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Prime Healthcare Services sues California union under racketeering statute


By Beth Kutscher
Posted: August 26, 2014 - 6:45 pm ET
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Prime Healthcare Services is suing a union it says is waging an ongoing smear campaign to pressure the chain into unionizing its workforce.

The closely held hospital operator has a strategy of buying up failing hospitals and then restoring them to profitability. In 2011, it launched a nationwide expansion plan that took it far beyond its California headquarters.

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But its tactics have caught the ire of the Service Employees International Union-United Healthcare Workers West, which has accused the Ontario, Calif.-based chain of a number of misdeeds ranging from overbilling Medicare and unsafe patient-care practices to cutting services and laying off large numbers of workers.

The SEIU is now seeking to rally support to block Prime's acquisition of Daughters of Charity Health System in Los Altos Hills, Calif.

In the 69-page lawsuit filed Monday in U.S. District Court in San Francisco, Prime accuses the SEIU chapter of violating the federal Racketeer Influenced and Corrupt Organizations Act, which Congress enacted to help the government prosecute organized crime.

“While Defendants' methods are wide-ranging and elaborate, their purpose is straightforward: Defendants have met with and told Prime that if it does not turn over the nonunion healthcare workers at its hospitals on terms dictated by Defendants, they will destroy Prime and ruin the lives of its executives,” the suit states. “To make good on their threats, Defendants have embarked on a campaign of extortionate assaults on virtually every aspect of Prime's business.”

Those methods include manipulating California Watch, a media outlet founded by the Center for Investigative Reporting, into serving as the SEIU's “ally and spokesperson,” Prime alleges. It also accuses the union of having close financial ties with two California legislators—Dr. Ed Hernandez, a state senator, and Dr. Richard Pan, who chairs the Assembly's health committee—to champion bills that expressly target the company.

Finally, Prime alleges that the union pressured Truven Health Analytics to rescind its quality awards.

These tactics, Prime contends, have hurt its business, damaged its reputation and led to government investigations.

"The allegations in Prime Healthcare’s lawsuit against SEIU and related groups and individuals simply do not hold up to scrutiny," said Steve Trossman, director of public affairs at SEIU-UHW, in a statement. "Many of them were contained in a previous lawsuit against SEIU that was dismissed multiple times by a federal judge. SEIU will seek a fast dismissal of this complaint as well."

This isn't the first time Prime has taken the union to federal court. In 2011, Prime filed an antitrust suit alleging the SEIU and Kaiser Permanente conspired to prevent the chain from competing in California hospital markets. That was dismissed by a judge last year but is in appeals.

Prime operates 28 hospitals in seven states.

Follow Beth Kutscher on Twitter: @MHbkutscher


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