First, let's keep the issues straight. Priceline had nothing to do with it. They got you the rate. What happened after that had everything to do with the hotel and nothing to do with what you paid or why you paid it.
Next, try to separate what wasn't their fault from what was. A hotel can't legally refuse a legitimate booking from anyone, even a youth hockey team. What it can do is supervise their behavior on the premises and enforce some standards of decency. Apparently they didn't, and to make things worse told the hooligans who had complained. They also didn't have the kind of room they confirmed to you. This is where you have a legitimate beef.
The next step is to write a letter to the chain's CEO stating clearly what happened and what part of it was the hotel's fault. State how your trip, under stressful enough circumstances to begin with (play up the surgery bit - I'm glad it wasn't major, but they don't have to know that and any surgery carries risk) became unbearable DUE TO THE HOTEL'S ACTIONS. Say things about how you're sure they stand behind the quality of their hotels and would want to make amends if a stay isn't up to their usual standard, and how they would surely agree that this one wasn't. Then, suggest what you expect in return. If you think you might go back, a free stay is a possibility. If you won't, you can suggest you shouldn't be expected to pay for rest you didn't get.
Another option is to write to Conde Nast Traveler's "Ombudsman" column, but they get so much mail the chances of their picking your case to pursue are small. It didn't happen in an exotic location or involve rare jewels.
Either way, leave Priceline out of it. They didn't do a thing wrong. (I have no financial or other interest in them and have never used them. I just like to see blame put in the right place.)
Good luck!