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Eden Hospital (STAFF FILE)

Sutter Health scored a seemingly decisive victory last month in the long-running battle over the future of San Leandro Hospital. However, the Eden Township Healthcare District is not yet ready to throw in the towel.

Sutter claims San Leandro Hospital is a money loser and has plans to shutter its emergency room and convert the hospital from an acute care emergency service facility to an acute rehabilitation center. Critics of the plan say closing the emergency room means San Leandro residents will have to travel out of town during medical emergencies. The Eden Township Healthcare District sued Sutter over the plan, alleging that an agreement that allowed Sutter to take ownership of the hospital was invalid, putting Sutter's plans for the hospital on a three-year hold.

Last month, the First Appellate Court of Appeal came down in favor of Sutter, deciding that the district did not have a valid case. The healthcare district's board of directors voted 3-1 last week to request a review of the decision by the California Supreme Court.

"We feel that the court of appeals in San Francisco did not address the law," said district board chairwoman Carole Rogers. "We want the Supreme Court to annul the negotiated agreement."

Sutter operates San Leandro Hospital, but the district owns it. A 2008 memorandum of understanding gives Sutter the option to purchase the hospital.

In 2009, Sutter attempted to exercise that option, but the district sued, claiming that the memorandum of understanding was invalid because two members of the board who approved it had conflicts of interest.


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The district alleges that then-board members George Bischalaney and Dr. Francisco Rico had financial interests that could have influenced their votes.

Bischalaney is the president and chief executive officer of Eden Medical Center, a nonprofit corporation that currently leases San Leandro Hospital from the district.

Rico holds an ownership interest in Alameda Anesthesia Associates Medical Group, which provides anesthesia services at San Leandro Hospital.

The appellate court ruled Dec. 21 that the memorandum of understanding approved by Bischalaney and Rico had no financial impact on them.

Rogers said she is confident that a conflict of interest existed under Government Code section 1090, which prohibits public officials and employees from having financial interests in contracts they make in their official capacities.

District board member Dr. Rajendra Ratnesar voted against filing a review. "I wanted them first to talk to Sutter to see if we could get a negotiated settlement before we went to the court. If we lose this, the district could go bankrupt because we could have to pay damages."

Ratnesar said he fears Sutter might attempt to force the district to pay damages of $1 million a month going back to 2009.

The district can file for a Supreme Court review during a 10-day window that expires at the end of the month. Then there's up to a 90-day wait for the court to decide whether to review the decision.

Jason Sweeney covers San Leandro. Contact him at 510-293-2469.