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November 12, 2019

St. Louise hearing canceled, ruling on hospitals’ fate could come any day

There will be no federal court hearing of a request by Attorney General Xavier Becerra’s motion to block the sale of O’Connor and Saint Louise hospitals by Verity Health System to Santa Clara County.

U.S. District Court Judge R. Gary Klausner on Feb. 14 canceled the hearing, which had been scheduled for Feb. 22 in his courtroom in Los Angeles.

“No appearances by counsel are necessary,” the judge wrote. “The court will issue a ruling after full consideration of properly submitted pleadings.”

WIth the filing today, Feb. 15, of the attorney general’s final response to the Verity Health System’s pleadings, Klausner’s ruling could come any time after court is back in session Feb. 19, after the Feb. 18 federal holiday.

Becerra is seeking a stay of the county’s $235 million purchase of the two failing hospitals, until the District Court hears his objection to a December decision in U.S. Bankruptcy Court approving the sale.

Verity submitted its objections to Becerra’s request on Monday, Feb. 11.

A stay of the Bankruptcy Court approval of the sale would cause the deal to collapse, forcing the hospitals to close, according to Verity Health and the county. The purchase agreement that had been approved by Bankruptcy Court Judge Ernest Robles expires Feb. 28. There were no other purchase offers.

The case was transferred to Klausner’s courtroom on Feb. 11 by District Court Judge Dolly Gee, who had set the Feb. 22 hearing after rejecting Becerra’s request for an “emergency” review before the deal closed.

Verity Health System sought Chapter 11 protection last fall in Bankruptcy Court. If Saint Louise Regional Hospital were to close, the 110,000 people in the communities of Gilroy, San Martin and Morgan Hill would lose their local hospital, and more than 2,000 healthcare workers at the two hospitals would be out of work. The 93-bed Saint Louise hospital is in Gilroy. The 358-bed O’Connor Hospital is in San Jose.

Becerra had initially sought the stay in Bankruptcy Court, but Robles rejected it Jan. 30. The attorney general’s attempts to block the sale of the hospitals ignited a firestorm of protest from the hospital’s patients, staff, community leaders and Santa Clara County politicians, with rallies and a social media campaign.

Becerra contends that only oversight by his office can ensure that the hospitals provide comprehensive health care services to Medicare, MediCal and other patients. Santa Clara County countered that it is legally required—and eager—to provide these services.

In its Feb. 11 filing, Verity Health said a stay of the purchase “would terminate the county’s purchase of the hospitals, result in their closure, and would eviscerate healthcare access for some of the Santa Clara County’s neediest residents.”

The hospital owners—supported by Santa Clara County and affirmed by the Bankruptcy Court judge—said the attorney general had no legal authority to get involved in the sale.

In the Feb. 15 filing, filed in Becerra’s behalf by Deputy Attorney General Alicia Berry, claimed the county had refused to provide a range of healthcare services.

Further, she wrote, “State law allows the attorney general to enforce the health and safety protections within his conditions to the fullest extent provided by law.”

Berry also wrote that the Bankruptcy Court had “abused its discretion by finding that state law did not apply to this sale transaction.”

“The attorney general’s reply conveniently ignores most of the material that was submitted in opposition to his stay request,” said County Counsel James Williams, in email statement. He said the attorney general ignores the county’s assertion that a stay “would effectively kill the transaction and likely lead to the hospitals’ closure,” and that the fact that the county has committed to “comprehensive healthcare services.”

“Willful ignorance doesn’t make that evidence disappear,” Williams wrote.  “When the judge reviews the actual record and the law, we certainly hope he reaches the same conclusion the Bankruptcy Court did and denies the stay

The attorney general’s office said it was only seeking to protect “vital” healthcare services, and repeated his assertion that predictions by the Bankruptcy Court, Verity Health and Santa Clara County that granting a stay would force the hospitals to close were “merely speculative.”

“Rather than state that the sale is in danger of collapsing in a declaration under penalty of perjury, County Counsel James Williams attaches a letter to his declaration [that] constitutes hearsay,” Berry said in the filing.

If the sale of the hospitals does close on March 1, nurses at the two hospitals would become county employees under the county’s contract with the Registered Nurses Professional Association (RNPA). The California Nurses Association, a rival union that represents nurses in a contract with Verity Health that was voided in Bankruptcy Court, said its members will strike unless the county opens immediate negotiations with the CNA. The nurses told supervisors they had a right to strike because of “unfair labor practices” committed by the county in transitioning nurses into new jobs as county employees.

The court filings in the Verity Health case came the same day that Becerra was in the national spotlight, announcing that he would sue President Donald Trump to challenge the constitutionality of the President’s decision to declare a national emergency along the U.S./Mexico border.

Klausner was in the national spotlight two years ago when he presided over a trial in which jurors cleared the rock group Led Zeppelin of plagiarizing the melody for its iconic “Stairway to Heaven.” Klausner was in the news again last year, when a U.S. Circuit of Appeals in San Francisco ordered a new trial in the case, ruling that Klausner had made several errors in his instructions to the Led Zeppelin jury.

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