Santa Clara County Succeeds in Securing the Future of Endangered Local Hospitals

The County of Santa Clara (Calif.) assumed responsibility for the operation of O’Connor Hospital in San José, St. Louise Regional Hospital in Gilroy, and De Paul Health Center in Morgan Hill on March 1, 2019. This transaction advances the County Board of Supervisors’ strategic goal to grow the size and scope of the County’s public healthcare delivery system. Juniper Advisory advised Santa Clara County on this transaction.

The two hospitals and health center were acquired from Verity Health, a health system that filed for Chapter 11 protection in late August 2018, triggering the potential sale of all six of its hospitals and other related assets in California. The County purchased the three Verity Health facilities located in Santa Clara County for $235 million.

“We are excited to bring these community hospitals into our health system as we expand and enhance the high-quality care that so many Santa Clara County residents have come to rely on,” said County Executive Jeffrey V. Smith, M.D., J.D. “Our new partners share our mission, values, and passion to serve. We expect O’Connor and Saint Louise hospitals and De Paul Health Center to continue the phenomenal work they have already been doing in their communities.”  

The County of Santa Clara will invest in new technology and infrastructure at the newly acquired facilities, expand and augment current medical and hospital services, and be better positioned to offer the County’s extensive and integrated health services to all residents of Santa Clara County.

“This acquisition is truly a win-win for the community. It prevents the closure of two critically important hospitals and ensures continued access to medical services for those who need it, regardless of ability to pay,” said Supervisor Joe Simitian, President of the County of Santa Clara Board of Supervisors.

Per the agreement with Verity for the purchase of the 358-bed O’Connor Hospital, the 93-bed Saint Louise Regional Hospital, and the De Paul Health Center, the County has made assurances to continue operating the facilities with a focus on providing high-quality care and services, as well as improving the health of the community. The County will also institute its financial assistance programs at the new facilities to ensure that the most underserved in the community have greater access to high-quality care.

The hospitals, their staff and physicians all share the County’s mission to provide high-quality, compassionate and accessible healthcare. 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.

“We have worked hard over the past few months to lay the foundation for transitioning these new facilities into the County family of health care resources,” said Santa Clara Valley Medical Center Chief Executive Officer Paul Lorenz, who is leading the integration of the community hospitals into the County’s Health System. “While even positive change can be challenging, we are fully invested in supporting this integration to make sure it is as smooth as possible for patients and staff.”

“The acquisition of two more hospitals and a clinic in Santa Clara County is a tremendous win for thousands of patients who need our services, often in emergency situations, and the highly trained doctors, nurses and others who provide them,” said Supervisor Cindy Chavez.

“We did it! Thanks to the extraordinary effort of County staff and thousands of county residents, we were able to purchase O’Connor and St. Louise Hospitals – hugely important to everyone, especially the 100,000 people in South County who have no other alternative,” said Supervisor Mike Wasserman.

“I am proud of this County’s ability to lead on all things that matter most to the quality of life of the residents of this Valley; in this case access to quality healthcare,” said Supervisor Susan Ellenberg. “The expansion of the County’s hospital system through these purchases translates into a more robust safety net for our most vulnerable families, children and seniors. And that’s something worth celebrating.” 

“I am relieved that the sale has been completed and we are eager to move forward with integrating our health care system,” said Supervisor Dave Cortese. “The two hospitals and the clinic are essential to the lives of the residents who would have been left without nearby emergency care.” 

“The completion of the sale means that these important institutions will continue providing local communities with the high quality care they need and deserve,” said Rich Adcock, CEO of Verity Health Systems in  a statement to the San José Mercury News.

This transaction was recognized as the “Restructuring Deal of the Year- $100M-$250M” by M&A Advisory  and as “Restructuring and Sale of the Year- $200+M” by the Global M&A Network.