After agreeing to a rent increase, Marin General Hospital in Greenbrae, Calif., will continue to lease the 110-bed facility from the hospital's owner, the Marin Healthcare District.
The Sept. 20 agreement settles a two-year legal dispute between Marin General, a private not-for-profit corporation, and the district, which wanted to take the hospital back.
The district's lawsuit, filed November 1997 in Sacramento (Calif.) Superior Court, said the lease, which took effect in 1985, was invalidated by conflicts of interest by Marin General officials and failure by the hospital to live up to its financial commitments to the district.
Marin General and its parent, Sacramento-based Sutter Health, denied all allegations.
Sutter absorbed Marin General in January 1996, when it acquired San Francisco-based California Healthcare System.
A week before the trial was set to begin, the district's publicly elected five-member board formally accepted Marin General's settlement offer.
Under terms of the agreement, Marin General will pay the district a one-time cash payment of $400,000 to resolve all economic claims and will increase its annual lease payment to the district to $363,000 from $213,000, effective Jan. 1, 2000.
The annual lease payment will be subject to an inflation adjustment, which is capped at 5% a year.
The 30-year lease expires in 2015.
That translates into about $2.3 million in additional cash for the district during the next 15 years.
Hospital governance will remain unchanged.
"We're happy to have this behind us and to get back to doing the business of the district," said Diana Parnell, M.D., chair of the district board.
Etta Allen, chairman of the Marin General board of directors, said in a written statement that the hospital welcomes "the opportunity to work cooperatively with the district."
The settlement does not require court approval, according to Marin General spokesman Jim Loveland.