friedman, the other board directors were relatively silent (Board Director Dr. Vin Sawhney was absent). Board Chair Carole Rogers, however, queried Briscoe over the possibility of various stipulations, including the District offering the money contingent on need. Briscoe said he could not negotiate on behalf of Alameda Health Systems, formerly named the Alameda County Medical Center, but added after viewing Sutter's financials, he believes the contention it lost $24 million over the past 2 years at San Leandro Hospital is “inflated.”
Just how the District could fund such a large, one-time subsidy is not clear. Briscoe offered three suggestions, including the liquidation of assets, sloughing off revenues from its real estate holdings or issuing additional debt. The first two appear untenable, said Briscoe. Selling off more than half of the District’s assets would trigger a state law placing the issue before voters. Ironically, this same issue was raised by Senate Majority Leader Ellen Corbett in the past against Sutter Health as a threat to block the transfer of the hospital. Briscoe said using future revenue streams from the District’s holdings is insufficient, but issuing debt on its three real estate properties would suffice.
Although the District’s three properties became financial albatrosses during the Great Recession, there is reason to believe the real estate market is improving. The Dublin Gateway Medical Center, according to the District, is its biggest asset worth $51.5 million. The San Leandro Medical Arts Building, located near San Leandro Hospital, is worth $5.5 million and its brand new medical office building in Castro Valley is a $6.5 million asset.
During a District meeting earlier this month, its CEO Dev Mahadevan noted the appraised value of the properties is on the uptick as are the number tenants signing leases at its medical offices. However, the District has borrowed against its assets in the past. Dublin Gateway has a loan value of $35 million, according to Mahadevan, while the Castro Valley medical office building is $45 million.