Mercy Medical, St. Anthony Have Favorable Outlook about Dignity Health Merger

The two hospitals are now owned by Catholic Health Initiatives, which has faced financial problems of late.

Two hospitals in Oregon owned by Catholic Health Initiatives are preparing for the advent of a merger with Dignity Health following an announcement last week that the two health systems signed a nonbinding agreement to explore aligning their organizations.

“We have a pretty favorable reaction to the news, and don’t anticipate any changes,” Larry Blanc, director of communications at St. Anthony Hospital in Pendleton told The Lund Report. He’s optimistic the merger will boost the financial performance of CHI which has faced downgrades by both Standard & Poor’s and Moody’s Investors Service in the past few months.

From the perspective of Mercy Medical Center in Roseburg, which is the only other CHI hospital in Oregon, the discussion is still in the early stages to assess and explore opportunities, said Kathleen Nickel, communications director and senior manager. “In early 2017, both organizations should have more information to share about this potential partnership.”

Last year, both hospitals were forced to lay off employees or eliminate positions to combat poor financial performance by CHI, which cut about 1,500 positions nationwide, about 1.5 percent of its 90,500 workforce.

Two major ratings agencies also downgraded CHI’s debt ratings this spring.

In April, Standard & Poor’s Rating Services lowered its long-term ratings for CHI's debt to A-, from A, and said the chain's outlook is negative, citing concerns about "persistent and large operating losses" 

In May, Moody's Investor Service downgraded CHI's long-term debt to A3, from A2, a move that affects about $7.3 billion of CHI's total $9 billion in debt. Moody's said the downgrade reflected weak operating performance across multiple markets, and that the outlook for the chain was negative.

According to the most recent financial disclosure, St. Anthony Hospital ended 2014 with a net income of $1,731,801, down 87.18 percent from 2013, while its net patient revenue was $58,249,613, up 16.1 percent, charity care stood at $1,879,091, down 32.5 percent, and its profit margin was 3.24 percent, down from 22.93 percent a year earlier. The hospital only has 25 beds.

Comparatively, Mercy Medical ended up on the other end of the ledger at the end of 2014. Its net income stood at $27,745,000, up 25.64 percent from 2013; it had amassed $184,788,000 in net patient revenue; charity care decreased by 27.73 percent, while its profit margin reached 13.52 percent, compared to 27.73 percent in 2013. Mercy had 129 available beds, down from 141 the year prior.

Overall, CHI generated $15.2 billion in revenue in fiscal year 2015 at 103 hospitals and at critical-access facilities and living communities in 18 states.

Dignity Health generated about $12.9 billion in revenue at some 400 hospitals, urgent-care centers and primary-care clinics in 18 states. The geographical reach of the two organizations does not overlap.

“The potential to align the strengths of these two organizations will allow us to play a far more significant role in transforming health care in this country,” said Kevin Lofton, CHI's CEO. “Together we could enhance our shared ministry as the health industry transitions to a system that rewards the quality and cost-effectiveness of care.”

"Healthcare is at a turning point in our nation," according to Lloyd H. Dean, president and CEO of Dignity Health. "Through a stronger strategic and financial foundation, an aligned ministry would accelerate our ability to advance our healing mission into the future."

Diane can be reached at [email protected].

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