Catholic Health Initiatives, Dignity Health in merger talks

Catholic Health Initiatives, Dignity Health in merger talks

[If the merger happens, will Catholic Health Initiatives go the way of Dignity Health concerning its Catholic identity?]

Dignity was founded in 1986 by the Sisters of Mercy under the name Catholic Healthcare West. From the time of its founding, and until 2012, the company was an official ministry of the Roman Catholic Church. In 2012, the company’s corporate governance structure changed, moving it out of the Catholic Church and resulting in a name change to Dignity Health. – Wikipedia

October 24, 2016

Hospital operator Catholic Health Initiatives, which has struggled after rapid expansion and a foray into health insurance, is in merger talks with Dignity Health to create one of the nation’s largest nonprofit hospital systems by revenue.

Catholic Health Initiatives and Dignity Health said in a statement they are in talks regarding “aligning their organizations.” A person familiar with the matter said the talks involve a merger.

The deal would combine 103 hospitals owned by Arapahoe County-based Catholic Health Initiatives, with 39 hospitals operated by San Francisco-based Dignity Health. Combined revenue for the new organization would reach $27.8 billion annually, based on the most recent financial statements.

The proposed union is the latest megamerger among U.S. hospital operators, both nonprofit and publicly traded. It comes as antitrust regulators have stepped up their scrutiny of such deals.

Catholic Health Initiatives operates in 18 states, but not in Arizona, California and Nevada, where Dignity Health operates its hospitals. In Colorado, Catholic Health Initiatives operates Centura hospitals including St. Anthony Central and North in metro Denver, Penrose Hospital in Colorado Springs, and St. Mary Corwin in Pueblo.

“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,” Catholic Health Initiatives CEO Officer Kevin Lofton said in the joint statement announcing the talks, which were reported earlier by trade magazine Modern Healthcare.

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. For the last fiscal year, which ended June 30, 2015, Catholic Health Initiatives reported a slim margin, with $3.1 million in operating income on revenue of $15.2 billion. That is after the prior year’s operating loss of $109.4 million on revenue of $13.6 billion.

Since April, all three major ratings firms downgraded Catholic Health Initiatives, which had $9 billion in debt as of March 31.

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