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U.S. Bankruptcy Court Rules in Favor of County of Santa Clara and Upholds Sale of O’Connor and St. Louise Hospitals


SANTA CLARA COUNTY, CALIF.—Today, the U.S. Bankruptcy Court in Los Angeles denied a request from the California Attorney General to block the purchase of O’Connor Hospital, Saint Louise Regional Hospital, and the DePaul Health Center. Barring further opposition by the Attorney General, this action allows the County to complete the sale and continue offering high quality, critical health care services in these hospitals.

“We are happy about the Court’s decision and will move forward with the maintenance and expansion of community healthcare services in San Jose and South Santa Clara County,” said County Executive Jeffrey V. Smith, M.D., J.D. “We will ensure the continued availability of essential healthcare services in the entire region, something the Attorney General was jeopardizing by attempting to block the sale and threatening the closure of these hospitals.”

As a public hospital system, the County provides care to all people living in Santa Clara County, and this acquisition will support the County’s ability to serve even more residents in the community. California law (under Government Code and Welfare and Institutions Code) lays out very specific guarantees requiring county governments to provide comprehensive healthcare to residents of their counties. The County of Santa Clara has effectively complied with all the medical and clinical conditions for the purchase and will continue to meet all state law requirements – as it already does throughout its high-quality health system.

Since October 2018, the County has been working with the Attorney General’s office to address the conditions of the sale. The County of Santa Clara has been very clear about why the various non-clinical conditions drafted for private entities were either inapplicable or made no sense when applied to the County.

“Sadly, the Attorney General’s Office has refused to work with the County to assuage its concerns. The Office of the Attorney General continues to make false accusations regarding the County’s ongoing commitment to the provision of medical services,” Smith continued. “It is simply not accurate for the Attorney General to argue that the County has not explained and provided reassurances that we will provide all appropriate healthcare services to all patients in need in Santa Clara County, regardless of their ability to pay.”

The Verity Health facilities in Santa Clara County will be owned by the County of Santa Clara and will be operated as community hospitals with appropriate local control by the physicians at the hospitals and by local administrators. The County health system provides a wide range of specialty and other essential services and is known for offering state-of-the-art care to all patients. The addition of these hospitals to the health system will expand access for all residents to the highest quality healthcare. 

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. 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 County’s award-winning hospital, Santa Clara Valley Medical Center. 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. “We hope that now that the Court has made its ruling, we can all focus on the health and welfare of our residents.”

The County is awaiting Attorney General Becerra’s response to the ruling, as the Attorney General can request a stay at the District Court level and further attempt to block the sale. We hope the Office of the Attorney General will not continue its opposition in the District Court. If the Attorney General’s office continues its attempt to close the hospitals, we will continue to fight for the health and welfare of our residents.

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On December 27, 2018, the U.S. Bankruptcy Court in Los Angeles approved the County’s bid to acquire O’Connor Hospital in San Jose, St. Louise Regional Hospital in Gilroy, and DePaul Health Center in Morgan Hill for $235 million. The California Attorney General requested that the U.S. Bankruptcy Court stay the sale order approving the purchase of the hospitals by the County.

Since October 2018, the County has been in close contact with representatives of the Attorney General’s Office on numerous occasions to address the Attorney General’s concerns regarding the sale conditions. Based on these discussions, the California Attorney General issued a clarification letter on November 9, 2018, stating clearly that a number of the more significant conditions would “not be enforced” as to the County.

In today’s U.S. Bankruptcy Court hearing in Los Angeles, the Judge issued a tentative ruling to deny California Attorney General Xavier Becerra’s request to stay the Sale Order, thus approving the sale of O’Connor and St. Louise hospitals and the DePaul Health Center to the County of Santa Clara.

This link provides access to the documents filed in the federal bankruptcy action:

About the County of Santa Clara, California 

The County of Santa Clara government serves a diverse, multi-cultural population of 1.9 million residents in Santa Clara County, the sixth largest county in California. With a $7 billion budget, more than 70 agencies/departments and 20,000 employees, the County of Santa Clara plans for the needs of a dynamic community, offers quality services, and promotes a healthy, safe and prosperous community for all. The County provides essential services including public health and environmental protection, medical services through Santa Clara Valley Medical Center (SCVMC), child and adult protection services, homelessness prevention and solutions, roads, parks, libraries, emergency response to disasters, protection of minority communities and those under threat, access to a fair criminal justice system, and scores of other services, particularly for those members of our community in the greatest need.

Media ContactLaurel Anderson/Marina Hinestrosa​, Office of Public Affairs, (408) 299-5119.

Posted: January 30, 2019

Last updated: 1/30/2019 4:00 PM