California children’s hospitals complete merger

After more than a year of planning and securing approvals, Rady Children’s Hospital San Diego and Children’s Hospital of Orange County have formally come together.

Rady Children's and Children's Hospital of Orange County have completed their merger. Patrick A. Frias, MD, president and CEO of Rady Children’s, and Kimberly Chavalas Cripe, the longtime president and CEO of CHOC, will serve as co-CEOs.

The two pediatric health systems announced the completion of their merger this week. The newly merged organization will be known as Rady Children’s Health.

Rady Children’s and CHOC first announced plans to join forces in December 2023. The merger cleared a key hurdle when California Attorney General Rob Bonta signed off on the transaction in November, although he also imposed requirements to maintain key services.

Officials with both hospitals said before the deal that they hoped to improve pediatric care and research in California. Rady Children’s announced the completion of the deal Tuesday, but the organization said the merger closed on Dec. 31.

The merged organization will have two chief executive officers. Kimberly Chavalas Cripe, the longtime president and CEO of CHOC, and Patrick A. Frias, MD, president and CEO of Rady Children’s, will both serve as co-CEOs of Rady Children’s Health.

“Our shared vision puts children and their families first,” Frias said in a statement. “Our goal is to ensure families have access to the very best practitioners, treatments and technology available in pediatric medicine.”

Cripe, who has led CHOC since 1997, said the merger “highlights our commitment to achieving unparalleled excellence in patient care, education, research and advocacy.”

“Together, we are poised to make an even greater impact on the health and well-being of children for generations to come,” Cripe said in a statement.

The merged organization includes three hospitals: Rady Children’s Hospital in San Diego, CHOC Hospital in Orange, and CHOC at Mission Hospital in Mission Viejo. Each of the hospitals will maintain their own separate staff, along with local leadership and governing boards, the system said.

Rady Children’s Health also operates primary care and specialty care clinics in six counties.

Rady Children’s and CHOC have collaborated for years, but they said they could do more good together as a unified system. The organizations say they’ll be able to improve patient outcomes and expand their research capabilities. In addition, they said a merger would help in attracting and keeping top talent.

While the California attorney general signed off on the merger, Bonta said his approval hinged on the combined organization meeting a number of conditions.

Specifically, Bonta said Rady Children’s and CHOC must maintain the acute hospitals, pediatric trauma centers, and emergency and specialty services in Orange County and San Diego County for at least 10 years. Bonta also said Rady Children’s Health cannot prohibit medical staff from contracting with payers for 10 years.

The merged system must also continue to accept patients from Medi-Cal, California’s Medicaid program. Rady and CHOC also had to agree to maintain charity care and community benefits at the level of the most recent three-year average for each hospital.

After the attorney general outlined his conditions, CHOC initially said it would need to review those contingencies before moving ahead with the merger, and initially said the deal may not close before the end of the year. But as it turns out, the transaction was finalized on Dec. 31, the final day of 2024.

Matthew Cook, president and CEO of the Children’s Hospital Association, issued a statement of support for the merger of Rady Children’s and CHOC.

“By combining the strengths of two outstanding organizations, Rady Children’s Health will enhance access to top pediatric providers, and advocate for policies, practices and performance improvements that will benefit children and families throughout the region,” Cook said in the statement.

Families shouldn’t see any change in services, the system said.

Even with the merger, CHOC will maintain its relationship with the University of California at Irvine and its medical school, while Rady Children’s will continue its affiliation with UC San Diego.

California has seen several hospital deals over the past year. UCI Health, the clinical enterprise of UC Irvine, acquired four hospitals from Tenet Healthcare Corp. last year in a $975 million deal.

Adventist Health purchased two California hospitals from Tenet last year in a $550 million deal.

In August, USCF Health completed the acquisition of two San Francisco hospitals from Dignity Health, a division of CommonSpirit Health, in a $100 million deal.