5/31/13 – ETHD’s Role in Supporting San Leandro Hospital

May 31, 2013

Eden Health District’s role in Supporting San Leandro Hospital

The article in Friday’s Daily Review about the Eden Health District’s (the District) support of San Leandro Hospital needs some clarification about the District’s position on Mr. Alex Briscoe’s request in the context of the letter of intent signed by Sutter Health with Alameda Health Systems (formerly Alameda County Medical Center) and Alameda County Healthcare Services Agency.

First, the District purchased San Leandro Hospital and related assets in July 2004 and immediately leased it to Eden Medical Center (EMC), a subsidiary of Sutter Health, to operate it continuously as an acute general hospital with emergency services. The District’s investment in San Leandro Hospital, at that time, was over $25 million. The lease consideration paid by EMC to the District was to continue the operations as before until July 1, 2007, at the earliest. Subsequent lease changes continued this until July 1, 2009 at the earliest. In September 2012, the District transferred the title to San Leandro Hospital with an estimated value of $17 million on which it paid transfer fees of over $100,000 to the City of San Leandro and the County of Alameda in order to avoid any cloud on title to the Hospital.

In effect, as of September 28, 2012, the District invested $25 million for which it received the satisfaction that it was meeting its mission of providing needed healthcare services to the citizens of San Leandro and the neighboring community for 8 years with the help and support of Sutter Health, which also contributed to the operating losses incurred by the Hospital.

In March and April of 2013, the District further committed 50% of its available cash beyond prior legal commitments to keeping San Leandro Hospital open, for three years, to Alameda County Medical Center and to Sutter Health, as long as the Hospital continued to operate as it does, with the same general acute services and emergency department.

On Wednesday, May 29, the Board of Directors further committed to pursue vigorously, every option to meet additional needs identified by Mr. Briscoe in keeping San Leandro Hospital open. This paper accurately reported from that meeting that Mr. Briscoe told the Board that he knew that it was facing difficult choices and there other competing needs in the District which were pressing.

The District has three real property assets and just over $11.5 million in the Bank as of April 30, 2013 of which $8 million is restricted by loan covenants. The three real properties are San Leandro Medical Arts Building, the Eden Medical Building and the Dublin Gateway Center complex (two buildings and property). These properties were appraised at about $56 million in November 2012, securing a loan of $45 million. Simple math shows that the District’s unencumbered assets as of April 30, 2013 were worth about $12.5 million if everything could be liquidated and turned to cash, net of costs. If the $8 million restriction is eliminated with the loan paid off in the sale, the District would have net cash remaining at the end of such liquidation of $20.5 million.

The District serves all its residents and provides grants and supports services including Eden Medical Center and St. Rose Hospitals. The District has committed more than $8.6 million to such projects since 1998 and funded more than 60 non-profit agencies serving thousands of patients and community members. The Board members legitimately ask whether it is right to pledge all of the assets of the District, even if they could do so legally, to one-third of the residents of the District.

There is considerable doubt that all of this liquidation of property can be done without a vote of the residents of the District which includes Hayward, Castro Valley and San Leandro (along with Ashland and Cherryland). What the voters will think of such an investment is not for me to speculate on, but other non-profits have already asked that their share be considered in such generosity.

The future of the District looks good as our medical office buildings start to fill up and the revenues increase and as the economy improves. We expect to be able to make more contributions in the future and the value of our assets to increase. In order to do that, the Board needs to continue to manage the District’s assets and exercise its stewardship. It will be worth considerably more in the future.

The District Board has displayed extraordinary concern and spent considerable resources of the District in the effort to keep San Leandro Hospital open. These efforts continue and we are doing everything to explore every avenue and source of help. It would be nice to know that some of our past contributions are acknowledged, even as leaders come to us for further assistance.

Dev Mahadevan, CEO, Eden Health District