Coastal Voices: Hospital ownershsip issue is still in play

Written by Kevin Caldwell March 12, 2014 04:42 pm

As a current Del Norte Healthcare District Board member, three-term former Chief of Staff and Board member of Sutter Coast Hospital (“SCH”), and local physician for the past 29 years, I would like to clarify some information published in last week’s Del Norte Triplicate which may have left readers confused as to the ownership of SCH.

As you read opinion pieces on Sutter’s plans for our community, please ask yourself if the information was written by someone who receives money from Sutter Health. I have no financial ties of any kind with any Sutter corporations.

First, a definition of “regionalization”: a Sutter Health statewide policy to transfer ownership of community-owned, Sutter-affiliated hospitals from local ownership to regional ownership.  In our case, regionalization would transfer ownership of Sutter Coast Hospital (which has always been owned and governed locally) from Del Norte County to Sutter West Bay Region in San Francisco. 

Sutter Coast Hospital is currently owned by the corporation of Sutter Coast Hospital, and is governed by a Board of Directors, the majority of whom reside locally.  SCH is affiliated with, and managed by, Sutter Health.  How do I know this?

1) The settlement agreement between Sutter Health and the Del Norte Healthcare District states, “Sutter Coast Hospital owns Sutter Coast Hospital.” In the first draft of the settlement agreement, Sutter attorneys inserted the statement, “Sutter Health owns Sutter Coast Hospital,” but the Healthcare District made Sutter Health remove that statement, because it was false. Nevertheless, SCH CEO Linda Horn continued to spread the false claim that Sutter Health owns SCH.

2) Sutter West Bay Region President Mike Cohill, in a recorded meeting held in Del Norte County on Aug. 2, 2012, stated that Sutter Coast Hospital is owned by Sutter Coast Hospital.  

3) Sutter Coast Hospital currently has its own Board of Directors, bylaws, Articles of Incorporation, and tax I.D. number, all of which are dissolved with regionalization.   

In last week’s Del Norte Triplicate, editor Richard Wiens quoted the following from the Settlement Agreement between Sutter Health and the Del Norte Healthcare District: “Sutter Health has been the sole general member of Sutter Coast Hospital, with the right to exercise control over it, since its inception.”  I suspect few readers understand the meaning of that statement.

The “general member” is Sutter Health. In some corporations, the general member is all-powerful. In our case, the general member is not — Sutter Coast has a number of powers over Sutter Health.

“Control,” in the sense used here, is a legal term which means Sutter Health has the power to appoint the majority of the SCH Board.  “Control” does not mean Sutter Health can do whatever it wants — its powers are limited by SCH bylaws, Sutter Health bylaws, Medicare regulations, Joint Commission standards of hospital accreditation, and California law.

According to Mike Cohill, Sutter Health and SCH are separate corporations, each with its own unique powers (which Mr. Cohill calls “reserve powers”), as defined in the bylaws of each corporation. One of SCH’s reserve powers is the authority to approve and disapprove of mergers. In other words, Sutter Health cannot transfer ownership of Sutter Coast out of Del Norte County (regionalize) without the approval of the Board of Directors of SCH.

The SCH Board did vote to regionalize on Nov. 3, 2011, over my objection. I advised my fellow hospital Board members that we should not vote on something we did not understand. The Board had not read the regional bylaws before voting to regionalize, although three hospital Board members falsely stated they had read the regional bylaws in advance of the Regionalization vote. I know this because the regional bylaws were not distributed to the SCH Board until Nov. 8, 2011, five days after the vote to regionalize.

So, the hospital Board voted on a policy it had no way of understanding. Does a Board have a responsibility to cast an informed vote?

In 2011, Sutter Regional executive Larry Dempsey, Esq., rewrote the bylaws of SCH, weakening many of the hospital’s reserve powers over Sutter Health. Mr. Dempsey did not explain this fact to the SCH Board, which had no independent legal counsel. On Feb. 3, 2011, following minimal discussion, Mr. Dempsey’s 1,300 changes to the SCH bylaws were approved by the SCH Board. 

The California State Bar is the agency which oversees attorney conduct. It is a Bar rule that one attorney cannot represent two parties without the written informed consent of both parties. Sutter Health  attorneys never obtained consent from SCH before re-writing the SCH bylaws or asking the SCH Board to dissolve themselves and transfer hospital ownership to San Francisco. Dr. Greg Duncan and I filed a complaint regarding two Sutter Health attorneys to the State Bar, which is currently under review.   

The fact is, despite overwhelming community opposition to Sutter’s plans for this region, Sutter refuses to budge. Sutter Health is determined to end its 28-year relationship of managing a locally owned, Acute Care hospital in Del Norte County.

The SCH Board refused to rescind its regionalization vote. Regionalization remains SCH Board policy.  Sutter will not release any Board meeting minutes. Last May, SCH CEO Linda Horn announced in a televised meeting that “Critical Access is not being discussed,” even though the SCH Board had just approved a $170,000 study on the hospital which mandated an analysis of Critical Access.

In December, the SCH Board voted for Critical Access. Last month, it filed the application.

The SCH Board refuses to discuss community letters of concern in the Board room, which remains closed to the public. Sutter Coast’s ongoing secrecy and high prices have compelled many in our community to seek care at distant hospitals, resulting in a steady decline in our hospital census over the past year.

During our Jan. 28 meeting, the Del Norte Healthcare District voted unanimously to oppose Critical Access and regionalization. The Triplicate did not report on that resolution, so the district ran the announcement as a paid advertisement.

We believe our community deserves options for its health care. Three other health-care systems have offered to provide capital to develop an affiliation with our hospital.   Please share your thoughts with me and my fellow  Board members at: The Del Norte Healthcare District, 550 E. Washington Blvd., Crescent City, CA  95531. We want to hear from you.

Kevin Caldwell is a local physician and former memdical chief of staff at Sutter Coast Hospital.