Huntington Hospital, Cedars-Sinai Sue State Over Limitations Placed on Proposed Affiliation

Huntington Hospital in Pasadena and Cedars-Sinai filed a lawsuit Tuesday against the state Attorney General’s Office and the Department of Justice over “unprecedented” conditions representatives say have been placed on the healthcare providers as they move forward with a plan for Huntington Hospital to join the Cedars-Sinai Health System.

The affiliation was first announced in March 2020, the organizations said in a joint written statement. The proposal was approved by the Attorney General’s Office in December, “but only if Huntington and Cedars-Sinai accept so-called ‘competitive impact’ conditions,” according to the statement.

“The lawsuit emphasizes that these unprecedented conditions would put Huntington and its patients at a distinct disadvantage compared to any other hospital in the region,” the statement reads.

Hospital affiliations have become increasingly common to help deal with increased demand by allowing sharing of resources, and therefore, cost savings, the statement said. “Without affiliation, standalone hospitals such as Huntington face significant obstacles to their long-term ability to serve the community.”

Huntington Hospital President and CEO Dr. Lori J. Morgan said she was “shocked” by what she described as an “unprecedented over-reach of the conditions being imposed.”

“Rather than benefiting our community, the conditions primarily benefit health insurance companies,” she said.

The limits were put in place by Attorney General Xavier Becerra, who is preparing to leave his position to take a post as Health and Human Services secretary in the Biden administration. Gov. Gavin Newsom appointed Democratic Assemblyman Rob Bonta as Becerra’s replacement last week.

The “unprecedented ‘competitive impact’ conditions’” were imposed even after the Federal Trade Commission analyzed the proposal and found no concerns that the affiliation would harm competition, the statement said.

“The Attorney General’s Office has never imposed such conditions on any previous nonprofit hospital affiliation,” it added.

Among the rules imposed by the state is a requirement for Huntington Hospital to cap rates to insurance companies for at least a decade, “without any requirement that the insurance companies pass their savings on to consumers,” the hospitals’ statement said. “Another condition forces Huntington and Cedars-Sinai to submit to insurance companies’ demands for ‘winner-take-all’ arbitration in contract negotiations any time that an insurance company wants to do so. No other hospital in California is subject to such conditions.”

Morgan said the restrictions create an “unlevel playing field.”

“[It] jeopardizes Huntington’s and Cedars-Sinai’s future ability to provide access to quality care for the many communities we serve — and those who rely on us for life-saving care when it’s needed most,” she said.

The hospital accused the Attorney General’s Office of making its decision based on “unvalidated academic theory called ‘cross-market effects,’” according to the statement.

“This theory assumes that, following an affiliation, Huntington and Cedars-Sinai might engage in ‘all-or-nothing’ negotiations with health insurance companies, forcing an insurance company to accept the same terms for both Cedars-Sinai and Huntington,” the statement said.

“But Cedars-Sinai and Huntington do not engage in ‘all-or-nothing’ negotiations and they proposed to the Attorney General’s Office that they would agree not to engage in such negotiations with insurance companies for at least 10 years,” it continued, “The Attorney General’s Office rejected this proposal even though its own expert’s ‘cross-market effect’ analysis confirmed that such a commitment would remove any concerns regarding competition.”

Huntington Hospital Signs Letter of Intent to Join Cedars-Sinai Health System