Catholic Health, Dignity close merger into new CommonSpirit

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The merger of Catholic Health Initiatives and Dignity Health will create a nonprofit health system with about $10 billion in debt, $29 billion in revenue and operations in 21 states.

The merger was completed Friday after years of negotiations and upheaval in federal regulation. The combined organization, called CommonSpirit Health, is relocating to Chicago but is not expected to enter the Illinois healthcare market. Dignity is headquartered in San Francisco while CHI is based in suburban Denver.

The deal's closure culminates a long process that began with an October 2016 announcement.

Integrating the two organizations, both affiliated with the Catholic Church, will be a time-consuming task. The firms expect to combine their credit groups within three years, officials said.

CHI is rated BBB-plus by S&P Global Ratings and Fitch Ratings and Baa1 by Moody’s Investors Service. All assign a stable outlook; Moody’s revised its outlook from negative in May after CHI’s results improved.

Dignity is rated A-minus by Fitch and A3 by Moody’s with stable outlooks. S&P has a negative outlook on Dignity’s A rating.

“The current positive outlook on CHI and negative outlook on Dignity Health remain applicable pending the upcoming credit review,” S&P analyst Martin Arrick said Friday. “We expect to harmonize the rating on both CHI and Dignity at our next review.”

The review is expected to take three to four months, Arrick said.

With 142 hospitals, 150,000 employees, and more than 700 care sites across 21 states, including 30 hospitals in California, CommonSpirit is just nine facilities shy of nonprofit health leader Ascension, according to Modern Healthcare. CommonSpirit will rank second to Kaiser Permanente in revenue.

CHI chief executive Kevin Lofton will share leadership duties with Dignity Health chief executive Lloyd Dean.

"We created CommonSpirit Health because in order to solve national health challenges, we need the breadth, scope, and resources to make a nationwide impact,” Dean said. “We believe that no one should ever have to choose between being healthy and putting food on the table."

Hospital systems stepped up merger efforts when President Barack Obama’s Affordable Care Act became law in 2010 on a party-line vote by Democrats. Since then, Republicans have sought to have the law overturned. President Trump lauded a Texas court ruling in 2018 that the health-care law was unconstitutional.

With millions of Americans enrolled in the ACA, elimination of the health insurance would have a major impact on health-care giants such as CommonSpirit.

“Despite policies that have extended health coverage to more people, 27 million Americans remain uninsured, and life expectancy dropped in 2018 for the second time in three years,” the organization's leaders said.

“Too many people still can’t access quality health care in their communities,” said Dean. “America’s health care system needs big changes, and we have a big goal of improving the health of millions of people in this country. CommonSpirit Health will be a champion for the common good and extend access to good health for everyone, especially those who are most in need.”

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