Dignity Health, the company that operates the local Mercy, Methodist and Memorial hospitals, announced Thursday that it will be merging its operations with Colorado’s Catholic Health Initiatives, creating a hospital system that will employ roughly 159,000 employees at hospitals and clinics in 28 states.
After the merger, which requires regulatory approval, the new health system will be run by CEOs of both companies: CHI’s Kevin E. Lofton and Dignity’s Lloyd Dean. In a videotaped message to employees, the two men said they will have separate responsibilities but will continue to work toward shared goals of ensuring that the poor and vulnerable have access to quality care.
“It became clear we could best achieve this goal by creating a new organization, one that will have a stronger foundation and be in a better position to advance our collective mission,” Dean said. “This announcement is the culmination of more than a year of thoughtful exploration and collaboration.”
There have been a number of mergers and acquisitions in the health-care industry since implementation of the Affordable Care Act, with companies saying they can achieve new efficiencies because of their economies of scale, but health-care analysts have said that the mergers don’t always lead to big savings.
Rather, they said, the combined systems increase their bargaining power, allowing them to negotiate higher rates from insurers than they could command as smaller entities. However, Dignity Health officials pointed to a 2016 study by the American Hospital Association that says mergers increase quality while reducing costs.
A new name has not yet been chosen for the combined CHI-Dignity health system, leaders said, but a new name will be announced in the second half of 2018. That is around the same time that approvals are expected to be final from federal, state and church officials. Both companies were founded by the Catholic church.
Dignity Health, now based in San Francisco, severed formal ties to the church in 2012 when it changed its name from Catholic Healthcare West. This merger, however, would create a single Catholic nonprofit health system. The new company will be based in Chicago, officials said, because that city is centrally located and allows good access to all cities where the combined company will have ministries.
“Our people share a passion to serve all people with compassion, and we both celebrate our Catholic heritage,” Lofton said, “and we both advocate for those who are poor and vulnerable, who count on us for access to quality care.”
CHI and Dignity have no overlapping hospital areas, a company statement said, and there are no plans to close any facilities. CHI, now based south of Denver, has hospitals in 17 states.
Including U.S. HealthWorks and other brands, Dignity operates facilities in 22 states, including Mercy General, 4001 J St., in Sacramento; Mercy Hospital of Folsom, 1650 Creekside Drive, in Folsom; Mercy San Juan, 6501 Coyle, in Carmichael; Methodist Hospital of Sacramento, 7500 Hospital Drive, in Sacramento; Sierra Nevada Memorial, 155 Glasson Way, in Grass Valley; and Woodland Memorial Hospital, 1325 Cottonwood St., in Woodland.
“We have an opportunity to bring together two strong systems and create a new industry leader that integrates the best of both CHI and Dignity Health,” Lofton said, “and because our existing service areas do not overlap, we can focus on growing clinical and community services. Despite all the uncertainties in today’s health-care environment, one thing is constant: Standing still is not an option.”