California county pushes ahead with purchase of Verity hospitals despite AG opposition
- Santa Clara County, California, is moving ahead with the acquisition of two Verity Health System hospitals, despite efforts by California Attorney General Xavier Becerra to block the sale.
- The county's board of supervisors voted Tuesday to fund wages and benefits for employees of O'Connor Hospital in San Jose and Saint Louise Regional Hospital in Gilroy. The board also put money into reserves for capital and other expenses it anticipates above the $235 million purchase price, County Executive Jeff Smith said.
- California-based Verity Health filed for bankruptcy in August. Corona, California-based KPC Group plans to buy four other Verity hospitals, while Silicon Valley Medical Development has a bid on five clinics owned by Verity Medical Foundation, The Mercury News reports.
Smith told Healthcare Dive the county has plans in place for the transition and hiring of employees, is getting contracts in place with doctors and suppliers and is pursuing necessary licenses with the state. "We're moving ahead as if it's going to be approved, and the only risk is the attorney general," Smith said.
At the time it filed for Chapter 11 bankruptcy, Verity was facing $175 million in annual losses and more than $1 billion overall. The health system secured debtor financing of up to $185 million and maintained its intention to keep its six hospitals open as it moved through the bankruptcy process.
On Jan. 30, a federal bankruptcy judge denied Becerra's petition to block the sale of O'Connor Hospital and Saint Louise Regional Hospital, citing lack of standing. Becerra sought a temporary stay of the sale until Santa Clara County agreed to conditions set by former attorney general and U.S. Senator Kamala Harris (who just announced a 2020 presidential bid) of the 2015 sale of six California hospitals. The conditions aim to ensure changes in ownership and financing won't affect access to emergency care, women's health and other services for local residents.
In a statement following the ruling, Becerra said the decision "strips our office of the authority to protect patients when hospitals are transferred to public entities like the County of Santa Clara. This is concerning since the County of Santa Clara would not articulate which of these important patient protections and services that were a condition for the operation of Verity's hospitals would survive in the transfer of ownership. Nor would Santa Clara County explain why it would not commit to maintain these levels of patient protections and services."
The county maintains its one remaining hospital can't meet the needs of the community, particularly its safety-net patients, many of whom were cared for at the Verity hospitals. "The risk of closing them would mean losing the ability to take care of those people, and we have a legal, moral obligation to do so," said Smith, who is a physician and lawyer.
He said the funding reserves approved by the board include money for capital expenses, as well as a transition period when revenue likely won't meet expenditures.
Becerra has asked the U.S. District Court in Los Angeles for an emergency stay of the bankruptcy court's ruling, pending an appeal. That hearing is set for Feb. 22.
The case echoes increasing activism by state regulators concerned about the effects of healthcare consolidation on access and costs. Massachusetts' attorney general signed off on the merger of Beth Israel Deaconess Medical Center and Leahy Health, but only after the parties agreed to show evidence they're holding down costs while maintaining access to low-income patients.
Becerra has gone to court for California patients before. Last year, the attorney general filed an antitrust lawsuit against Sutter Health accusing the system of "illegal anti-competitive conduct" that he said drove up healthcare costs. Sutter maintains its hospitals charge less than other northern California hospitals.