AG doubles down in new bid to block hospital sale

    Last week’s local jubilation over a second court victory in the battle to save Saint Louise Regional Hospital and O’Connor Hospital was short-lived, as California Attorney General Xavier Becerra two days later made one final attempt to block the sale of the two hospitals to Santa Clara County.

    Becerra late Friday, Feb. 1 asked the U.S. District Court for an “emergency” stay of a Bankruptcy Court approval of the sale, which the same bankruptcy judge had affirmed in emphatic terms on Jan. 30.

    The final legal showdown is set for Feb. 22 in a hearing in Los Angeles, less than one week before the county’s purchase agreement with Verity Health System expires.

    That means a judge could make a definitive ruling in the dispute in time to salvage the $235 million deal and keep the hospitals open—if Becerra loses.

    The unlikely dispute between Santa Clara County, hospital patients and staff on one hand, and the recently elected state attorney general on the other roiled past the boiling point in the last week of January.

    In one week:

    • The attorney general said if the sale closes March 1, his bid—pending in U.S. District Court—to claim authority over the deal would be dead.
    • The county—and U.S. Bankruptcy Court—said Becerra has no legal basis for his claim.
    • The county said if Becerra is successful in his second attempt at a stay—the first was denied in Bankruptcy Court Jan. 30—the Verity Health System sale of the two hospital would be dead.
    • Patients, health professional and local politicians took that one step further, saying Becerra’s actions would close the hospitals and actually put lives of South County residents in danger.
    • The attorney general told the court he didn’t believe these dire predictions.
    • In his filing for the stay in U.S. District Court, Becerra said he needed to stop the sale to enable his appeal to continue, but he made no mention that his effort to “preserve vital healthcare services in Santa Clara County” might have the opposite effect.
    • The attorney general alleged again in more certain terms Feb. 1 that the county had “refused” to guarantee the provision of essential healthcare and emergency services, or to promise acceptance of Medicare and MediCal patients.
    • County Executive Jeff Smith accused Becerra of making “false” and “misleading” statements, referring to well-publicized statements by the county and to the attorney general’s rejection on Jan. 22 of a signed agreement with the county assuring the provision of the healthcare services to all county residents.
    • The attorney general said that if he can’t enforce guarantees, “the county is free to close the hospitals or eliminate vital healthcare services in those communities.”
    • This claim was called “just absurd” last week by Santa County Executive Jeff Smith. Smith said the county offered to pay $235 million to buy two hospitals to keep and expand vital healthcare services—not to shut them down.

    Becerra has declined invitations to meet directly with county officials, and has refused all requests for media interviews.

    One lawyer familiar with the case characterized Becerra’s filing late Friday on the eve of Super Bowl weekend as a “Hail Mary” pass, aimed at convincing a federal judge that only the attorney general could protect healthcare services in Santa Clara County.

    Becerra submitted his 29-page filing late Friday, Feb. 1, two days after a similar request for a stay was rejected by the same U.S. Bankruptcy Court judge who had approved the hospitals’ sale in late December.

    Becerra argued in his District Court request that a stay “would promote the public interest,” and “involves important issues of state law regarding health, safety and welfare.”

    Without the stay, “the families and patients served by O’Connor Hospital and Saint Louise Regional Hospital will suffer irreparable injury,” wrote Becerra.

    In the latest court filing, the attorney general made no mention of the claim by the county and Verity Health that if he is successful in his legal fight, O’Connor and Saint Louise will close.

    He said in a Jan 31 press release that the Jan. 30 court decision “strips our office of the authority to protect patients when hospitals are transferred to public entities.”

    Becerra’s Feb. 1 filing repeated arguments that were soundly rejected by Bankruptcy Judge Ernest Robles in his Jan. 30 ruling. Robles said he was concerned about the impact on Santa Clara County residents if the two hospitals were to close.

    Smith said the attorney general’s actions could only be explained by a desire to exert his authority, at the expense of the health and safety of Santa Clara County residents, especially those who live in the South County communities of Morgan Hill, Gilroy and San Martin.

    In his Jan. 30 ruling, Robles agreed with that assessment, saying the harm to the attorney general’s office would pale in comparison to the harm to Santa Clara County if the hospitals were to close.

    Robles also said that Becerra’s District Court appeal was futile and that he would probably lose.

    Becerra said the opposite on Feb.1, telling the District Court he is likely to succeed on the merits of his appeal of the Bankruptcy Court’s approval of the sale.

    Robles characterized the attorney general’s legal case as weak, with a “lack of merit.”

    “The attorney general still has not identified the specific statutory provision establishing his authority to review the sale,” Robles said in the order.

    Smith said in an interview on Jan. 31 that the stated goals of quality health care for all are share by Santa Clara County and the attorney general.

    “We’re on the same time team, with the same goals,” he said. “It’s as if someone on the ame team is trying to shoot me in the back.”

    “We’re going to continue to work as if it’s a done deal. We’re anticipating a clean sale order on the First of March,” he said.

    In an interview, Richard Adcock, chief executive officer of Verity Health System—whose filing for Chapter 11 bankruptcy protection last fall opened the door to the county’s purchase offer—praised the Jan. 30 ruling by the bankruptcy court.

    “We are happy and proud” of the sale of two of its six hospitals to Santa Clara County and the pending sale—headed for approval next week—of the sale of the other four hospitals to KPC Group, a private, Southern California firm, he said.

    Adcock said Verity is working on a transition plan with Santa Clara County, to provide IT and other support in the weeks after the sale is closed March 1.

    “We believe that working with Santa Clara County is in the best interests of those hospitals, to keep them open,” he said.

    In court testimony, Adcock had said that if a stay were granted, “the sale would be in material danger of collapsing.”

    The Verity Health System facilities in Santa Clara County beginning March 4 will be owned by the County of Santa Clara and will be operated as community hospitals with local control by the physicians at the hospitals and by local administrators. “The addition of these hospitals to the county health system will expand access for all residents to the highest quality healthcare,” Smith said.

    He said he expects to hire more than 2,000 hospital staff and contract with approximately 700 physicians now affiliated with the two Verity Health hospitals.

    “Contrary to the attorney general’s assertion, throughout the entire purchase process the county has been committed to continuing to provide essential healthcare services, including access to emergency care, urgent and intensive care services, coronary care and neonatal intensive care,” Smith’s statement read. “The only reason for the county to purchase the hospitals is to keep them open. It is misleading to suggest otherwise.”

    “All of the clinical services the attorney general has been talking about are also provided comprehensively and with high quality at our award-winning hospital, Santa Clara Valley Medical Center,” he said. “The county intends to expand those high quality and intensive care services to O’Connor and St. Louise hospitals upon the close of the sale,” Smith said.

    “Closure of the hospitals, even if it were temporary, would severely harm the public interest,” Bankruptcy Judge Robles concluded. “The attorney general’s theory is that public health and welfare can be adequately protected only if he has the opportunity to enforce the conditions.”

    “This argument overlooks the reality that enforcement of the conditions would likely lead Santa Clara to withdraw from the sale,” he wrote.

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