Sutter Health will transfer control of San Leandro Hospital and $22 million to the Alameda Health System in order to prevent the collapse of the 93-bed facility and free Sutter of a financial albatross once and for all.

The county on Tuesday signed a nonbinding letter-of-intent to take ownership of the hospital, according to Sutter officials. The deal would end years of legal battles, as well as the near shutdown of San Leandro Hospital's emergency room, the only such facility in the city.

"It would have been a disaster if that had closed," said Supervisor Wilma Chan, who brokered the deal between AHS and Sutter.

She brought the two sides back to the table for a third time in five years.

"We all agreed not to talk about the past but to go forward," she said Tuesday, crediting both sides for their willingness to compromise and put the past behind them

She also credited the community's lobbying to keep open San Leandro Hospital, which has an emergency room that serves about 27,000 people a year.

The community "was really my bottom line," she said.

The deal includes the $22 million cushion and a complete transfer to AHS of the facility, supplies and equipment, as well as control over how to run the hospital.

"This shows Sutter Health's support to the community. After years of negotiations about the best use of the hospital, we decided the county is best positioned to operate it and determine its best use in the community," Sutter Health Spokeswoman Stacey Wells said Monday of the deal.


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As for San Leandro Hospital's current 300 to 400 employees who would be affected, Wells said Sutter will work with the county to ensure what she called "a smooth transition for staff."

Once the money is in escrow in July, Sutter can draw down as much as $6 million of the $22 million to keep the hospital running until AHS takes over in early October.

AHS will have to rebuild services such as orthopedic surgery that Sutter has been cutting at San Leandro Hospital, which lost $40 million between 2011 and 2012

Chan said the facility will need at least two years of financial support.

Alameda County and the city of San Leandro committed $1 million each to AHS contingent on keeping the emergency department open.

AHS Executive Director Wright Lassiter III was noncommittal in the past about emergency services, and there is no guarantee about how long he will keep it operating. He did not respond to several attempts to contact him.

But in a statement to AHS employees released Friday he called the agreement a "significant milestone" toward efforts to expand the system's network of facilities and find a new home for inpatient physical rehabilitation services being moved from Fairmont Hospital.

In a similar statement released Tuesday, Lassiter said that despite the progress represented by the letter-of-intent, "there is still considerable work to be accomplished in bringing this arrangement to fruition."

The two sides have until July 1 to reach a definitive agreement that will go to the AHS board of directors for approval.

Eden Township Healthcare District, the previous owners of the hospital, last year lost control to Sutter after a legal battle. The county is expecting Eden to contribute about $20 million to the deal, Chan said. "We are expecting a large donation."