Court Gives Healthcare District a Financial Lifeline, Thereby Raising Concerns for San Leandro Hospital

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An Alameda County Superior Court judge has granted a hardship request by the Eden Township Healthcare District to pay the $19.7 million in damages it owes to Sutter Health over the next decade instead of a lump-sum payment that threatened the district’s financial viability. 

Dev Mahadevan.
  • Dev Mahadevan.
In the ruling issued last week, the court sided with the district’s petition to pay the $19.7 million over ten years plus interest based on the one-year Treasury bill rate. Eden Township Healthcare District CEO Dev Mahadevan said the elected board of directors is ready to make its first payment on June 30. Sutter Health could still appeal the hardship decision, but it is unlikely.

After the healthcare district, which covers much of Southern Alameda County, sued in 2009 to block a bid by Sutter Health to gain control of San Leandro Hospital and close its emergency room, a state court ruled in Sutter Health’s favor four years later. Damages from the estimated losses to Sutter Health, incurred at the hospital during the legal fight, were set at $19.7 million. The district, however, maintained that being forced to pay that amount all at once could force the public agency into bankruptcy.

In a side deal, Sutter Health had pledged to donate the $19.7 million to San Leandro Hospital’s new owner, Alameda Health Systems, along with $22 million to operate the hospital’s emergency room. The judge's ruling, thus, raises questions about the hospital's financial viability, since it will not be receiving the $19.7 million right away.

Stacey Wells, vice president of communications and public affairs for the Sutter East Bay Medical Foundation, said the organization was disappointed with the court’s decision. “The district has assets that can and should be liquidated to resolve this judgment instead of its continued efforts to avoid payment.”

Alameda County Supervisor Wilma Chan, who is widely credited with brokering the deal between Sutter Health, Alameda Health System, and the Eden Township District, said: “Basically this settles everything. Obviously, that’s a good thing.” But Chan wants more from the healthcare district.

Chan said in an interview that she will soon propose to both Sutter Health and the Eden Township District a plan that will bring more than $20 million to the struggling hospital over the next five years. Chan’s proposal includes: Sutter Health giving roughly $2 million in annual payments from the Eden Township District to San Leandro Hospital. In addition, Chan will urge the Eden Township District to provide another $2 million toward the hospital above its yearly payment for damages. The City of San Leandro and the county is already slated to contribute $1 million each due to be allocated this year to the facility’s operations for the next year.

“That’s a reasonable request. It’s a three-way win” for patients and the community which has strived for years to keep the hospital emergency room in operation, said Chan. In addition, it fulfills Sutter Health’s requirement as a healthcare nonprofit to provide charity care and allows for the district to continue its “obligation” to keeping the hospital open.

But Mahadevan indicated the Eden Township District board may be cool to continuing to further subsidize San Leandro Hospital. “We’ve done as much for this hospital in one year as anyone else,” said Mahadevan of the roughly $50 million in assets that district officials said was used to keep the hospital in operation during the long court case. “We think that’s enough.”

Mahadevan added that if Sutter Health chooses to donate the annual damage payments from the Eden Township District to running San Leandro Hospital, “Good luck to them.” In the meantime, any formal proposal from Chan will be forwarded to the district board for consideration, Mahadevan said. And now that the Eden Township District has some fiscal certainty following the hardship ruling, said Mahadevan, the board will begin discussions this week to increase the monetary amount of grants it provides to healthcare-related nonprofits in the area. 

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