Palo Alto City Hall became an unlikely frontier in a broader battle over health care costs Monday night, when a crowd of medical professionals packed into the Council Chambers to debate the merits of a citizen initiative that would cap how much local hospitals can charge patients.

Dozens of supporters and opponents of the initiative attended the City Council meeting to hold competing signs and sound off on the measure, which is being spearheaded by the Service Employees International Union -- United Healthcare Workers West and which will would prohibit Stanford Health Care and other local medical providers from charging patients more than 115 percent of the "reasonable cost of direct patient care."

Earlier this month, the Santa Clara County Registrar of Voters confirmed that the petition had received more than 2,430 signatures, enough to qualify for the November ballot. A similar initiatives is slated to appear on the Livermore ballot and another that has qualified in Emeryville has been put on hold as the city is challenging the legality of the union proposal.

The battle between the union and Stanford Health Care -- the main target of the campaign -- has placed Palo Alto officials in an uncomfortable position -- smack in the middle of a battle they had never signed up for. On Monday, the Palo Alto council met in a closed session to consider whether to file its own legal challenge to the union proposal. Though the council didn't take any action on a potential lawsuit, staff and council members indicated later in the meeting that they have major reservations about the proposal, which would require the Administrative Services Department to take on the unfamiliar role of health care regulator.

City Manager James Keene noted that the city didn't get any advance notice from the union about the petition, much less a request for feedback. This, he said, is unusual given the huge impact the health care initiative would have on City Hall.

"We're not equipped to handle this," City Manager James Keene said. "We need to recognize that this has been dropped on us, really."

Despite its concerns, the council voted unanimously to certify the results of the initiative petition, setting the stage for the November vote. It also requested staff to prepare an "objective and fact-based analysis" on the effect of the measure on Palo Alto residents. The council is scheduled to consider the staff report in August, after its summer recess.

Vice Mayor Eric Filseth said that the measure appears to constitute a "very large unfunded mandate" by requiring the city to regulate health care. The city, he said, has neither the expertise nor the bandwidth to fulfill this mandate. Getting the required resources to pay for this function would require the city to potentially use revenues that are currently used for things like fixing pot holes and providing fire services.

But given that the initiative got the necessary signatures, the council's options were largely limited to either sending it to the voters or adopting it outright as law. No one supported the latter option.

"Since it's not clear that the majority of the residents would make this a priority at this time, I think we should not adopt it," Filseth said.

Before its vote, the council heard from dozens of speakers -- proponents who urged the council to place the issue on the ballot and opponents who urged the council to follow in Emeryville's footsteps and oppose the SEIU proposal. The crowd included executives from Stanford Health, Palo Alto Medical Foundation and other local providers, all of whom opposed the initiative; and graduate students and union supporters,

who spoke in its favor.

David Entwistle, president and CEO of Stanford Health Care, argued that the initiative is "inherently against the best interest of Palo Alto and its residents" and that it will have "far-reaching negative consequences." If it succeeds, it could cut into the revenues of local health care providers, requiring them to cut back on services and potentially relocate, he argued.

"We recognize that health care is costly. We are working to bring the costs down, but this initiative doesn't help that," Entwistle said. "It will just reduce the ability of health care programs and services by drastically underfunding them."

Union supporters rejected this logic and characterized Stanford for exorbitant rates and substandard care. While Stanford's attorneys argued that the initiative is unconstitutional -- largely because it forces the city to regulate an area that is normally reserved for federal and state agencies -- Declen Walsh, research analyst at SEIU-UHWW, argued that Stanford's assertions are baseless.

Walsh also claimed that the city will be recovering the costs of enforcing the new rules through fines. He urged the council to place the initiative on the ballot.

"The council should let the people decide whether they want to lead on affordable, quality health care rather than allow Stanford to pre-empt that decision," Walsh said. "The people of Palo Alto demand that their health care be affordable and be delivered by institutions that are also willing to be accountable for the quality of the care they provide."