Mercury News editorial board: County must show it will preserve Verity Health hospitals

The editorial board of The Mercury News published an op-ed Oct. 4 highlighting the importance of preserving two hospitals in Santa Clara County that are expected to be auctioned off in December by current owner El Segundo, Calif.-based Verity Health, which filed for bankruptcy in August.

Verity Health, a six-hospital system, filed a motion Oct. 2 in bankruptcy court to hold an auction in December to sell its two hospitals in Santa Clara County. The county placed a $235 million "stalking horse bid" for the hospitals. The bid serves to set the floor for any competing offers. If no other offers emerge, Santa Clara County's offer will stand.

In its op-ed, The Mercury News editorial board said it is imperative San Jose, Calif.-based O'Connor Hospital and St. Louise Regional Hospital in Gilroy, Calif., remain open, as the county already suffers from a shortage of hospital beds.

The challenge, the board wrote, is for the county to show the public how it can buy and operate both hospitals without damaging other existing county programs. A county executive said Oct. 3 it would lease revenue bonds to pay for the hospitals and use the revenue generated from the hospitals to pay for the bonds. The move would prevent the county from using its general funds.

"If O'Connor and Saint Louise close, that would put enormous pressure on the county's [Fruitvale, Calif.-based Santa Clara Valley Medical Center] to carry the burden, crowding its emergency room and creating a need for the county to build additional hospital beds. The estimated cost of constructing new facilities is double that of purchasing O'Connor and Saint Louise hospitals," the board wrote.

The editorial board said Verity Health and the hospitals' prior owner, the Catholic Daughters of Charity, have lost millions attempting to finance the hospitals during the past decade. The primary driver for the facilities' financial losses was  their payer mix, which included a high percentage of MediCal and Medicare patients. However, county officials said the county's more favorable reimbursement rates for such patients would generate enough revenue to cover the lease revenue bond payments.

"County officials need to be fully transparent about how they would finance and operate the two hospitals without doing significant damage to other county programs. But there should be no question about the need to keep O'Connor and Saint Louise hospitals open for county residents," the board wrote.

To access the full op-ed, click here.

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