Suit Aims To Limit Calif. AG’s Power Over Not-for-Profit Hospital Sales
Prime Healthcare Services has filed a lawsuit that aims to limit California Attorney General Kamala Harris' (D) power to place conditions on the sale of not-for-profit hospitals in the state, Modern Healthcare reports (Kutscher, Modern Healthcare, 9/21).
The lawsuit comes after Prime in March withdrew its offer to buy Daughters of Charity Health System's six safety-net hospitals after Harris imposed a series of conditions on the deal with her approval of the sale (Pfeifer, Los Angeles Times, 9/21).
The proposed sale involved four Northern California hospitals -- O'Connor Hospital in San Jose, Saint Louise Regional Hospital in Gilroy, Seton Coastside in Moss Beach and Seton Medical Center in Daly City -- and two in Southern California -- St. Francis Medical Center in Lynwood and St. Vincent Medical Center in Los Angeles.
The conditions called for by Harris went beyond the parameters of the sale as negotiated between Daughters of Charity and Prime. The conditions included:
- Prime must ensure continuation of services and charity care for 10 years instead of five, which includes the skilled nursing services of Seton Coastside;
During that time, Prime must be certified to participate in the Medi-Cal, California's Medicaid program, and Medicare programs and is required to have Medi-Cal managed care contracts at all six hospitals;
- Reproductive health services are required services at all six hospitals; and
- Prime must revise its debt-collection practices and procedures to comply with state law.
The Attorney General's office also reiterated that Prime would have had to invest $150 million in capital improvements over three years and assume and guarantee all pension obligations for current and retired employees at the facilities. If the sale had been completed, Harris would have required Prime to file a compliance report every year for a decade with the Office of the Attorney General (Gorn, California Healthline, 2/23).
Details of Lawsuit
In the suit, Prime argues that Harris' review of the sale was not impartial and that she sided with Service Employees International Union-United Healthcare Workers West, which opposed the sale.
Prime alleges that SEIU-UHW promised to financially back Harris in a bid for a U.S. Senate seat (Rauber, "Bay Area BizTalk," San Francisco Business Times, 9/21).
Troy Schell, general counsel for Prime, said, "Harris abused her constitutional authority by placing her need for political financial support over the healthcare needs of the people," adding, "By imposing restrictive conditions on Prime and only Prime, she forced the company to withdraw its offer for the DCHS hospitals, jeopardizing health care in these underserved communities" (Los Angeles Times, 9/21).
Prime seeks unspecified monetary damages and the overturning of California's Non-Profit Transfer Hospital Statute, which requires the state attorney general to review and approve any not-for-profit hospital sales.
In a statement, Harris spokesperson Kristin Ford said, "Prime's decision to walk away, and this lawsuit, reaffirms the concerns voiced at multiple community meetings, that Prime never intended to prioritize the continuity of vital health services" (Modern Healthcare, 9/21).
Ford noted that the conditions came "[a]fter an in-depth and independent review, 44 hours of public meetings and 14,000 public comments" ("Bay Area BizTalk," San Francisco Business Times, 9/21).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.