Attorney General Bonta: Conditionally Approved Pediatric Hospital Merger to Transform Pediatric Health in Southern California

Attorney General's conditions to Rady Children's Health merger to ensure children receive affordable specialized medical services while maintaining healthcare competition

OAKLAND - California Attorney General Rob Bonta conditionally approved the affiliation of Rady Children's Hospital and Health Center, and its subsidiary, Rady Children's Hospital, with Children's HealthCare of California, and its subsidiaries, Children's Hospital of Orange County (CHOC) and CHOC at Mission. Rady, CHOC and CHOC at Mission will combine into a single healthcare delivery system and create a single parent entity called Rady Children's Health. Under California law, any transaction involving the sale or transfer of control of a nonprofit hospital must secure the approval of the state Attorney General.

"Our children deserve access to affordable specialized medical services that support their health and well-being," said Attorney General Bonta. "These conditions ensure that Southern California families retain access to quality, affordable pediatric care during the most difficult times in a child's life. By prioritizing patient-centered approaches, we are able to ensure that every child, regardless of their condition, can thrive and achieve their healthiest potential while maintaining robust competition in Southern California's pediatric hospital system."

Today's approval and conditions will ensure children in Orange, San Diego, Riverside, Imperial, San Bernardino, and parts of Los Angeles Counties, can receive the highest quality of care tailored to their specific medical needs while maintaining a competitive and fair healthcare landscape in Southern California.

The Attorney General's conditions are based on independent experts' in-depth analysis of the health and medical needs of children within the communities that surround and utilize the subject hospitals as well as our own investigation. Among other things, the conditions will require Rady Children's Health to:

• Maintain Services: Rady Children's Health must continue to provide services, including to Medi-Cal patients, for 10 years and maintain the general acute hospitals, pediatric trauma centers and emergency services, and specialty services in both Orange County and San Diego County.
• Maintain Medical Staff: Rady Children's Health must maintain open medical staff privileges, and cannot restrict the ability of its medical staff to contract with payors or in certain circumstances with other providers, for 10 years.
• Labor and Continuity of Care: Rady's Children's Health must meet conditions designed to protect the labor force and their delivery of services to local communities.
• Preserve Competition: In order to ensure a competitive pediatric specialty care market and accessible healthcare, and to prevent the risk of price hikes, Rady Children's Health must:
  • Refrain from bundling, conditioning, and other related anticompetitive practices for a period of at least 10 years;
  • Limit price increases for contract renewals to no more than 4.8% for a period of at least seven years; and
  • Submit to independent monitoring through Attorney General-appointed monitor to ensure compliance with these conditions.
• Provide Charity Care and Community Benefits: The hospitals must continue to provide charity care and community benefits consistent with the most recent three-year average for each hospital, and all patients must be offered to be screened for financial need, whether the patient has private insurance, Medi-Cal, Medicare, or is uninsured.

The California Department of Justice's Healthcare Rights and Access Section (HRA) works proactively to increase and protect the affordability, accessibility, and quality of healthcare in California. HRA's attorneys monitor and contribute to various areas of the Attorney General's healthcare work, including nonprofit healthcare transactions; consumer rights; anticompetitive consolidation and conduct in the healthcare market; anticompetitive drug pricing; privacy issues; civil rights, such as reproductive rights and LGBTQ healthcare-related rights; and public health work on tobacco, e-cigarettes, and other products.

A copy of the conditional approval letter is available here.