Dignity Health, CHI Finalize $29B CommonSpirit Health Megamerger

The newly merged, $29 billion system will have a footprint in 21 states, with more than 700 care sites and 142 hospitals, and an extensive social services and population health network.

Dignity Health and Catholic Health Initiatives on Friday finalized the megamerger of the two Catholic health systems that will now be known as CommonSpirit Health.

The newly merged, $29 billion system will have a footprint in 21 states, with more than 700 care sites and 142 hospitals, along with research programs, virtual care services, home health programs, and population health initiatives to tackle the root causes of poor health.

CHI CEO Kevin E. Lofton and Dignity Health President and CEO Lloyd H. Dean are "each a CEO in the Office of the CEO" for the new health system, which will be based in Chicago.

"We didn't combine our ministries to get bigger, we came together to provide better care for more people," Dean said in a media release.

"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.

Lofton said CommonSpirit Health "will bring the expertise of a national health system to neighborhoods across the country."

"Whether it's a neurological institute in Arizona, a 25-bed critical access facility in North Dakota, a mobile lung cancer screening program in Tennessee, or a 'hospital at home' in Nebraska, CommonSpirit Health will expand the best approaches from across our new organization," Lofton said. "Our whole will be much greater than the sum of our parts."

The new health system has 150,000 employees and 25,000 physicians and advanced practice clinicians.

Dean noted that 27 million Americans remain uninsured, and life expectancy continues to fall, despite some progress made under the Affordable Care Act. He said CommonSpirit will focus on underserved populations and the social causes of poor health.

"Too many people still can't access quality healthcare in their communities," Dean says. "America's healthcare system need big changes, and we have a big goal of improving the health of millions of people in this country."

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Lofton said CommonSpirit "will focus on treating the whole person, particularly the social causes of poor health that lead to needless suffering, unnecessary hospital visits, and premature deaths."

"Our goal is to be the leader in every type of care, whether you need brain surgery, urgent care for the flu, or help managing your diabetes," he said.

CHI and Dignity Health previously announced that the new ministry will retain the names of local facilities and services in the communities where they are located.

'Gaining Economies of Scale'
 

Brad Haller, director in West Monroe Partners' Mergers & Acquisitions practice, notes that "so far, the new entity has shown very little change to how they will actually deliver care."

"While the organization has a name for the merged entity, CommonSpirit, both systems indicated they are going to continue operating under both the CHI and Dignity names in their local markets," he says.

"The merger wasn't about branding or changing the nature of its business, but rather gaining economies of scale and geographic footprint, which makes sense for the like-mindedness in the way they deliver care and manage operations," he says.

Concerns had been raised during the merger talks that women's healthcare services would be ill-affected under the consolidated health system. Haller says those concerns appear to have been addressed when California approved the merger with a stipulation that CommonSpirit must maintain emergency services and women’s healthcare services for 10 years after the deal closes.

"(California) also required CommonSpirit to create a Homeless Health Initiative to support hospitalized homeless patients," Haller says. "I would suspect that the newly merged organization will find more synergies in care delivery as time goes on, as most merged organizations find during the post-integration phase, but in the spirit of efficiency or expansion."

"The merger wasn't about branding or changing the nature of its business, but rather gaining economies of scale and geographic footprint, which makes sense for the like-mindedness in the way they deliver care and manage operations."

—Brad Haller
 

Allan Baumgarten, a veteran observer of the hospital sector in Midwestern states, says several Dignity hospitals are considered "non-Catholic" and not subject to the Vatican guidelines, such as not performing tubal ligations.

"Those hospitals will be kept somewhat separate so they can continue to offer those services," he says.

Baumgarten notes the odd choice of Chicago as a headquarters for CommonSpirit, "even though neither system has a presence there."

"CHI has three small hospitals in Minnesota (Park Rapids, Breckenridge, LIttle Falls) and some nursing homes, but otherwise the combined system has only a small presence in the Midwest," he says.

"Not sure what to say about the impact on care delivery," Baumgarten says. "In theory, if one system has certain strengths, like better care management and discharge planning, thereby reducing the number of readmissions, it could share those strengths and practices with the other hospitals."

"To gain efficiencies, you might see them agreeing on a single vendor for certain medical devices or commodity suppliers that all hospitals will have to use in the future," he says. "In any of these mergers, health economists will tell you that most of the benefits could be achieved by contracts and strategic partnerships."

CHI and Dignity announced their plans to merge in December 2017. The deal was expected to close at the end of 2018, but it was delayed for one month. No specific reason was given for the delay.

The name CommonSpirit Health was chosen in November from among more than 1,200 possible names. The health systems said they settled on that name because it represents a shared sense of missional service and because it resonates with the diverse populations being served, the organizations said.