The district will pay out most of that amount, $2.9 million, to its computer vendor over the next seven years. But $1.1 million will have to be paid soon after the district regains control of the hospital from Sutter Health in June 2010, increasing pressure on the district to secure adequate start-up capital. Sutter is required to leave the hospital with just $10 million in operating capital when it leaves.

Lee Domanico, the district's chief executive officer, has said GE Capital has signed a letter of intent to loan the district $30 million at that time. Domanico has also urged the not-for-profit corporation board that oversees Marin General Hospital for Sutter Health to assert its authority and prevent Sutter from continuing to transfer profits out of the hospital prior to the changeover. Since 1995, Sutter has transferred from Marin General $120 million in profits, including $49 million in 2008 and $39 million in 2007.

Domanico reported to the district board on Monday that the $1.1 million expense resulted because Sutter withheld key data files beyond the point at which the data could have been easily loaded into the system electronically. The district obtained the files only after Marin Superior Court Judge Michael Dufficy ordered Sutter's attorneys to participate in an expedited arbitration.

Domanico

"These additional costs caused by Sutter/Marin General Hospital Corporation were completely avoidable and we intend to pursue compensation from the responsible parties," Domanico wrote in a report to the district board.

Kathie Graham, a spokeswoman for Sutter Health, said, "We have not received a demand from the district for these damages, nor any documentation. We do not believe we have caused any damages to the district. Sutter remains committed to a smooth transition of the Marin General Hospital to the district."

The district has to install a new computer system to replace the one provided by Sutter Health. In 2006, Sutter entered into a legal settlement with the district, which owns the hospital, agreeing to end its 30-year lease early and return control of the hospital to the district in June 2010.

The district has signed a $55 million contract with Dallas, Texas-based Affiliated Computer Services that calls for the company to deliver the new computer system and maintain it through 2017. ACS is subcontracting with San Francisco-based McKesson Corp., which is supplying its Paragon software system.

District board member Jennifer Rienks said Sutter also played a role in another of the unexpected costs. Those resulted when the district underestimated the number of cardiology and radiology images that would have to be converted into a format compatible with the new computer system and the amount of additional storage capacity that would be required to accommodate the images.

The district's contract with ACS called for conversion and storage of 400,000 images.

"We just had the figure Sutter gave us for that," Rienks said.

Once the conversion began, it was discovered that there were close to 1 million images. The cost for converting those additional images and storing them over the next seven years will amount to $1.13 million, or $161,964 per year.

Contact Richard Halstead via e-mail at rhalstead@marinij.com