A federal judge in Los Angeles on Wednesday dismissed the state attorney general's move to block Santa Clara County from purchasing two local hospitals after their owner declared bankruptcy.
Verity Health System, which owns O'Connor Hospital in San Jose and St. Louise Regional Hospital in Gilroy, declared bankruptcy on Aug. 31, 2018, and began the sale process.
The Los Angeles court approved Santa Clara County's $235 million bid to purchase both hospitals, making it the only bidder, but Attorney General Xavier Becerra ordered a stay on the purchase Jan. 9.
Becerra said the county had not met the conditions to maintain the hospital -- the same conditions imposed by then-Attorney General Kamala Harris when Verity purchased the hospitals from the Daughters of Charity Health System in 2015.
Those conditions include maintaining general acute care and 24-hour emergency facilities.
"The Attorney General is entrusted with the responsibility under the state constitution and statute to protect the health and safety of patients and the community served by hospitals," Becerra's office said in a statement.
Bankruptcy Judge Ernest Robles issued a tentative ruling saying the attorney general's stay order, if it had been approved, would have led to the collapse of the sale agreement. The court stood by the tentative ruling on Wednesday, according to Verity Health attorney Samuel Maizel.
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Robles questioned Becerra's authority over reviewing the sale agreement, and said the hospital and Santa Clara County had already put significant resources into transferring the hospital's ownership.
"If the sale collapses, all of that work will have been wasted," the tentative ruling says. "Closure of the Hospitals, even if it were temporary, would severely harm the public interest."
The county and local residents held a news conference last week pushing back on Becerra's move, saying hospital closures would remove 451 beds for patients and further aggravate a shortage in the county.
They said the hospitals would continue abiding by some conditions, such as the general acute care and 24-hour emergency services, but many others were not feasible for a public hospital.
County officials said today it is awaiting the attorney general's next move, as Becerra's office prepares to file an appeal to the dismissed stay order.
"Our message in court has been clear and simple. We take our responsibility to protect the health and safety of California patients and the Santa Clara community seriously," Becerra said in a statement.
