Santa Clara County Moves to Buy Two Hospitals After Bankruptcy

Santa Clara and San Mateo County leaders are hoping to keep the doors open at four Bay Area hospitals owned by financially embattled Verity Health System, which filed for bankruptcy in late August.

In Santa Clara County, the Board of Supervisors voted unanimously on Tuesday to authorize its staff to move forward with a process to purchase O’Connor Hospital in San Jose and Saint Louise Regional Hospital in Gilroy, both operated by Verity.

In neighboring San Mateo County, where Verity owns Seton Medical Center in Daly City and Seton Coastside in Moss Beach, a town hall is scheduled for Wednesday night in San Francisco to discuss ways to prevent the closure of those hospitals.

"These hospitals are huge assets to the community in general, but specifically, they provide health care to an enormous number of low-income people in the community," said state Sen. Scott Wiener, who will attend the meeting. "And if these hospitals either shut down or are significantly scaled back, many, many low-income families will suffer, many children will suffer, many seniors will suffer. And our community will be less healthy. We need to avoid that at all costs."

Verity CEO Rich Adcock wrote in a statement that the hospitals will remain open throughout the Chapter 11 process and that patient care remains a top priority. The statement said that an additional $185 million has been secured "to continue care for patients, pay employee wages and salaries and honor employee benefits and other workforce obligations." Verity owns six hospitals in California, including two in Los Angeles County.

San Mateo County Supervisor David Canepa said last month following the bankruptcy filing that the Bay Area hospitals have traditionally served low-income patients and communities. He said 87 percent of Seton’s patients receive either Medicare or Medi-Cal.

"This is a big issue. You’re talking six hospitals. And these hospitals are located in communities that need them most," Canepa said.

Santa Clara County’s initial bid for O'Connor Hospital and Saint Louise Regional, according to Verity, is $235 million. The board also voted to create 1,379 positions to hire the employees at the two Santa Clara County facilities.

"I think there’s a lot of excitement and a lot of good energy in purchasing these hospitals that I think will serve the county and our residents very well in the future," Santa Clara County Supervisor Ken Yeager said Tuesday.

Santa Clara County Board President Joe Simitian was more cautious, calling the purchase a "very big lift." He warned that difficult decisions on how to fund the purchase and operation of the hospitals still lie ahead.

County supervisors plan to hold a public hearing on the purchase next month.

Other companies could bid on the Santa Clara County hospitals, and Verity Health is still seeking buyers for its San Mateo hospitals as well as its two Southern California facilities, St. Francis Medical Center in Lynwood and St. Vincent Medical Center in Los Angeles.

Integrity Healthcare, which manages Verity, took over the hospitals from Daughters of Charity of St. Vincent de Paul in July 2015. The Daughters of Charity had tried to sell the hospitals to two for-profit systems, including Prime Healthcare Services.

Last year, NantWorks, the Culver City company controlled by billionaire physician and entrepreneur Dr. Patrick Soon-Shiong, bought Integrity Healthcare with the goal of revitalizing the hospitals. Soon-Shiong also purchased the Los Angeles Times this year.