Calif. AG won't sign off on sale of hospital

Jessica M. Karmasek Sep. 21, 2011, 11:29am


SACRAMENTO, Calif. (Legal Newsline) - California Attorney General Kamala Harris has denied consent to the sale of Victor Valley Community Hospital to Prime Healthcare Services Foundation Inc. and PHSF Victor Valley LLC.

Michael Troncoso, acting chief deputy attorney general, explained the office's position in a letter Tuesday to Charles E. Slyngstad of Los Angeles law firm Burke, Williams & Sorenson LLP.

"Incoming to this decision, we have carefully considered all relevant factors, including those set forth in Corporations Code section 5923," he wrote in the one-page letter.

"We have concluded that this proposed sale is not in the public interest and will likely create a significant effect on the availability or accessibility of health care services to the affected community."

Troncoso said the attorney general's decision was based on material contained in a July 19 notice, the results of its investigation, public records, reports of its consultants and advisors, and comments received from the public, parties involved and potential alternative bidders.

Prime has been criticized for its business practices and is being investigated for allegedly exaggerating the severity of patient illnesses to turn a profit, according to California Watch, a nonprofit and nonpartisan investigative reporting group operated by the Center for Investigative Reporting.

However, the foundation argues that Harris' "inexplicable and unexpected decision" could have an immediate and dire impact on the needs of what it says is an already underserved High Desert community.

Prime said in a statement Tuesday that its fully qualified and "exhaustively vetted" offer to purchase and operate Victor Valley as a nonprofit community hospital was accepted by the hospital's board of directors, which has a fiduciary responsibility for the facility.

In addition, the foundation said, a medical expert hired by Harris had recommended approval of the sale with conditions, and it had agreed to every single condition.

"Through her decision, the attorney general has posited that she knows more about what is good for the hospital than those who govern the hospital and are committed to keeping it open, as well as her own medical expert," it said.

Prime said it had contractually agreed to offer employment to nearly all of Victor Valley's existing employees and provide the same, or greater, levels of charity care as it has traditionally provided.

It said it also had committed to form a local governing board consisting of local physicians and community
members with input from the hospital's current board of directors.

On top of that, the foundation said it had pledged to invest no less than $25 million for capital improvements, information technology, infrastructure improvements, and/or working capital and maintain all essential services, including emergency services, medical/surgical services, labor and delivery services and pediatric beds.

"It is difficult to view this decision by the attorney general in anything other than a political light," Prime said.

"Without giving any specific reasons for the denial, she clearly has chosen to use the legal authority of her office to make league with one particular labor organization that has been running a blatantly false smear campaign of vilification against hospitals operated by Prime Healthcare."

The foundation is a nonprofit public charity that was founded by Dr. Prem Reddy and his family. It owns and operates two nonprofit hospitals, Encino Hospital Medical Center and Montclair Hospital Medical Center, and is governed by an independent board of directors.

From Legal Newsline: Reach Jessica Karmasek by email at

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