Adam Spencer, The Triplicate

City attorney raises 'condemnation' as a possible option

During a Tuesday night meeting focused on retaining local control of Sutter Coast Hospital in Crescent City, a potentially dramatic legal maneuver was proposed by the city attorney and passions flared over the local hospital board's commitment to "regionalization."

There were 115 people at the presentation given by Dr. Gregory Duncan, chief of medical staff for Sutter Coast Hospital and a vocal opponent of the hospital board's move to regionalize, which would replace the local board with a Bay Area-based board of directors.

Duncan's presentation, hosted by the Del Norte Tea Party Patriots, was billed to include "impacts of Obamacare," but Duncan stuck to the potential threats and impacts of Sutter Coast being regionalized while recapping perceived transgressions of Sutter Health since the local board initially voted to dissolve itself in November 2011.

Duncan referenced a dispute over the profitability of Sutter Coast. Although Sutter Health executives have said that Crescent City's hospital could go broke without regionalizing, the hospital was profitable as recently as 2010 with $1 million in profits.

Duncan, who as chief of medical staff also holds a seat on Sutter Coast's board, said determining profitability has been tricky when everything beyond two weeks worth of operating expenses is transferred to Sutter Health's treasury via "intercompany transfers."

"I can't sort it out, and I'll tell you why I can't. Because they won't let me see the books, even though it's the unrestricted right of any board member to inspect any document," Duncan said.

The Del Norte Health Care District, which is in litigation against Sutter Health and Sutter Coast, also wants to see the books. The district has subpoenaed the hospital's financial records, but they have not been provided so far.

"It's been like pulling teeth. Our attorney has tried every avenue he can to get some financial records released," said 26-year Health Care District board member Dwayne Reichlin in a phone interview on Wednesday.

"Basically what we're trying to determine is if they're profiteering or not," said Health Care District chairman Clarke Moore in a phone interview. "There isn't a problem with making a profit but there's a difference between making a profit and profiteering."

Sutter has appealed a preliminary injunction won by the district preventing regionalization, but the same ruling also moved the dispute into arbitration.

"The issue of what documents might have to be produced will be resolved in the arbitration," said hospital spokesperson Beth Liles in an email to the Triplicate.

'Ultimate option'

One of the most interesting statements of the night did not come from Duncan, but Crescent City's city attorney, Bob Black.

"I just want to plant a seed of thought for an ultimate option if we aren't able to stop this through present litigation and political means," Black said. "And that is to consider the option of condemning Sutter Coast; having the county essentially take it in a condemnation proceeding and then begin to solicit a buyer for it and flip it to a private owner, because that would stop this."

Black's reference to the county exercising eminent domain to take over private land (with just compensation) for public use has been considered by the Health Care District.

"That has been discussed," saidMoore by phone. "But we have to make sure that there is someone out there that, number one wants us, and number two, is going to provide the level of service that we want to have here."

At least one other health organization has expressed interest in running the Crescent City hospital if Sutter leaves the picture. Asante Health System, already serves some areas in Northern California and Southern Oregon, incuding Grants Pass and Medford.

Many Tuesday night audience members said that the hospital board should consider Asante.

"What the board members at Sutter Coast need to understand is that they still control what goes on at that hospital," Reichlin said by phone. "What we are asking them to do is to look at these other options."

In response to the condemnation concept, Sutter Coast's Liles wrote in an email:

"We cannot comment on this matter as we do not know what the county might do. The exercise of the power of eminent domain is an extraordinary and expensive process."

Reason to regionalize?

Despite intentions to speak on the "impacts of Obamacare," the only mention of the Affordable Care Act that Duncan made behind the podium came in regards to its creation of Accountable Care Organizations (ACO), entities whose "payment is tied to achieving health care quality goals and outcomes that result in cost savings," according to, a website of the U.S. Department of Health and Human Services.

"I had a hunch that this ACO was related to regionalization, but I couldn't put my finger on it," Duncan said. Like a sleuth deciphering another clue, he shared his hypothesis:

"You have to have a single tax ID number for all the hospitals in the ACO. We have a unique tax ID number at Sutter Coast. If we regionalize, we become part of the tax ID number for the region so then we qualify to be in the ACO," Duncan said.

Duncan painted ACO's as a threat because of capitation, fixed payment to health care providers, which he said would incentivize doctors "to not order the MRI or not order the physical therapy."

"I can say that we do not know what Dr. Duncan is talking about and that regionalization has NOTHING to do with an ACO.He admits he is speculating," Liles said in an email.

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