An arbitrator has awarded publicly owned Marin General Hospital in Greenbrae, Calif., $20.9 million after sorting through a blizzard of post-breakup litigation with the hospital's former parent system, Sutter Health.
Both Sutter and Marin General claimed victory after arbitrator's decision was announced
Tuesday. Officials for Sutter said they were gratified that Arbitrator Rebecca Westerfield rejected most of the hospital's $300 million in claims against the former parent system, including key arguments that Sutter and its executives had breached a fiduciary duty owed to the Northern California hospital.
“Sutter Health not only met the fiduciary requirements … but also returned a high-quality, well-run hospital that, at the time of transfer, generated revenue well in excess of its monthly expenses,” Sutter President and CEO Pat Fry said in a statement. “Sutter is extremely pleased with the arbitrator's decision to deny the vast majority of the damages the district sought and her finding that Sutter and its directors acted prudently and in accordance with fiduciary duties.”
Marin General CEO Lee Domanico said in a written statement that “Westerfield found that Sutter willfully and purposely failed to meet their contractual duties. Sutter also was found to have breached its duty of good faith and fair dealing by charging MGH for 'cost of capital' despite providing no capital to MGH 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. Judge Westerfield also found that Sutter failed to make reasonable efforts to cooperate with the IT transition at the Hospital and failed to pay its agreed share of IT training costs.”
The district finally took control of the hospital's local operating corporation, Marin General Hospital Corp., in June 2010. The corporation subsequently sued Sutter, claiming Sutter had inappropriately transferred at least $120 million in assets to its centralized reserves rather than investing in Marin General, among other claims that added up to $300 million.
Ultimately, Westerfield ruled that Sutter owed Marin General for just a handful of allegations relating to Sutter breaching a physician recruitment agreement, improper charges for the cost of capital, withdrawals of excess contributions from a pension fund, and a refusal to cooperate with a data-transfer effort during the corporate transition.