While the raucous debate over health insurance reform continues on the national level, Marin is quietly working out the details of its own form of "public option" healthcare reform.

During a season of "town hall" meetings across the country that mostly devolved into name calling and slogan throwing, the board of the Marin Healthcare District has been hammering out the details of a new governance structure for a revamped district that will resume control over Marin General Hospital. While debate over the details sometimes dips into political dogma, the board has for the most part done the work to build a governance structure for running the hospital after Sutter Health returns the facility to district control.

From a strictly political viewpoint, Sutter hasn't made the job any easier, especially with the revelations of the amount of money it has been taking out of Marin General. And the nonprofit healthcare corporation has acted as secretly as possible, often rebuffing requests for information that would aid the transition of the hospital to the district, which will begin June 20, 2010. That's about five years early on a lease Sutter negotiated with the district. Sutter agreed to an early end as part of a deal that allows the corporation to withdraw "excess cash" from Marin General. Since 1995, Sutter has withdrawn about $120 million.

The criticism hit the fan in July, when Sutter released its most recent excess cash withdrawal numbers. News about the cash transfer went public at a meeting of the healthcare district's lease and building committee. Committee members already knew that Sutter had extracted about $25 million from Marin General in 2008.

Beyond the $25 million, Sutter revealed that it had also taken about $24 million in excess operating revenue and used to it replenish a sagging pension fund. Under a 2006 transfer agreement, Sutter is obligated to turn over the hospital with a fully funded pension program. The company already had replenished the fund to the tune of $500 million. But Sutter has not been immune to the financial meltdown, and its pension fund investments took a big hit. At the time, healthcare district board member Larry Bedard also called into question Sutter's lack of a funded depreciation account for Marin General.

When the hospital joined the Sutter system, Bedard says, about $830 million in funded depreciation existed for hospitals in the Sutter system. But all that money is on the books for hospitals in the system other than Marin General. Bedard says the Marin General Hospital funded depreciation account "is zero."

Bedard called for the private operating board of the hospital to halt or at least stem the outflow of funds from Marin General. Assemblyman Jared Huffman, D-San Rafael, took note of the situation and asked the private board of the hospital for information that would explain how and why its members were making decisions regarding the district's interests and Sutter's interests. The private board rebuffed Huffman, who said if the board failed to explain its actions, he would call for an investigation.

Marin isn't alone in questioning the Sutter Health operations. Other communities in which Sutter has facilities also are raising red flags. Huffman recently joined California Senate Judiciary Committee Chairwoman Ellen Corbett, and several other colleagues in Sacramento, to call on the attorney general to investigate Sutter. Among the issues raised is the legitimacy of Sutter's nonprofit status.

"What is particularly disturbing is that in many of these cases, Sutter has closed community hospitals, or driven them to closure by opening hospitals nearby to directly compete with them," says Huffman. "I'm concerned that some of the money taken out of Marin General may be used to fund a competing facility."

Sutter already has purchased property in Marin Square in San Rafael. Although the company has announced no specific plans, speculation includes the possibility that it could open a healthcare campus there to compete with Marin General. Sutter already has Novato Community Hospital and the Sutter Health Facility in Terra Linda.

"I think Sutter is incredibly competitive," says Bedard. "I think they want to kill [Marin General, and they want to make it look like suicide. I think Sutter is very unhappy up at the board level, and they would be just as happy to see us fail so they can say, 'See, we told you so.' But they want it to look like we are going to fail because of our own incompetence."

A serious lack of public-relations acumen has, in large part, led to the calls for the investigation of Sutter. In Marin, the district's split boards--one public and elected, one private and appointed--has played a central role in the criticism of Sutter. But the fight over Marin General governance actually goes back to 1985.
Back then, the world of community hospitals was in an uncertain state.

To cope with an increasingly competitive healthcare-delivery atmosphere, the healthcare district board agreed to lease Marin General to a new entity called the Marin General Hospital Corporation--an entity created by newly appointed CEO Hank Buhrmann. The corporation had its own operating board, separate from the elected healthcare district board.

That corporate board was responsible for the day-to-day operations at Marin General; the public board set policy. The arrangement allowed the corporate board to make decisions beyond the glare--some say sunshine--of public debate. That board structure lasted through different permutations as the Marin General Hospital Corporation became an affiliate of California Healthcare Systems. Then Sutter arrived and took control of the hospital with its own private board on which it placed some members.

