Buyer Files Claim in FHP Hospital Sale

The company that bought FHP International Corp.’s former hospital in Fountain Valley this year seeks more than $275 million in alleged damages from the Santa Ana-based health plan over aspects of the sale.

The acquiror, Memorial Health Services of Long Beach, claims that FHP fraudulently or negligently misrepresented information in connection with the sale, according to an FHP securities filing. Memorial made the claims in a filing requesting private arbitration on the matter.

In January, Memorial paid $87 million to buy the 230-bed hospital, three adjacent office buildings, including FHP’s former corporate headquarters, and the surrounding 11-acre campus. In its arbitration filing, Memorial alleges that the deal gave it the exclusive right to care for FHP members at that hospital and other Memorial facilities, according to FHP.

Memorial also owns hospitals in Long Beach, Anaheim and Laguna Hills.

The Long Beach company claims that if FHP had been upfront about certain aspects of the sale, it would have insisted on a lower purchase price for the hospital and higher fee for the FHP members it serves before agreeing to the deal, according to the filing.

Rhoda Weiss, Memorial’s spokeswoman, said, “We are working on resolution of these issues and we are optimistic that they will be resolved soon.” She declined to elaborate.

FHP contends that Memorial’s claims lack merit and can’t be arbitrated. The company said it intends to vigorously defend against such claims.

FHP disclosed the dispute in its proxy for its proposed acquisition by PacifiCare Health Systems Inc. of Cypress. An FHP spokesman predicted the dispute won’t alter the deal and won’t have a material affect on its financial standing.

Shareholders of both companies are set to vote on the deal Dec. 31.