Sutter Health Eyes Purchase of Brown & Toland Medical Group

Sutter Health, which owns several hospitals in northern California including California Pacific Medical Center and St. Luke's in San Francisco, is eyeing the purchase of Brown & Toland Medical Group. A source says Sutter wants to take Brown & Toland national. But a growing minority of the 1,500 Brown & Toland physicians are unhappy with the relatively small amount of money the medical group has offered certain doctors for their shares. They're also worried that a lack of accountability will allow Brown & Toland's CEO and other executives and board members to walk away with too large a slice of the pie if the sale to Sutter goes through.

Nearly 200 of Brown & Toland's 1,500 physicians signed a petition demanding information about the compensation packages of CEO Gloria Austin and Board President Dr. Joel Klompus, according to the San Francisco Business Times. Attorneys have told the physicians that, as shareholders, they have the right to know details of Austin's and Klompus' compensation. Although Brown & Toland apparently continues to refuse to disclose the information to the doctors, a source says Austin makes just less than $1 million and Klompus makes slightly more than $500,000.

Brown & Toland placed an advertisement in the March 14 San Francisco Chronicle requesting to buy back shares from 62 shareholders for $400 each. That's the value the shares had 16 years ago. The notice stated that shareholders whose certificate numbers were listed in the ad were no longer qualified to hold shares in the corporation. But Dr. Roger Friedenthal, who is leading the group of dissident physicians, says he thinks most of the 62 physicians whose certificate numbers were listed are connected with the Physician Foundation at CPMC. The 80-member specialty group has been at odds with Brown & Toland over contracting and other issues. Friedenthal says that just because a physician no longer contracts with Brown & Toland doesn't mean he or she cannot be a shareholder.

A source also reports that physicians are concerned about reimbursement rates for their services if Sutter buys Brown & Toland. Doctors fear that Sutter might impose Medi-Cal reimbursement rates especially in practice areas where there is a surplus of physicians.