A U.S. District Court judge in Los Angeles rejected a bid by California Attorney General Xavier Becerra to block the purchase of two failing Verity Health System hospitals by Santa Clara County.
The Feb. 22 ruling cleared the way for the county to close its $235 million purchase of Saint Louise Regional Hospital in Gilroy and O’Connor Hospital in San Jose, plus the DePaul Urgent Care Center in Morgan Hill this week. County officials said they expected to close the deal Feb. 28, when a court-approved purchase agreement expired, and take ownership on March 1.
“We are pleased that the district court denied the stay, which will allow the county to complete its purchase of the hospitals,” said County Counsel James Williams. “We will now be able to keep these hospitals open to ensure access to healthcare for the residents of Santa Clara County.”
The federal court decision ended nearly two months of anxiety for patients, staff and community leaders, especially in southern Santa Clara County, where for more than 100,000 people Saint Louise is the only local option for many healthcare services.
Becerra had appealed a bankruptcy court’s December approval of the sale to U.S. District Court, and sought a stay of the sale, pending resolution of the appeal. If successful, Becerra’s effort would have voided the county’s purchase agreement and forced the two hospitals to close. There were no other purchase offers.
“The public interest factors weigh against the stay,” U.S. District Court Judge R. Gary Klausner wrote in his six-page opinion. “A stay may result in the cancellation of the sale, which could in turn lead to a closure of both hospitals.
“The bankruptcy [court] did not abuse its discretion when it found that ‘far from protecting the health and welfare, a stay would set in motion a series of events that, in all probability, would reduce the availability of healthcare services to the public,” the judge wrote in his ruling.
A spokesperson for the attorney general still had conceded defeat early this week. On Feb. 25, Becerra’s press office issued a terse statement: “We are exploring our options.”
The attorney general had only one option after Klausner’s ruling—to ask the 9th CIrcuit Court of Appeals to intervene before Feb. 28, a move observers considered futile and unlikely.
“These two hospitals are essential to the continued health and well-being of folks in our region,” said Santa Clara County Supervisor Joe Simitian, president of the county Board of Supervisors. “Continued litigation by the attorney general is a distraction from the important work we have to do. It’s time to stop arguing about who’s right and start focusing on what’s right, and that’s taking care of the folks here in the county who need our help.”
Becerra had argued it was necessary to block the sale—even it if meant closing the hospitals—to ensure that his office could enforce guarantees of healthcare services.
“Two federal judges have now rejected the attorney general’s arguments against the county as meritless attempts to exert authority he does not have over local governments,” said County Executive Jeffrey V. Smith. “The county will ensure that O’Connor and Saint Louise hospitals continue serving our communities with the enhanced services we will offer through the hospitals as part of the county’s integrated health system.”
Klausner affirmed in today’s ruling an earlier decision in Bankruptcy Court that the sale of the hospitals “is not reviewable by the attorney general.”
“Losing Saint Louise Hospital simply was not an option for me and for the 100,000 Gilroy and Morgan Hill residents who would have lost their local hospital,” said Supervisor Mike Wasserman, whose district includes Gilroy and Morgan Hill. “I am grateful to the many people who joined our fight.”
“This is all about the thousands of patients who need our services, 451 hospital beds and 1,700 highly trained and dedicated nurses, doctors and other healthcare industry workers who provide those services,” said Supervisor Cindy Chavez in a statement.
“We are very pleased that the district court denied the stay, allowing the county’s purchase of the hospitals to go forward,” said Williams. “The county has and will continue to serve as a model for local governments nationwide in protecting the health and well-being of our residents.”
Smith predicted that after the county takes legal possession of the two hospitals on March 1, the transition process will be “seamless” as far as patients are concerned, wth most of the doctors and staff at the two hospitals staying at their current jobs.
There is one more bump in the road for the county—a possible strike by Saint Louise and O’Connor nurses.The California Nurses Association, which represented nurses at O’Connor and Saint Louise under contracts voided by the Bankruptcy Court, has asked the state Public Employment Relations Board to intervene on the nurses’ behalf.
The nurses union is a rival of the Registered Nurses Professional Association, which represents nurses at the flagship of the expanded county healthcare system, Santa Clara Valley Medical Center. The new county-employee nurses will be covered by the RNPA contract beginning March 1.
CNA members told the county Board of Supervisors last week they would strike at O’Connor and Saint Louise if the county didn’t recognize their union and begin negotiations on a new nurses contract for the two hospitals. The CNA has asked the state Public Employee Relations Board to seek an injunction in state court next week to force the county to the bargaining table.
The county said to do so would violate state law, the RNPA contract and the county’s own personnel rules.
“We asked the PERB to seek an injunction to ensure the county bargains in good faith with the Saint Louise and O’Connor nurses through their chosen union, CNA,” said Andrew Prediletto, the regional CNA director. “We want to ensure nurses stay at the hospitals and to preserve the patient care protections that nurses have won over the past two decades.”
Felix de la Torre, general counsel for PERB, said he will make his recommendation on the CNA request to the board by March 1, but said he could not say when or if the quasi-judicial board would make a decision.
