CHI-Dignity merger complete; new health company is formed
The long-awaited merger of two national health system powerhouses, which includes St. Luke's Health System in Houston, is now complete, marking the latest in high-profile couplings that are transforming the industry.
Catholic Health Initiatives and Dignity Health announced Friday they have sealed the deal to become Common-Spirit Health. The Chicago-based, $29 billion nonprofit system will be one of the nation's largest, with 142 hospitals across 21 states and more than 150,000 employees.
“Now, at last, the bold and ambitious journey to create the health system of the future begins,” said Doug Lawson, CEO of the CHI Texas Division and president of Baylor St. Luke’s Medical Center, said in an email to employees on Friday.
It has been a long and, at times troubled, courtship that began in
October 2016 and hit a series of snags along the way. The deal not only captured attention across the industry, but also from the Roman Catholic Church, which expressed concern about abortion, physicianassisted suicide and other medical procedures that must be separated when a Catholic hospital joins with one not affiliated with the church.
Ultimately, though, the Vatican gave its blessing.
The California attorney general also took issue with the proposed deal, citing a potential lack of availability of women’s health services.
That, too, was addressed in a merger stipulation that emergency services and women’s health care services must be maintained for 10 years after the deal closed.
There are not expected to be any changes in the Houston market from the merger, hospital officials have said.
"We created CommonSpirit Health because in order to solve national health challenges, we need the breadth, scope and resources to make a nationwide impact," Lloyd Dean, Dignity Health president and CEO who will be sharing the CommonSpirit chief executive role with CHI CEO Kevin Lofton, said in prepared remarks on Friday.
From the beginning of the negotiations, Dignity Health, headquartered in San Francisco, was in a stronger financial situation than the Coloradobased CHI, even though the Catholic health system was larger, analysts have said.
CHI, which bought St. Luke’s in 2013, has particularly struggled in Texas. It laid off 810 employees and cut its payroll by more than 1,200 people between August 2016 and March 2017, mostly in Houston.
The system rebounded some in 2018, narrowing its net losses to $276 million after cost-cutting.
In the first quarter of fiscal 2019 losses were further whittled, but it remained in the red by $73 million, according to financial reports.
Dignity reversed it losses in 2018 to report a $529 in income. It has reported $46 million in operating income for the first quarter of fiscal 2019.
Baylor St. Luke’s, the crown jewel of CHI’s Texas Division, has been rocked by controversy in recent months.
In August, the Centers for Medicare and Medicaid Services cut off funding for heart transplants at the hospital following a Houston Chronicle and ProPublica investigation that found a high rate of patient deaths and complications in recent years.
Last month, the hospital ousted three top executives and pledged reforms to improve care after a St. Luke’s patient died as the result of a botched blood transfusion.
State and federal regulators are investigating the incident.
In its annual financial report last summer, CHI acknowledged the problems with heart transplants but said the federal termination was not expected to have a major impact on patient service revenues.
The Common-Spirit Health deal is part of a larger trend of mega-mergers and consolidations in the health care field. In October, Houston’s Memorial Hermann Health System and Baylor Scott & White, of Dallas, announced plans to merge making it the largest nonprofit health system in the state.
If all goes as plans that merger is expected to be complete by summer.