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In response to Prime lawsuit, SEIU goes on the attack

(Story updated at 10:45 p.m. ET)

The Service Employees International Union-Healthcare Workers West is stepping up its campaign to block the sale of Daughters of Charity Health System to Prime Healthcare Services, which is accusing the union of racketeering and extortion.

The media campaign comes one day after Prime Healthcare Services filed a lawsuit in U.S. District Court in San Francisco against the California-based union. Prime contends that the SEIU's efforts represent a smear campaign to force it into unionizing its workforce.

The SEIU chapter represents workers at three Prime hospitals in the state.

In a video posted on YouTube, the SEIU accuses the chain and founder Dr. Prem Reddy of spending Medi-Cal funds on a Bentley, his Beverly Hills home, a private helicopter and luxury hotel rooms in Las Vegas. It juxtaposes comments allegedly made by Reddy against images of a gold-plated toilet, which the narrator says Reddy has in his home.

Some of the comments attributed to Reddy were taken from court testimony in a 2005 lawsuit brought by two former nurse managers, who said they were fired for challenging Reddy's efforts to bring in more insured patients and push out the uninsured. In the transcript, Reddy said he did not remember making the comments.

Another came from a 2007 interview with the Los Angeles Times. “Why is it in healthcare we expect to have the same?” he was quoted as saying. “It's an entitlement mentality.”

In a statement, Tony Schell, Prime's general counsel, called the assertions "a total lie and meant to deflect the serious allegations within the [Racketeer Influenced and Corrupt Organizations] complaint." He added, "Prime remains committed (PDF) to the lawsuit, exposing SEIU's illegal conduct and defending the rights of hospitals across California."

The SEIU video ends by urging viewers to contact California Attorney General Kamala Harris to protest the Daughters of Charity takeover. The struggling Los Altos Hills, Calif.-based system reported an operating loss of $15.6 million in its most recent fiscal year—which was an improvement from the $90.7 million it lost the previous year.

Prime's interest in the system emerged this month. Without mentioning Prime directly, a news release from Daughters of Charity said the proposed sale “is being unfairly criticized by the nurses' union and other special interest groups who have put their own self-interests above those of the DCHS hospitals.”

The SEIU is supporting a competing bid from Blue Wolf Capital Partners, a private equity firm.

Schell, Prime's general counsel, argues that Blue Wolf has no experience managing hospitals. Moreover, he said, labor costs at Daughters of Charity represent 70% of revenue, compared with an industry standard of 50%, a factor Prime considers "a major reason Daughters has found itself in such financial discussion."

Although the SEIU contends that Prime has threatened to put the Daughters of Charity hospitals into bankruptcy if it doesn't get labor concessions, the Ontario, Calif.-based chain denies the charge.

In a news release, Prime said it has invested about $788 million in its facilities since 2005 and has never closed a hospital or put one in bankruptcy.

Follow Beth Kutscher on Twitter: @MHbkutscher



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