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Catholic Health Initiatives and Dignity Health are in Merger Talks

October 25, 2016
by Heather Landi
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Englewood, Colorado-based health system Catholic Health Initiatives is in merger talks with San Francisco-based Dignity Health to potentially create one of the largest nonprofit health systems by revenue in the country.

In a press release, the two health systems announced they have signed a “non-binding letter of intent to explore aligning their organizations and expanding their mission of service in communities across the nation.”

The potential merger would the latest in a steady stream of mega-mergers in the healthcare industry.

The boards and sponsors of the two health systems are evaluating the potential alignment to strengthen their leadership role in transforming healthcare through increased access and enhanced clinical excellence, the health systems stated in the press release.

Catholic Health Initiatives operates in 18 states, but not in Arizona, California and Nevada, where Dignity Health operates its hospitals, along with 19 other states. The deal would combine Catholic Health Initiatives’ 103 hospitals, including four academic health centers, with Dignity Health’s 39 hospitals. According to an article in The Wall Street Journal, combined revenue for the new organization would reach $27.8 billion annually, based on the most recent financial statements.

According to WSJ reporter Melanie Evans, “Catholic Health Initiatives has faltered in recent years with weak or negative operating margins after a push into health insurance stalled and hospital operations struggled after a string of acquisitions.”

“The potential to align the strengths of these two organizations will allow us to play a far more significant role in transforming health care in this country,” Kevin Lofton, chief executive officer of Catholic Health Initiatives, said in a statement. “Together, we could enhance our shared ministry as the health industry transitions to a system that rewards the quality and cost-effectiveness of care.”

“Health care is at a turning point in our nation,” Lloyd Dean, president and chief executive officer of Dignity Health, said in a statement. “Through a stronger strategic and financial foundation, an aligned ministry would accelerate our ability to advance our healing mission into the future.”

The merger talks follow last month’s announcement that the two health systems are collaborating on a large, community-based precision medicine program, called the Precision Medicine Alliance LLC, which could be available to approximately 12 million patients annually.

In the press release, health system officials state that the organizations complement one another in many other important ways. “CHI brings a diverse geographic footprint with proven clinical service lines and home-health capabilities, as well as successful partnerships in research and education. Dignity Health has a proven operating model that has successfully scaled enterprise-wide initiatives to ensure consistent practices across the system, and is well known for its work with innovative, diversified care-delivery partnerships. There is no geographical overlap of acute care facilities,” health system officials wrote.

It is anticipated that discussions will continue through early 2017.

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