Business & Tech

Arbitrator Awards Marin General Hospital $21.6 Million in Sutter Health Dispute

Both sides in longstanding battle affirm ruling as a validation of their positions.

An arbitrator with the Judicial Arbitration and Mediation Services (JAMS) has awarded the Marin General Hospital Corporation $21.6 million in its dispute with Sutter Health.

The arbitrator, retired Judge Rebecca Westerfield, awarded Sutter Health $721,000.

Sutter Health had a 20-year contract to manage Marin General Hospital but it ended five years early on June 30, 2010 when management of the hospital was transferred to the Marin Healthcare District.

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The Marin General Hospital Corporation sued Sutter Health Corp. in August 2010 in Marin County Superior Court, alleging Sutter "systematically and improperly" took $120 million from the hospital's accounts while the operation of Marin General Hospital was being transferred to the Marin Healthcare District.

The suit claimed Sutter Health took more than $30 million a year since 2006 from Marin General Hospital's reserves and put the money into its own accounts. In the five years before 2006, Sutter made "cash sweeps" of less than $3 million a year, according to the lawsuit.

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The complaint alleged Sutter began taking the $120 million for its own benefit in 2006 when Sutter agreed to stop managing the Greenbrae Hospital.

A Marin County Superior Court judge approved arbitration in December 2010. The arbitration hearing began on Jan. 17, 2012, and ended on Feb. 8, 2012.

Both Sutter Health and the Marin General Hospital Corporation said they are pleased with Judge Westerfield's ruling.

"Sutter is extremely pleased with the arbitrator's decision to deny the vast majority of the damages the (Marin Healthcare) District sought and her finding that Sutter and its Directors acted prudently and in accordance with fiduciary duties," Sutter Health President and CEO Pat Fry said in a statement.

"We were always confident that we met our fiduciary obligations to Marin General Hospital, invested an appropriate amount of capital and left the hospital in a strong financial position," Fry said.

Marin General Hospital Chief Executive Officer Lee Domanico said in a statement that Westfield "found that Sutter willfully and purposefully failed to meet their contractual duties.

"Sutter also was found to have breached its duty of good faith and fair dealing by charging Marin General Hospital for 'cost of capital' despite providing no capital to Marin General Hospital and forced Marin General Hospital to make contributions to the Sutter Health Retirement Plan greatly in excess of Marin General Hospital's fair share for its employees," Domanico said.

"The ruling validates our long-standing contention that in the years leading up to the transition, Sutter did not operate Marin General Hospital in a manner consistent with the best interests of our community. Instead they diverted funds for the benefit of Sutter and the detriment of the people of Marin," Domanico said.

"We are gratified that the arbitrator agreed with us and has ordered Sutter to restore funds to Marin General Hospital," Domanico said.

--Bay City News Service


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