Almost immediately after Buhrmann completed his deal, critics charged that he and the district directors who voted for his plan had stolen a public asset from district residents. The critics mounted a campaign to regain control of the hospital that has lasted more than 20 years. That chapter is coming to an end, but as with revolutions, it's often harder to create a government than it is to bring one down.

Sutter critics have kept that debate over a governance structure alive, and it's still a bone of contention as the currently elected board hammers out a governance structure in preparation for the day Sutter returns the keys to Marin General.

The Sutter critics still maintain that the healthcare district should reject the dual-board concept and have the elected board control operations at the hospital. But, say proponents of the two-board approach, a hospital just can't survive under those circumstances. The district needs an operating board that can make business decisions shielded from political debate.

Sutter critics, however, say look at how Sutter and its private board have failed to act in the best interest of the district residents. What will be different when the healthcare district assumes control of the hospital and then creates its own private operating board, a structure similar to that under Sutter?

The current Sutter operating board "has two masters," says Jennifer Rienks, a member of the elected board. "They've got Marin General and Sutter. Our concern with that board has always been what happens when push comes to shove, and what's good for the hospital isn't good for Sutter, or vice versa." That's the kind of investigation Huffman and others are seeking.

"We're not going to have that situation," says Rienks about the bipartite board structure. "It's all going to be about what's good for the hospital" and Marin residents. Unlike Sutter, the healthcare district will not withdraw "excess cash" and send it to other communities, which Sutter says it does to promote healthcare goals throughout its 26-hospital system in the state.

The elected board this week heard and unanimously approved a second reading of a governance structure for the district. Under the structure, and after an initial period during which the operating board will be formed through appointments, a new governance structure will begin.

The process follows an advise-and-consent model. Members of the operating board (which will still meet in private, shielded from political clamor) will propose nominees for open seats on the operating board. The elected board will have the right to approve or reject the nominees. There's one other crucial difference in the new structure, says Bedard: Board nominations and appointments "will be based on [healthcare expertise."

The current operating board includes members from the community-at-large. That's not sufficient for a hospital operating board, say Bedard and others. The board needs medical expertise to navigate the increasingly complex waters of healthcare delivery. The longtime Sutter critics would like to see the elected board appoint members of the operating board, without the additional step of allowing the operating board to put up nominees.

Another bone of contention is whether the elected board should have the power to hire and fire the district CEO. That would allow special interests to inject political pressure tactics into a decision that should come from a logical rather than a visceral source, says healthcare district board member Sharon Jackson.

The governance structure the district is forging will create performance criteria for the operating board. The elected board will retain responsibility for oversight and will retain the right to assume control if things really go south. That's an essential difference from the current governance structure.

"We're the parent; they are the subsidiary," says Rienks. "They are in a sense going to be working for us. I do believe that whenever you want people to do a good job you have to give them free rein." But, the elected board will keep its hands on the bridle. "We need to have oversight, and I think that, especially given all the things that happened with Sutter's board, we do need to demonstrate accountability and transparency."

In addition to creating a new governance structure, the district also is hammering out new rules to cover conflict of interest and other issues that will be included in a set of new bylaws that will govern the district and its hospital operations. Until the final approval of the complete set of bylaws, segments can be amended. "It's been a difficult transition," says Jackson, "but we've quietly been working on the nuts and bolts."

The work to return the hospital to public control mirrors the national healthcare debate. Assuming responsibility for the healthcare delivery system is a key factor in both arenas. To underscore that concept in Marin, say Bedard, Rienks and others, the district should engender a sense of ownership among district residents. Holding community meetings to discuss healthcare policy could engage residents, many of whom have not been part of the discussion.

"That's really important to do," says Rienks. "It is the residents' hospital, and I think we've forgotten that over the years. We have an incredibly talented pool of people in Marin. If we work together we can make Marin General a world-class hospital."

The return of Marin General comes at an opportune time, she adds. "If there's anything this whole debate over healthcare has taught us, it's you have to become an advocate, you have to learn about the issues. The hospital is a great place for us to start taking control of our healthcare by taking control of our hospital."

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