What they found were complementary geographic footprints, hefty debt burdens and several very successful markets dragged down by a smattering of challenging ones.
Now they are on a due-diligence fast track to gauge by early 2017 whether they'd be stronger together or better off apart.
Daniel Morissette, Dignity's chief financial officer since February, said on a call with analysts last week that CHI and Dignity share a common Catholic heritage that has created consistent dialogue between the two systems over the years. “We've always had a culture of partnerships,” he said.
At first blush, Moody's Investors Service sees a merger—if that's where the talks lead—as “a net positive.” So far, Dignity and CHI have said they are exploring an “alignment” and have declined to publicly define the prospects beyond that.
A merger would create the nation's largest not-for-profit hospital company with combined annual revenue of $27.8 billion and 142 hospitals. That's bigger than the current leader, St. Louis-based Ascension, with its annual revenue of $20.5 billion.
San Francisco-based Dignity has leading market-share positions in Southern California, the Bay Area, Arizona and Nevada. Its 39 hospitals are concentrated in just those three states. Moreover, it has been able to maximize annual revenue of $12.6 billion by offering every conceivable access point for patients through a large physician practice and joint ventures with for-profits in ambulatory surgery, urgent-care centers and even micro-hospitals—a model that pairs an emergency department with 10 to 20 beds.