Catholic Healthcare West took what has turned out to be a controversial step last year when it bought the administrative arm of a San Francisco-based group of emergency room physicians for $36 million. The Phoenix company, one of the largest hospital systems in the western United States, planned to manage the group’s day-to-day business operations through a wholly owned subsidiary called Meriten Physician Management Co. Inc. Clinical services were left under the control of the 100-plus doctors in San Francisco’s Emergency Physicians Medical Group (EPMG), which had hospital contracts in California, Arizona, Nevada and Hawaii.

But on Thursday, Meriten and the doctors’ group were in San Francisco Superior Court preparing to defend themselves against allegations that Catholic Healthcare’s deal violates federal anti-kickback laws and defies California law aimed at preventing lay corporations from controlling doctors’ medical decisions. Trial could begin any day.

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