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California Requires More Charity Care from CHI-Dignity Megamerger

Analysis  |  By Steven Porter  
   November 21, 2018

The combined organization, CommonSpirit Health, will operate 140 hospitals, with 31 of them in California, where the attorney general's office gave its conditional approval.

A massive merger planned between two of the largest Catholic-affiliated health systems in the nation is on track to close by the end of the year after California's regulator gave its conditional approval Wednesday.

Among some common requirements, such as maintaining emergency and women's healthcare services for at least a decade, the California Attorney General's Office included a requirement that Dignity Health expand its charity care policy to offer 100% discounts to more patients.

Dignity Health, based in San Francisco, is merging with Catholic Health Initiatives (CHI), based in Englewood, Colorado, to form a new nonprofit under the name CommonSpirit Health, with 140 hospitals and annual revenues of $28 billion, making it one of the largest systems in the country.

Under the current financial assistance policy in effect at Dignity Health, patients whose families earn up to twice the federal poverty level qualify to have their entire bill discounted. Under the conditions outlined in California's 351-page conditional approval, that threshold will rise to two-and-a-half-times the federal poverty level, beginning next year.

The federal poverty level for a family of four in the contiguous U.S. is $25,100 this year. So the family income threshold to qualify for a 100% discount will rise from $50,200 this year to about $62,750 next year for a family of four. This policy must be posted online and in prominent locations frequented by patients.

The conditional approval also requires the organizations to create a homeless health initiative in California to support care for hospitalized homeless patients across the 30 communities in which Dignity Health currently operates. The initiative must have an allocation of $20 million over six fiscal years.

"Our office carefully reviewed this transaction to protect patients and our communities here in California, and our office will monitor compliance with the conditions," Sean McCluskie, chief deputy to the attorney general said in a statement.

In its own statement, Dignity Health described the review by the California Attorney General's Office as "the most extensive reviews of hospital services in California history," complete with a series of independent Health Care Impact Statements and 17 public meetings.

"This review process offered a chance to hear directly from people in our communities, and we heard over and over how important our services are to the areas we serve," Dignity Health President and CEO Lloyd Dean said in the statement. "Our alignment and the Attorney General's consent will help ensure we can continue providing care for many years to come."

The deal has been reviewed by the Federal Trade Commission, and the Catholic Church indicated that it will not block the deal.

Steven Porter is an associate content manager and Strategy editor for HealthLeaders, a Simplify Compliance brand.


The health system currently offers 100% discounts to patients whose families earn up to double the federal poverty level. That will rise next year to two-and-a-half-times the poverty level.

The combined organization will also launch a homeless health initiative to coordinate care for homeless patients in California.

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