Attorney General Bonta Conditionally Approves Affiliation Agreement Between Methodist Hospital and USC Health System

OAKLAND – California Attorney General Rob Bonta today conditionally approved the affiliation of Methodist Hospital of Southern California (Methodist Hospital) and USC Health System (USCHS). The Attorney General’s conditional approval would allow Methodist Hospital to become part of USCHS’s healthcare delivery system. Under California law, any transaction involving the sale or transfer of control of a nonprofit hospital must secure the approval of the state Attorney General. The conditions of Attorney General Bonta’s approval today seek to improve healthcare access and maintain healthy competition in the San Gabriel Valley.  

“When our hospital systems look to consolidate, it is essential that they do so in a way that maintains competition and affordable healthcare,” said Attorney General Bonta. “The conditions we have attached to the proposed affiliation of Methodist Hospital with USC Health System will serve to keep our healthcare market competitive and provide residents of the San Gabriel Valley with continued access to essential care.” 

Methodist Hospital is a 348-bed full-service community hospital in Arcadia, California with clinical services that include cancer care, emergency services, cardiac care, inpatient and outpatient surgery, and maternity services. USCHS, a non-profit subsidiary of the University of Southern California, provides medical care to patients in Los Angeles, and focuses on academics, research, and clinical care through its network of hospitals and multispecialty outpatient clinics. 

The Attorney General’s conditions are based on independent experts' in-depth analysis of the health and medical needs of the communities that surround and utilize the subject hospitals. Among other things, the conditions will require USCHC and Methodist Hospital to:

• Maintain Competition: In order to ensure a competitive market and accessible healthcare, and to prevent the risk of price hikes, Methodist Hospital and USCHS must:
  • Refrain from bundling, conditioning, and other related anticompetitive practices for a period of at least 10 years;  
  • Limit price increases for contract renewals to no more than 4.8% for a period of at least five years; and
  • Submit to independent monitoring to ensure compliance with these conditions.
• Maintain Services and Investments: Bed designations and services currently available at Methodist Hospital must remain at or above current levels for at least 10 years post-transaction, including:
  • 26 emergency room beds, 202 medical/surgical beds, 24 obstetrics beds, 29 intensive care beds, 10 coronary care beds, 10 acute respiratory care beds, 17 neonatal intensive care beds, and 30 rehabilitation center beds;
  • Comprehensive Cancer Care Program;
  • Cardiology services with Chest Pain Team;
  • Interventional Radiology and Diagnostic Imaging;
  • Surgical Services, including 12 operating rooms; and
  • Wound Healing Center and Hyperbaric Oxygen Center.
• Participate in Medicare and Medicaid Programs: Methodist Hospital must continue to participate in Medi-Cal programs and provide the same types and levels of emergency and non-emergency services as other, similarly-situated hospitals for at least 10 years.
• Maintain Existing Language Services: Methodist Hospital services a diverse population, with only 35% of residents in the surrounding area speaking only English at home. Methodist Hospital must continue to provide language services, including a Chinese language hotline, financial assistance applications written in Cantonese, Mandarin, and Spanish, and translation services for the 29 languages spoken at Methodist Hospital.
• Provide Charity Care and Community Benefits: Methodist Hospital must provide at least $3.7 million in free care to individuals who are uninsured and at least $39.6 million in community benefit programs — such as discounted maternity and neo-natal care and free health education and blood pressure screenings — annually for at least five years post-transaction.
• Continue Capital Improvements: USCHC must invest $200.7 million in Methodist Hospital over a five year period. Planned investments include site development, including building and equipping primary and specialty care offices, and diagnostic and therapeutic services; enhanced equipment capabilities, such as DaVinci Robot, ultrasound, and heart/lung machines; and improved Electronic Medical Record integration, data security, and server and storage infrastructure.

The California Department of Justice’s Healthcare Rights and Access Section (HRA) works proactively to increase and protect the affordability, accessibility, and quality of healthcare in California. HRA’s attorneys monitor and contribute to various areas of the Attorney General’s healthcare work, including nonprofit healthcare transactions; consumer rights; anticompetitive consolidation in the healthcare market; anticompetitive drug pricing; privacy issues; civil rights, such as reproductive rights and LGBTQ healthcare-related rights; and public health work on tobacco, e-cigarettes, and other products. 

A copy of the conditional approval letter is available here.