Cedars-Sinai and Huntington Hospital are suing the California Department of Justice and the Office of former Attorney General Xavier Becerra over their challenge to a proposed merger first announced in March of 2020.
The lawsuit, filed Tuesday in Los Angeles County Superior Court, challenges the stipulations with which now HHS Secretary Becerra approved the merger.
The state required that Huntington Hospital cap rates to insurance companies for at least a decade, "without any requirement that the insurance companies pass their savings on to consumers," according to a statement from the hospitals. "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."
"The proposed affiliation between Cedars-Sinai and Huntington Memorial creates a risk of "cross-market" effects: that post-affiliation, prices will increase at one or more of the affiliating hospitals even though few patients would likely consider the affiliating hospitals to be "good substitutes" to each other," Becerra wrote in his decision.
Cedars-Sinai's President and CEO Thomas Priselac wrote in a prepared statement that the commonly used measure of market competition showed that the deal would not lessen competition since there is almost no overlap between Huntington's service area and Cedars-Sinai's, according to a press release.
"We are shocked at the unprecedented over-reach of the conditions being imposed," said Huntington Hospital CEO Lori Morgan. "Rather than benefiting our community, the conditions primarily benefit health insurance companies."
The Attorney General's office reliance on the concept of cross-market effects 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.
Both organizations cited cost savings and increased access as reasons to move forward with the merger.
"This unlevel playing field 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," Morgan said.