A Catholic Health Initiatives and Dignity Health combination that would form a not-for-profit powerhouse exemplifies a traditional health system mega-merger under a newly popular two-pronged leadership approach.
More than a year after announcing plans to align, CHI and Dignity late last week signed a definitive agreement to merge, potentially creating the nation's largest not-for-profit hospital company.
The new health system would include 139 hospitals, more than 159,000 employees and 25,000 physicians and other advanced practice clinicians. It would have operations in 28 states with no overlap in hospital service areas, which could expand access and help from a regulatory perspective, but also present obstacles to coordinating and standardizing care across a vast footprint. The combined revenue would total $28.4 billion.
The marriage, which is subject to regulatory and church approval, would place CHI-Dignity in front of St. Louis-based Ascension's $22.6 billion of revenue. Both significantly trail Kaiser Permanente, the nation's largest not-for-profit integrated system, which boasted $64.6 billion in revenue in 2016.
San Francisco-based Dignity's higher credit rating could bolster Englewood, Colo.-based CHI's access to capital and accelerate its turnaround plan, where it looks to trim some of its $6.2 billion in long-term debt by selling money-losing hospitals in Louisville, Ky., and exiting the insurance business.
Decisions on how to manage these strategies would be delivered through a co-CEO leadership structure. CHI CEO Kevin Lofton would have authority for mission, advocacy, sponsorship and governance, system partnerships and information technology, while Dignity CEO Lloyd Dean would have authority for all operations, including clinical, financial and human resources. The governing board for the new organization would include six members from each legacy board as well as the two CEOs.
A few organizations have been drawn to the co-CEO approach in recent years. Last week's announced merger creating Advocate Aurora Health would work under that model, and Robert Garrett and John Lloyd have been co-CEOs of Hackensack Meridian Health for more than a year.
While some experts and investors on both the CHI and Dignity first-quarter earnings calls questioned if the shared leadership structures could disrupt culture and continuity, Garrett and Lloyd said their shared roles have worked well at Hackensack Meridian.