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California hospitals sue attorney general over affiliation conditions

The lawsuit alleges the conditions would put Huntington at a distinct disadvantage compared to other hospitals in the region.

Jeff Lagasse, Associate Editor

(Photo by Pichsakul Promrungsee/EyeEm/Getty Images)(Photo by Pichsakul Promrungsee/EyeEm/Getty Images)

Two California hospitals, Los Angeles-based Cedars-Sinai and Pasadena-based Huntington Hospital, have filed a lawsuit challenging the conditions for approval of their affiliation that were imposed by the state attorney general. The proposed affiliation was announced in March 2020.

The lawsuit alleges that the conditions for approval would jeopardize the hospitals' ability to provide access to coordinated, specialized healthcare, lower costs and provide resources needed for Huntington Hospital to continue certain clinical programs and services.

WHAT'S THE IMPACT?

Affiliations between hospitals have become more common in recent years in response to increased demand for coordinated healthcare and access to specialized services. They often enable cost savings due to shared resources. 

The hospitals filing the suit contend that without affiliation, Huntington faces significant obstacles to its long-term ability to keep its doors open.

The Attorney General approved Huntington's affiliation with Cedars-Sinai in December 2020, but only if Huntington and Cedars-Sinai accepted what was called "competitive impact" conditions. The lawsuit alleges that these conditions would put Huntington and its patients at a distinct disadvantage compared to other hospitals in the region.

One of the conditions puts price caps on Huntington's rates to insurance companies for at least 10 years, without requiring that the insurance companies pass their savings on to consumers. Another condition requires Huntington and Cedars-Sinai to agree to insurers' demands for "winner-take-all" arbitration in contract negotiations. No other hospital in California is subject to such conditions, according to the lawsuit.

"The proposed affiliation is intended to strengthen and maintain Huntington's 128-year legacy, and to preserve its unique culture as a community institution governed by a local board, with its own employees and medical staff," the hospitals wrote.

"In addition, philanthropy and volunteer support will remain locally controlled, serving Huntington Hospital and its existing community."

THE LARGER TREND

Under California law, proposed affiliations of nonprofit hospitals are subject to approval by the California Attorney General's office, which may impose conditions to protect the availability or accessibility of healthcare services in affected communities. 

Huntington and Cedars-Sinai worked with the attorney general to lock down commitments to maintain operations and services, make major investments in capital improvements, maintain access to care for reproductive health services and ensure that there is no discrimination against LGBTQ individuals, the hospitals said.

The Federal Trade Commission's analysis of the proposed affiliation did not find any concern that the affiliation would lessen competition, according to the lawsuit, finding that the service areas did not overlap.
 

Twitter: @JELagasse
Email the writer: jeff.lagasse@himssmedia.com