Hospital control in rural California

In the Northwestern corner of California, a David and Goliath battle set in the impenetrable world of modern medicine is playing out as a small community musters everything they have to block a multi-billion dollar medical corporation’s attempt to centralize operations. 

Shifting governance of hospitals is a common trend nationwide.  What’s uncommon in Crescent City is the amount of political, economic and social capital that has been mobilized to stop what is perceived as a corporate takeover of “our local hospital,” as many elected officials and doctors would characterize the 49-bed Sutter Coast Hospital.

Sutter Health has operated Sutter Coast in Crescent City since 1986, drawn to the area for a lucrative contract with nearby Pelican Bay State Prison (California’s modern day Alcatraz).

For decades the Sutter Health/ Sutter Coast hospital relationship ran swimmingly, with the 49-bed hospital operating in the black every year until 2011 – the same year that Sutter Health executives pressured the hospital’s mostly-local board of directors to “regionalize,” dissolving the hospital’s local board of directors and ceding all governing authority to the board of directors to Sutter West Bay Region.

The timing coincidence has been too much to stomach for some local officials and members of the medical community, but more legally pertinent elements have also been called into question ranging from contractual obligations with public districts to outright criminal fraud. In Oct. 2012, the Del Norte County Health Care District won a preliminary injunction blocking regionalization based on a 25-year-old lease agreement between Sutter and the district that is believed to require Sutter to maintain a certain level of service.

The level of service that will continue if the Sutter Coast is regionalized has been called into question in a politically savvy move by the current chief of staff who is leading the opposition. Regionalization has been tied to downsizing of the hospital to a 25-bed “critical access” facility — a move that Sutter pursued with a hospital in Lakeport, Calif.

The possible downsizing of the local hospital has scared the pants off granny, granddad and friends, turning the areas robust retirement community into a swarm of first-time activists, including wielding placards in front of the hospital when Sutter executives pay a visit.

Responding to constituent concern, the Del Norte County Board of Supervisors, the City Council of Crescent City, and the District Attorney have also stepped in to voice opposition.  The City Attorney even publically proposed a last ditch effort if litigation fails: condemning the hospital, exercising eminent domain over the building to give Sutter the boot.

But Critical Access downsizing can happen without regionalization, as was the case in Lakeport. And the Sutter Coast board of directors already ceded much power to Sutter Health Corporation when more than 1,300 bylaws changes were approved in the same night they were introduced by a Sutter Health attorney, proving that local control may have been a façade.

The local board’s vote to regionalize itself succeeded handily in Nov. 2011, passing 8 -1, with the sole dissenting vote coming from then chief of medical staff – the only board position not appointed by mother Sutter. The medical chiefs of staff, then and now, have alleged that the information presented during board meetings to pass bylaws changes and regionalize was false, alluding to possible fraud charges. 

In the face of so much opposition, the relenting pursuit of regionalizing begs the motivation question.  The opposition-leading chief of staff guesses that Sutter Health wants Sutter Coast to become part of an Accountable Care Organization – an Affordable Care Act arrangement that now covers 10 percent of the country.

ACOs may simply be a sensible reality for rural hospitals like Sutter Coast in the wake of health care reform, but serious legal and ethical questions persist in this case. 

I’m neither an accountant nor an attorney.  Just an entry-level reporter attempting to make sense of a current battle deciding the future of a small rural hospital and how it ties in with health care reform.  With the help of California Endowment Health Journalism Fellowship program, we hope to shed some light.

Image by Philip Dean via Flickr