Catholic Health Initiatives, Dignity Health exploring merger

Nonprofit health systems Catholic Health Initiatives (CHI) and Dignity Health have “signed a non-binding letter of intent” to merge, which could create one of the largest nonprofit hospital chains by revenue in the U.S.

The deal would combine Englewood, Colorado-based CHI’s 103 hospitals with San Francisco-based Dignity’s 39 hospitals, with the new system’s annual revenue reaching nearly $28 billion.

“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," said CHI CEO Kevin E. Lofton. "Together, we could enhance our shared ministry as the health industry transitions to a system that rewards the quality and cost-effectiveness of care."

While CHI has facilities throughout most of the country, it doesn’t have a presence in California, Arizona or Nevada where Dignity operates, meaning there won’t be any geographical overlap of acute care facilities if the merger is completed. The two systems had already begun working together through the launch of a precision medicine program announced in September.

The Wall Street Journal reported CHI has been on shaky financial ground in recent years, partially thanks to its failed foray into health insurance and a number of hospital acquisitions. It reported $3.1 million in operating income in 2015 after a $109.4 million loss in 2014, according to the Journal.

The systems expect to continue merger talks into 2017.