Merger of California pediatric hospitals moves closer

Nearly a year after Rady Children’s Hospital and Children’s HealthCare of California said they were planning a merger, the planned deal has taken an important step forward.

California Attorney General Rob Bonta has given conditional approval of the planned merger between Rady Children's Hospital and Children's Hospital of Orange County.

California Attorney General Rob Bonta has given conditional approval for the organizations to come together. Children’s HealthCare of California operates

Children’s Hospital of Orange County and CHOC at Mission. Rady’s operates Rady Children’s Hospital in San Diego. If the merger takes place, the new parent company would be known as Rady Children’s Health.

Bonta announced the conditional approval earlier this week. He said the conditions include long-term commitments to participate in California’s Medicaid program, provide charity care, and maintain staff at the organizations.

“Our children deserve access to affordable specialized medical services that support their health and well-being,” Bonta said in a statement. “These conditions ensure that Southern California families retain access to quality, affordable pediatric care during the most difficult times in a child’s life.”

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Even with the attorney general offering conditional approval, it appears Rady and CHOC will need some time before the deal is finalized. In a statement, CHOC said the organizations are going over Bonta’s conditions.

“The next step is for CHOC’s and Rady Children’s governing boards to review the potential impact of these conditions and make a final decision to close the merger,” CHOC said in the statement. “We are uncertain how long this will take, but anticipate that if the boards approve, the merger will not close before the end of this calendar year. Both CHOC and Rady Children’s remain committed to advancing our missions and to serving the healthcare needs of children and families in our respective communities.”

An attempt for comment from Rady Children’s wasn’t immediately successful Friday.

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Rady Children’s and CHOC have collaborated for years. When they first announced plans for a merger in December 2023, they said they wanted to improve outcomes of pediatric patients in southern California and expand access to care.

Under the plans announced in December, Kimberly Chavalas Cripe, CHOC’s president and CEO, and Patricio A. Frias, MD, president and CEO of Rady Children’s, would run the parent company as co-CEOs. Officials said the hospitals would retain separate governing boards and focus on their communities.

Bonta spelled out some conditions for the merger to move forward.

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 10 years, Bonta said.

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

The hospitals must continue open medical staff privileges and can’t restrict staff from contracting with payers for 10 years, and Bonta also said they must commit to protect the labor force of the organizations.

In addition, Rady and CHOT must agree to maintain competition in the specialty care market and submit to monitoring from the attorney general’s office.

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Rady Children’s is licensed for 444 beds and is the largest pediatric hospital in the state, according to Fitch Ratings. CHOC’s hospital in Orange offers 334 beds, while its facility in Mission has 54 beds.