WHAT HAPPENED
McDermott represented Children’s Hospital of Orange County (CHOC) in its merger with Rady Children’s Hospital of San Diego, resulting in the formation of a nonprofit pediatric health system spanning Southern California.
The transaction involved the merger of each system’s parent companies, resulting in a combined organization that fits among the ranks of top pediatric health systems in the country and will enhance the quality and access of healthcare for its patients.
BREAK IT DOWN
Children’s healthcare can be a tough business. To best serve their communities, pediatric hospitals must battle rising costs and compete for top talent to address a range of complex challenges, from babies requiring heart surgery to adolescents struggling with behavioral health issues.
How can they address the issues?
Strategic partnerships can ease the financial burden associated with these challenges and unlock new innovations, including improved opportunities to conduct cutting-edge research and the ability to attract top-tier doctors in subspecialty fields – all in an effort to create a more patient-centered healthcare system.
Where does McDermott come in?
CHOC tapped McDermott, its longtime healthcare, transactional, and regulatory outside counsel, to lead the deal from its side.
CHOC and Rady entered negotiations on equal footing: They were similar in financial strength and a good cultural match. Because it was a true merger of equals, negotiations were intense as McDermott navigated the challenges of protecting CHOC’s interests while advancing the spirit of the partnership that CHOC and Rady Children’s were trying to build together.
The transaction timeline spanned several years and touched all areas, with due diligence review of thousands of documents and an extensive regulatory process, including a nine-month review by the California Attorney General’s office. During that time, McDermott collaborated across practices and with opposing counsel to handle public hearings and discussions with regulatory agencies to smooth the way to a successful outcome.
What was the outcome?
The California Attorney General approved the merger between CHOC and Rady Children’s, resulting in a combined organization that fits among the ranks of top pediatric health systems in the country. The combined pediatric health system spans Southern California and will enhance the quality and access of healthcare for its patients.
The new parent company will backstop the capital plans of both organizations, a cost budgeted to be more than $2 billion. The financial commitment is crucial to expanding and sustaining all of the hospitals within the combined organization, along with key clinical programs.
Will this be better for the kids of Southern California?
The merger between CHOC and Rady Children’s illustrates the power of collaboration in healthcare. Many of CHOC’s decisions about the merger were made with one question in mind: “Will this be better for the kids of Southern California?”
By combining their resources and expertise, CHOC and Rady Children’s will enhance their clinical programs and research capabilities. They are well positioned to attract top talent, improve quality of care, and expand access to specialized services for children in Southern California.
McDERMOTT KEY STATS
- 3 years of deal negotiations from start to finish
- 9 months of navigating regulatory review in California
- $2 billion+ in backstop for each party’s capital plans