Marin General sues Sutter Health to recoup $120M

Marin General Hospital Corp. filed a lawsuit in Superior Court in Marin County, Calif., Thursday accusing Sutter Health of illegally siphoning off $120 million of the hospital's money from 2006 on, the North Bay Business Journal reports.

The suit claims that Sutter Health transferred more than $30 million a year from the Greenbrae medical center's reserves, moving money into Sutter accounts for its own benefit between 2006 and 2010 for unclear reasons. Before 2006, cash sweeps to the Sacramento-based network were about $3 million a year.

According to Marin General, board shenanigans were involved. The $120 million in money transfers were facilitated by a hospital board "with a clear conflict of interest," the suit alleges. The governing board of the hospital included Sutter employees who were dependent for their career advancement on Sutter management. Although the board had a detailed knowledge of the large amounts of cash Sutter was taking and the effect on Marin General's finances, the board never questioned the appropriateness of Sutter seizing the money, according to the suit.

Officials with the Marin Healthcare District, which owns the hospital, allege that Sutter's transfers depleted the reserves and hindered operations at the hospital, which is the only trauma center in the county, according to the Business Journal.

The actions detailed in the lawsuit began when Sutter Health Corp. south to end its 20-year management contract with Marin General five years earlier. Marin General alleges that upon agreeing to a 2010 termination, Sutter began the massive cash transfers and sought to undermine Marin General as a future competitor.

In response to the lawsuit, Sutter spokeswoman Kathie Graham said in a statement that Sutter plans to vigorously defend itself and that the Marin Healthcare District's lawsuit has no basis. It has long asserted that cash transfers--known as equity transfers--are perfectly legal and routine for hospital organizations, the Business Journal reports.
To learn more
- read the complaint (via North Bay Business Journal)
- here's the Marin General press release
- read the Associated Press article
- here's the North Bay Business Journal article