Is Prime Healthcare settling scores with union?


In recent years, Prime Healthcare has built a reputation as a take-no-prisoners company willing to run roughshod over patients and employees alike in its quest for profits — $283 million on revenue of $1.6 billion in 2010, according to a financial statement filed with the Securities and Exchange Commission.

The closely held Ontario firm, which owns or operates 21 hospitals including 14 in California, has received a federal subpoena related to allegations that it has inflated its billings to Medicare. It is also under federal investigation for an alleged breach of confidentiality of a patient’s medical records. California regulators have already fined Prime $95,000 for the latter offense, which occurred after the patient gave an uncomplimentary news interview about her treatment at a Prime hospital.

The company has picked a courtroom fight with the Service Employees International Union, which represents about 1,200 workers at three of its hospitals — filing a lawsuit asserting that the union and Kaiser Foundation Health Plan conspired to drive Prime out of the Southern California hospital market. The lawsuit contained the remarkable assertion that the SEIU and Kaiser aimed to hurt Prime by agreeing on higher wages and increased nurse staffing ratios at Kaiser.


So it’s perhaps unsurprising that Prime would open a new front in its war with the union, exploiting a federal appeals court ruling in Washington to try to squeeze the union’s financial coffers and shut down an employee grievance case.

The pretext in this case is a controversial federal appeals court ruling in January purporting to invalidate a year’s worth of rulings by the National Labor Relations Board, on the grounds that President Obama’s appointments of three of its five members were unconstitutional and therefore the board has been acting without a proper quorum.

The ruling, which is known as Noel Canning, the name of the Pepsi bottler that brought the case, has cast doubt on the president’s right to make recess appointments of judges and executive branch officials while the Senate is not in session and thus unable to exercise its right to advise and consent.

The ruling has already thrown the NLRB into disarray, for scores of litigants with adverse rulings from the board have filed for reconsideration since it came down. The issue is so important that the Obama administration has said it will bring an appeal directly to the Supreme Court.

Prime isn’t waiting for that. Twice in the days after the ruling, the company cited Noel Canning as a rationale for anti-union actions. Both involve employees represented by the SEIU at Centinela Hospital Medical Center, which is located in Inglewood a few miles from LAX. In one case, the company informed the union that it was unilaterally terminating deductions of union dues from the paychecks of members, who have been working without a contract since it expired at the end of 2010. That step could cost the union tens of thousands of dollars a month.

When SEIU lawyer Bruce Harland asked to know the reason for the action, a Prime lawyer simply emailed him a copy of the Noel Canning ruling. That’s curious, Harland told me, because “nothing in the ruling says that all NLRB cases are void.”


In the second case, the company refused to forward information the union requested in connection with a grievance over the firing of a Centinela employee. When the union asked for an explanation, the company didn’t even email the ruling — just a newspaper clipping describing the ruling. Prime’s position was first picked up on by Reuters.

In neither case did the company even try to explain how it thought Noel Canning applied. Nor did they when I asked. Instead, I got a curt email from Prime’s assistant general counsel, Mary Schottmiller, who offered some legalistic mumbo jumbo about how “all decisions of the NLRB are subject to review by the Court of Appeals” and therefore the issues I raised “are not really issues at all.”

She also observed that many other companies are challenging NLRB rulings “in light of Noel Canning.” That’s true, but none appears to take as aggressive a tack as Prime, which is acting as though the appeals court in Washington invalidated the entire panoply of U.S. labor law dating back to 1935 and overturned the principles of good-faith bargaining along the way.

According to news reports, most of these companies are seeking new reviews by the NLRB or petitioning federal court to obtain formal opinions “in light of Noel Canning.” Indeed, such a course is recommended by labor lawyers at the firm of Jones Day, who represented Noel Canning in its successful case.

That might be prudent, because Noel Canning is nothing like settled law. The decision turns on such abstruse questions as whether the president can make recess appointments only during breaks between full sessions of Congress, or during shorter recesses, known as intrasession recesses.

Noel Canning holds that the latter are unconstitutional. But that finding contradicts prior rulings by other federal appellate courts that upheld intrasession appointments, the Justice . Department says. The discrepancies make the question ripe for the Supreme Court.

“The case is very much in play,” says John Elwood, who as a Justice Department official during the George W. Bush administration helped defend an important intrasession recess appointment.

One peculiarity of Prime’s actions against its unionized workers is that under long-standing NLRB precedent, it had the right to suspend the dues deduction from members’ paychecks even before the Noel Canning case. The NLRB has long permitted employers to end these deductions, known as checkoffs, the moment the old contract expired. At Centinela, that moment was January 1, 2011. Yet for the next two years Prime continued to make the deductions voluntarily.

Noel Canning did invalidate a Dec. 12 NLRB ruling that employers must continue to make checkoffs even after contracts expire, and for as long as bargaining continues. But Centinela suspended the checkoff more than a week before the Dec. 12 ruling. Noel Canning simply restored the law to what it had been before. So why does Noel Canning apply to Centinela’s checkoff? Schottmiller refused to say.

That suggests that the real explanation for Prime’s obnoxious carryings-on may be its gnarly history with the SEIU. Prime’s relationship with the union would make Torquemada’s opinion of Spanish heretics look positively broad-minded.

The company blames the union for fomenting the government’s suspicions about its Medicare billings. Its resentment over the investigation may also underlie its lawsuit against the union and Kaiser, with which Prime has had other fights in the past. The lawsuit was tossed out by a San Diego federal judge last August, but the company filed an amended complaint in September. Oral arguments on Kaiser’s and the SEIU’s motions to dismiss the new version are scheduled for early April.

It’s proper to keep Prime’s behavior in context. But the context isn’t pretty. In 2010, Prime paid more than $1.2 million to settle state charges that it illicitly billed privately insured patients, including as many as 6,000 Kaiser members, for services they received from Prime. The billings, which appeared to reflect a beef Prime had with Kaiser, were improper under state law.

And in 2011, Atty. Gen. Kamala D. Harris rejected an application by Prime to take over another California hospital as “not in the public interest.” She later cited Prime’s “disturbing business model,” which includes canceling all private insurance contracts when it takes over a hospital, so it can charge insurers of patients brought into its emergency rooms higher “out-of-network” fees.

In short, under founder and Chairman Prem Reddy, the firm has long been one of our more voracious and troubling healthcare conglomerates.

One can admire Prime as a financial entity. As part of a community’s healthcare infrastructure? Atty. Gen. Harris’ judgment seems more apt: “disturbing.”

Michael Hiltzik’s column appears Sundays and Wednesdays. Reach him at, read past columns at, check out and follow @latimeshiltzik on Twitter.