Judge Unlikely to Dismiss Hospital’s Claim Against Kamala Harris

Prime Healthcare touts the Centinela Hospital in Inglewood, California, as one its acquisition success stories.

SAN DIEGO (CN) – A federal judge said he’s unlikely to dismiss a lawsuit against Sen. Kamala Harris for conditions she placed on a hospital acquisition bid while she was California’s attorney general.

Prime Healthcare Services claims Attorney General Harris nuked the deal as a favor to the Service Employees International Union.

U.S. District Judge Gonzalo Curiel said he was unlikely to dismiss the case at this stage, as more details are needed about the heightened hospital services requirement to which Prime said Harris unfairly subjected it.

Prime sued Harris, D-Calif., in September last year when she denied its $843 million proposed acquisition of the Daughters of Charity Health System. As attorney general, Harris oversaw sales and acquisitions of nonprofits and charitable organizations in California.

When nonprofit health care facilities are sold in the state, the new owner is typically required to provide the same level of care and services for at least five years after the transaction. But Prime said Harris required it to provide the same services for 10 years, a condition that made the transaction “financially unviable.”

Prime claimed Harris did it in a conspiracy with the Service Employees International Union-United Healthcare Workers West, to block Prime from acquiring the nonprofit hospitals unless it agreed to allow workers to unionize.

At the April 28 hearing, Prime’s attorney John Mills said there’s proof Harris wanted the 10-year conditions imposed, and that “we have very consistent factual allegations by how these conditions were motivated by the SEIU.”

Mills said he went through “every single” similar nonprofit transaction overseen by Harris and that there was “a very clear pattern” of her imposing a five-year services requirement, rather than the 10-year condition imposed on Prime.

“My emphasis is, the pattern we see over and over is, there was a consistent way of handling these transactions with a certain number of conditions which always had more or less the same outcome,” Mills said.

“The only time Attorney General Harris veered from that pattern was with respect to Prime and the 10 years condition for the first time.”

When Curiel asked if the longer services requirement was just “a new day” and part of a new requirement being implemented, Mills said he didn’t believe Harris “intended to impose a new policy, but to treat Prime differently.”

But Curiel pointed out that some other hospital acquisitions were subjected to the same standard, telling the Mills: “It seems like you’re trying to find similarities when it suits you and ignore them when they don’t.”

Mills said his client tried to tell the attorney general that some of the services “were goners” and that keeping the services in place for 10 years would drain profits.

“The base of our case is we weren’t able to close this deal,” Mills said.

Harris’s attorney Michele Inan rejected the claim that Prime was treated differently than other bidders on similar acquisitions. “Every single transaction is different,” she said, and different communities need different hospital services.

She said Prime “misspeaks” when it claimed it was the only company subjected to the 10-year services requirement, and cited other “identical” transactions where the same conditions were imposed.

“We’re never going to be able to say one transaction is the same or different, because they are all inherently different,” Inan said.

But Curiel disputed Inan’s assertion that the case might be ripe for summary judgment.

“At this juncture, given the limited scope the court has to view these allegations … it seems almost inconceivable the court could grant a motion to dismiss,” Curiel said.

He said the “direct assertion” that the 10-year requirement came directly from Harris “is not a random allegation the court can just ignore.”

Curiel took the matter under submission and will issue a written order.

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