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Dignity Health in talks to link with an academic medical center


The headquarters of Dignity Health.

San Francisco-based Dignity Health has begun talks with an academic medical center (whose name it wouldn’t disclose) in the Bay Area, as it continues merger talks with Catholic Health Initiatives.

Dignity Chief Financial Officer Daniel Morissette  told analysts that  the system is interested in a possible joint venture with an academic medical center because it would benefit Dignity’s four hospitals in the Bay Area by having a teaching hospital connected with them.

He told analysts that two of Dignity’s hospitals in the area were profitable and two were “challenged.” By connecting with an academic medical center,  the hospitals would be part of a bigger provider network to seek contracts and improve performance, he explained.

To read more, please hit this link.

Dignity-CHI link’s plus and minuses


The talks between Dignity Health and Catholic Health Initiatives on affiliating or doing an outright merger have led analysts to point out  that a link could produce some economies of scale and take advantage of the systems’ complementary geographies but  that there are also some big potential problems, such as the systems’  huge debt.

Moody’s Investors Service says that a merger between the two would be “a net positive.”

An outright merger would create America’s largest not-for-profit hospital company, with combined annual revenue of $27.8 billion and 142 hospitals. The current leader, St. Louis-based Ascension, has annual revenue of $20.5 billion.

San Francisco-based Dignity has leading market-share positions in Southern California, the San Francisco Bay Area, Arizona and Nevada. Dignity has 39 acute-care hospitals and 250 ancillary-care sites.

CHI’s 103 hospitals are  situated where Dignity has none. The system, which posts annual revenue of about $15.2 billion, has 11 big multi-hospital hubs. Modern Healthcare noted that  Englewood, Colo.-based CHI’s hospitals are spread over 22 states, “providing economic diversity that makes it less susceptible to reimbursement pressures in a single state or region that might or might not have expanded Medicaid, for instance.”

But Fitch Ratings says that both systems have high debt, and both have underperformed financially in the past year.  In the case of CHI, that led Fitch to downgrade  CHI’s debt three notches from A+ to BBB+ with a negative outlook.

The publication noted that “high debt levels can be worrisome in an industry going through massive changes in reimbursement from fee-for-service to value-based payments and constant demands for capital to buy new IT systems, upgrade clinical equipment and open patient access points.”

“The teams  {of the two systems} wrestling over whether to join forces will focus on big-picture issues—such as whether larger scale would produce costs savings, better care and a stronger credit structure—so they can reach a conclusion by early 2017. ”

To read the Modern Healthcare article, please hit this link.

Dignity Health and CHI mull merger

The not-for-profit giants have signed a nonbinding agreement to evaluate “an alignment” between the systems.

A  merger would create the nation’s largest not-for-profit hospital company with combined revenue of $27.6 billion ahead of the $20.5 billion of  Catholic-sponsored Ascension. A CHI-Dignity union would make it the second-largest not-for-profit hospital system, with Kaiser Permanente continuing as the largest.

The companies didn’t disclose terms of the agreement, but did  cite   their new partnership, called the Precision Medicine Alliance, which the two systems called America’s largest community-based precision- medicine program.

The  companies’ statement  cited ways in which they say the systems complement each other. For example, Englewood, Col.-based CHI has 103 hospitals in 18 states and focuses on clinical and home-health services in addition to research while Dignity “is well known for its work with innovative, diversified care-delivery partnerships.”

San Francisco-based Dignity Health, with 39 hospitals, operates in 22 states with 9,000 physicians, 62,000 employees and 400 care centers.

To read the Modern Healthcare article, please hit this link.

Dignity, CHI launch precision-medicine program

Two major nonprofit integrated-delivery networks, San Francisco-based Dignity Health and Englewood, Colo.-based Catholic Health Initiatives, have formed what might be  America’s  largest precision-medicine program.

The Precision Medicine Alliance — a partnership formed as a limited-liability corporation between the two health systems — will make genetics-based diagnosis and treatment available at almost 150 community hospitals serving a total of  about 12 million patients a year..

The organization’s initial project  will  focus on diagnostic tumor profiling. Eventually, the program will move into predicting risk of cancer and cardiovascular disease, as well as into pharmacogenomics.

The partnership is  aligned with the  Obama administration’s Precision Medicine Initiative.

Please hit this link to read the whole article.

Fitch cuts rating of Catholic Health Initiatives


Catholic Health Initiatives’ headquarters.

Fitch Ratings has cut the credit rating of Englewood, Colo.-based Catholic Health Initiatives by three notches, citing the integrated health system’s weakening finances. Meanwhile, A.M. Best Co. downgraded  the rating of CHI’s health-insurance subsidiary.

