Dignity Health’s operations include St. Joseph Hospital in Arizona.

DALLAS – An alignment of Catholic Health Initiatives with Dignity Health to create one of the nation's largest nonprofit health-care providers would be a positive credit factor for the two organizations, according to Moody's Investors Service.

"While challenges are inevitable during the process, the decision to possibly align would be a discreet credit positive as it would likely create expanded market access, improved efficiencies and the opportunity to achieve a number of synergies," Moody's analyst Brad Spielman said.

Englewood, Colo.-based CHI, and San Francisco-based Dignity have both suffered ratings downgrades in the past year amid a dramatically changing national health-care rules.

If combined, the two firms would have operations in 25 states. Currently, their service areas do not overlap. The two organizations have a combined pro-forma revenue base of nearly $30 billion and combined pro-forma outstanding debt of almost $15 billion.

In addition to Colorado, CHI has more than 100 hospitals in 17 states, including Iowa, Kentucky, Nebraska, Ohio, Texas and Washington. The system employs more than 4,000 physicians. CHI is the third-largest non-profit hospital operator in Moody's rankings.

Dignity, ranked 7th in size by Moody's, operates in Arizona, California and Nevada.

A non-binding letter of intent, signed on Oct. 20, expresses the intent to explore comprehensively aligning the two organizations, essentially a merger. The earliest that the transaction would close is probably mid-2017, according to Moody's.

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