Union Files Lawsuit Against Daughters of Charity Health System
On Tuesday, the Service Employees International Union-United Healthcare Workers West filed a lawsuit on behalf of nurses and other employees against Daughters of Charity Health System over pension issues related to the system's planned sale to Prime Healthcare Services, the Los Angeles Times reports (Pfeifer, Los Angeles Times, 10/21).
Earlier this month, officials announced that Prime's bid to purchase six California safety-net hospitals owned by the Daughters of Charity Health Systems had been accepted.
The six facilities for sale are:
- O'Connor Hospital in San Jose;
- Saint Louise Regional Hospital in Gilroy;
- Seton Hospital in Daly City;
- Seton Coastside in Moss Beach; and
- St. Vincent Medical Center and St. Francis Medical Center in Los Angeles County.
Concerns have been raised about Prime by union officials and legislators. Union leaders say the company has a poor reputation in the health care community and that it has a practice of using its emergency departments to admit a higher percentage of patients to more-expensive hospital stays.
Prime Healthcare Services filed a lawsuit this summer against employee unions for interfering in its bid to purchase the struggling system.
Meanwhile, Prime is under investigation by HHS and the California Department of Justice for possible Medicare "upcoding" fraud.
Union leaders from SEIU-UHW and some legislators have asked state Attorney General Kamala Harris (D) to deny the sale. A decision from Harris is expected in three to four months (Gorn, California Healthline, 10/14).
Details of Lawsuit
The union's lawsuit alleges that Daughters of Charity underfunded its pension plan by about $229 million and improperly classified it as a "church plan," which is exempt from the Employee Retirement Income Security Act (Kutscher, Modern Healthcare, 10/21). SEIU-UHW also alleges that the impending sale to Prime "dramatically increased" the risks to the pension plan.
The suit has support from the United Nurses Associations of California.
SEIU-UHW spokesperson Steve Trossman said that while the suit names Daughters of Charity and its affiliates as defendants, Prime is "the reason we're filing the lawsuit."
Trossman said the union believes the health system "made a decision to sell to a for-profit chain that will destroy the pension plan," and instead should have accepted a competing bid from private equity firm Blue Wolf Capital Partners.
The lawsuit requests that:
- Daughters of Charity be required to fully fund the pension plan and convert it to be covered under federal pension law; and
- An independent agent be placed in charge of the pension plan.
Health System's Reaction
Daughters of Charity called the lawsuit "nothing more than an unfortunate scare tactic by a union waging a corporate campaign against Prime Healthcare that will do whatever it can to stop its purchase of Daughters of Charity Health System, including jeopardizing the pensions of its own members."
Elizabeth Nikels, a spokesperson for the health system, said that the pension plan "was a top priority" when determining criteria for selling Daughters of Charity. She added that Prime was the only bidder that agreed "to take 100% responsibility for all pension obligations for past and current Daughters of Charity employees," including union and non-union workers.
Health system officials said they are confident that the lawsuit will be "thrown out of court quickly" (Rauber, "Bay Area BizTalk," San Francisco Business Times, 10/21).This is part of the California Healthline Daily Edition, a summary of health policy coverage from major news organizations. Sign up for an email subscription.