Fitch said the big system  is struggling “to rein in the losses throughout a substantial part of its operations.”

CHI reported that in the  first nine months of the current fiscal year it had a net loss of $568.1 million. Health IT costs, investment losses and troubles with its health insurance company spearheaded the massive deficit. CHI’s credit rating from Fitch, which covers $6 billion of outstanding debt, was cut to BBB+ from A+.

Modern Healthcare reported that Fitch believes CHI “may need two to three years to fully implement its financial-turnaround plan. “High labor and supply costs, as well as difficult collections from the rising number of patients with high-deductible health plans, pose additional challenges for the hospital system, Fitch analysts said,” Modern Healthcare reported.

To read a Modern Healthcare article on CHI’s troubles,  please hit this link.

CHI getting out of scary insurance business


Englewood, Colo.-based Catholic Health Initiatives has decided to get out of the health-insurance business.

CHI’s insurance subsidiary, QualChoice Health, formerly known as Prominence Health,  has been offering Medicare Advantage and commercial insurance products to members in six states. But, Becker’s Hospital Review reports, the insurance business had a operating loss of almost $97 million in the first nine months of fiscal  2016, which ended March 31. In the like year-earlier period, QualChoice had a nearly $19 million operating loss.

CHI is one of many systems that have launched health plans in recent years, especially since the Affordable Care Act went into effect, but with often disheartening results.

McKinsey & Co.  found that of the 89 hospital-system insurance plans, more than 40 had negative margins in some or all of the past three years. To read the Becker’s story on this, please hit this link.


Video: CHI’s COO touts strategic partnerships with vendors


Catholic Health Initiatives’ headquarters, in Inverness, Colo.

Video:  Michael Rowan,  the chief operating officer of Catholic Health Initiatives, discusses why strategic partnerships, sometimes including having CHI take equity positions in partnering companies,  can make sense in controlling costs and boosting operating margins. He also discusses his system’s innovative forays in insurance and risk and supply-chain management, including in trying to stem the effects of the soaring cost of drugs.


Using Google Glass for EHRs


Sacramento-based Sutter Health, San Francisco-based Dignity Health, Colorado-based Catholic Health Initiatives, Cincinnati-based TriHealth Inc. and a fourth investor that asked to remain anonymous have made  a combined $17 million investment in Augmedix Inc., a San Francisco startup that uses Google Glass technology to maintain electronic health records and thus free physicians to spend more time with their patients,The Sacramento Bee reported.

The combined systems have more than 100,000 health care providers treating millions of patients nationwide.

Officials said that the  funding will let Augmedix and its investors expand the Google Glass-powered service across health systems and private clinics nationwide.



Growing CHI reports better results


This Legacy Tapestry was created in 2010 by Lynda Teller Pete using Navajo symbols. The tapestry represents CHI’s mission.

Modern Healthcare noted that the system has made  some big acquisitions in the past few years that  boosted revenue but also its expenses. “But for 2015, it managed to get on top of its costs, and the system said its growth strategy is starting to yield a return,” the publication reported.

“In Texas, for instance, a booming market that CHI entered just last year, it now has $2 billion in annual revenue. It also continued to benefit from its turnaround strategy in Kentucky, where it is seeing higher patient volume and better cost control in subsidiary KentuckyOne Health.

“CHI also highlighted growth in its Iowa, Minnesota, North Dakota and Pacific Northwest markets.”

Before accounting for restructuring costs, CHI reported a fiscal 2015 operating surplus of $169.8 million,  on $15.2 billion in revenue. That’s a 1.1 percent operating margin, compared to  fiscal 2014’s pre-restructuring operating surplus of $7.9 million on $13.6 billion in revenue. After restructuring costs, its  fiscal 2015 surplus was $3.1 million, compared with fiscal 2014’s  $109.4 million operating loss.


Moody’s: More nonprofit systems to become insurers


Nonprofit hospital systems are expected to expand their role in the commercial health-insurance industry in the next several years, says Moody’s Investors Service Inc. 

Pressures to dramatically improve care coordination and population-health management, particularly because of the Affordable Care Act, will be behind this. So will  hospitals’ growing need to diversify their revenue as inpatient volumes and other traditional  revenue drivers tend to fall.

Recent nonprofit entrants into health insurance include Ascension Health, Catholic Health Initiatives and Memorial Hermann Healthcare System.

Additionally,  Business Insurance reported,  consolidation in the commercial health-insurance industry “has put hospital systems under increasing pressure to grow to maintain adequate price-negotiating leverage with insurers.”

Moody’s wrote in its report: “The trend of not-for-profit hospital systems launching or acquiring health insurance plans will likely be limited to larger systems that have the resources to absorb the costs and risks associated with taking on an entirely new business.”

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