Catholic Health Initiatives last week announced an agreement to merge with a regional hospital chain, the first major expansion by giant CHI since its 1996 birth.
The proposed merger with fellow Roman Catholic provider Sisters of Charity of Nazareth Health System would make CHI a major player in Kentucky. It also would give the Denver-based system entree into Arkansas and Tennessee.
SCN, based in Nazareth, Ky., owns five hospitals in Kentucky, including its flagship two-hospital, 374-bed Caritas Health Services in Louis-ville. It also operates three hospitals outside Kentucky: It owns one in Chattanooga, Tenn., and another in Little Rock, Ark., and manages a third in Morrilton, Ark.
CHI owns one hospital in Kentucky, 39-bed Our Lady of the Way Hospital in Martin, which is managed by SCN.
The two companies said they expect to negotiate a final agreement by August following due-diligence review and federal antitrust scrutiny. They've been negotiating under a memorandum of understanding since last November.
Completion of the deal would give CHI 67 hospitals in 22 states. The system, which was formed through a merger of three Catholic systems in June 1996, earned combined operating income of $78.2 million on net patient revenues of $3.54 billion in 1996, according to MODERN HEALTHCARE figures.
SCN earned operating income of $24.5 million on net patient revenues of $639 million in 1996, according to the same data.
SCN would operate as the southeastern region of CHI. In a press release, CHI said leadership for the southeastern region would be selected after the merger is completed. Until then, SCN President and Chief Executive Officer Mark Dundon will act as interim president of the CHI region.
CHI includes four other regions.
A member of the Sisters of Charity of Nazareth would serve as a member of CHI's body of sponsoring organizations. Each of the system's sponsoring religious orders now appoints one member to the body, which has the reserved right to approve any major changes in CHI's direction.
SCN, meanwhile, would get two members on the CHI governing board, bringing its total board membership to 15.
At deadline, executives of both organizations were unavailable for interviews.