Prime Healthcare sues California Attorney General over failed hospital deal

Ontario, Calif.-based Prime Healthcare Services has filed a federal civil rights action claiming California Attorney General Kamala Harris abused her constitutional powers by imposing unprecedented conditions on the sale of Daughters of Charity Health System, a six-hospital network based in Los Altos, Calif., to Prime.

In October 2014, Daughters of Charity agreed to sell its hospitals to Prime. The proposed deal was a controversial one, with SEIU-United Healthcare Workers West strongly opposing the transaction.

In February, Ms. Harris approved the sale with several stern conditions, including requiring Prime to continue operating the facilities for their current purposes for 10 years. Prime was also required to participate in the Medi-Cal and Medicare programs and have or maintain Medi-Cal managed care contracts at each of the six facilities.

After considering the conditions placed on the deal, Prime decided not to pursue the transaction. Daughters of Charity subsequently selected BlueMountain Capital Management, a private investment firm, to manage and operate the system's six hospitals and medical foundation.

Prime filed its 62-page complaint in U.S. District Court for the Central District of California, calling the legal action "a sweeping indictment of governmental overreach and the California regulatory system and the unlawful influence of the SEIU-United Healthcare Workers West."

The lawsuit names Ms. Harris as a defendant and seeks immediate injunctive relief on constitutional grounds.

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