Dignity, Catholic Health Initiatives Exploring Merger

Dignity Health is exploring a potential merger with Catholic Health Initiatives, the San Francisco-based hospital chain has disclosed this week.

            The talks led to the systems issuing a statement saying they were in discussions about aligning their organizations and had entered into a non-binding letter of intent, with discussions likely to continue into early next year.

            "Healthcare is at a turning point in our nation," said Dignity Chief Executive Officer Lloyd Dean. "Through a stronger strategic and financial foundation, an aligned ministry would accelerate our ability to advance our healing mission into the future."

            The two hospital chains announced last month a joint venture to improve the use of precision medicine in healthcare.

            If Dignity and Catholic Health Initiatives were to merge, it would create the largest faith-based hospital chain in the United States by far, with 142 hospitals and annual revenue approaching $28 billion a year. Dignity operates 39 hospitals, primarily in California, but also in Nevada and Arizona. The Denver-based Catholic Health Initiatives operates in 18 states, primarily in the Midwest and Northeast.

            “The potential to align the strengths of these two organizations will allow us to play a far more significant role in transforming healthcare in this country,” the joint statement said.

            Both systems have been under financial pressure as of late. Dignity posted a $238 million loss for the 2016 fiscal year ending June 30 on revenue of $12.6 billion. That included a $63 million loss on its operations, which it attributed to “a more challenging industry environment.” It lost another $124 million on its investments.

Catholic Health Initiatives posted virtually no operating income in calendar 2015, although it netted nearly $110 million from investments. It posted an operating loss of more than $109 million in 2014.