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Analysis

Vatican Won't Block CHI–Dignity Health Deal

By Steven Porter  
   October 17, 2018

Without offering an affirmative stamp of approval, the Catholic leaders have confirmed that they will not stand in the way of the megamerger.

Shortly before two massive Catholic-affiliated health systems signed a definitive agreement nearly a year ago to merge into a 139-hospital combined system with $28 billion in annual revenue, Catholic leaders outlined their conditions for the deal.

Archbishop Samuel J. Aquila in the Archdiocese of Denver issued a nihil obstat—which is Latin for "nothing stands in the way"—outlining six conditions to ensure the arrangement would comply with Catholic moral teaching.

All six conditions have been met, including review by the Vatican's Congregation for the Doctrine of Faith, according to a statement the Archdiocese of Denver released Tuesday to HealthLeaders.

Vatican officials informed Aquila last month that, although they saw the planned merger between Catholic Health Initiatives (CHI) and Dignity Health as complex "with important canonical and legal implications," they would defer a decision on the matter to the bishops of the local U.S. dioceses where the merged system will operate, according to the statement.

Related: Is Healthcare M&A Different This Time?

Aquila informed CHI earlier this month that, as long as the conditions outlined in the nihil obstat continue to be met, Aquila will not stand in the way of the CHI–Dignity Health deal. This does not imply that the Catholic leaders affirmatively approve of the agreement, only that they do not view the proposal as morally or doctrinally objectionable, the statement noted.

A spokesperson for CHI, which is based in Englewood, Colorado, said Wednesday morning that the system was not yet ready to comment on Aquila's decision.

Catholic News Agency's Kevin Jones reported last year that, in addition to Aquila, Archbishop Salvatore Cordileone of San Francisco—where Dignity Health is based—would be among the Catholic leaders responsible for assessing the moral implications of the deal. Cordileone issued a nihil obstat of his own last December, a spokesperson told HealthLeaders.

Pushback from church leaders could thwart a planned deal or prompt health systems to overhaul their arrangement. That's happened in the past, especially when Catholic institutions sought deals with non-Catholic entities. For example, the sale of a Catholic hospital operated by St. Louis-based Mercy, to a for-profit company, fell apart under scrutiny from religious leaders and the Federal Trade Commission, as The Wall Street Journal reported in May.

In 2014, the Vatican issued new guidance on business deals involving Catholic healthcare organizations "to ensure that Catholic healthcare institutions neither cooperate immorally" with non-Catholic partners "nor cause scandal as a result of their collaboration with such other entities," as the Journal reported.

Related: HHS Policy Pendulum Swinging Back Toward Providers' Rights of Conscience

That guidance was updated in June, prompting some concern that the directives could complicate the CHI–Dignity Health deal. Others noted how the rising prominence of Catholic providers comes with restrictions on certain procedures the church deems to be immoral, such as services related to abortion or gender affirmation, as The New York Times reported in August.

One in six American hospital patients receive care in Catholic hospitals, according to the Catholic Health Association of the United States.

On Course to Close
 

Dignity Health announced Tuesday that it and CHI had selected a board of stewardship trustees for the combined system. The board will include the current CEO from each system, six existing board members from each system, and an additional member to be determined after the deal is complete.

"As we continue to face a shifting health care landscape, this team's diverse experience will help our new ministry innovate across the continuum of care and create healthier communities," Dignity Health President and CEO Lloyd Dean said in a statement.

The statement notes that the deal, which is still subject to reviews by state regulators, is on schedule, with closing expected by the end of the year.

Editor's note: This story has been updated to include a comment from a spokesperson for Archbishop Salvatore Cordileone of San Francisco.

Steven Porter is editor at HealthLeaders.


KEY TAKEAWAYS

All six conditions outlined by the Archdiocese of Denver have been met, including review by the Vatican.

The deal is still subject to review by state regulators.

The megamerger is expected to close by the end of the year.

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