California approves Dignity Health-CHI deal. But it comes with a catch

Close-up of handshake between person in suit and person in business shirt.
California's AG has approved the merger between Dignity Health and CHI. Officials say it is on track to close by the end of the year. (Getty Images/FS-Stock)

California officials have approved the megamerger between Dignity Health and Catholic Health Initiatives expected to be known as CommonSpirit. But regulators placed a number of charity care requirements on the deal. 

The state’s attorney general will require (PDF) the joint health system—which intends to operate as CommonSpirit Health—to preserve emergency care and care for women for the next decade. CommonSpirit will also be required to create a program for homeless patients that would provide coordinated care. 

Sean McCluskie, chief deputy to Attorney General Xavier Becerra, said in a statement that the AG will be monitoring CommonSpirit’s compliance with the requirements. 

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Should the deal clear all regulatory hurdles, the joint health system will be the largest nonprofit health system by revenue in the country. It will include nearly 700 sites of care, including 139 hospitals across 28 states. The Vatican has already signed off on the $28 billion deal

RELATED: What the CEOs of Dignity Health, CHI expect to achieve in $28 billion merger 

Under the deal, the joint system will be required to notify the state if it intends to shutter emergency care or women’s healthcare in years six to 10. CommonSpirit will invest $20 million in the homeless healthcare initiative over six years and must supply $10 million within the first three. The initiative will serve 30 communities in the state where Dignity Health currently operates hospitals, the AG said. 

The system will also have to offer a 100% discount to patients who earn up to 250% of the federal poverty level through its financial assistance programs. CommonSpirit will also be required to train staff to provide more details about monetary assistance to patients at the bedside and make online materials about such programs prominent and easy to access. 

Dignity Health CEO Lloyd Dean said in a statement that the system, which operates 30 California hospitals, already cares for more patients enrolled in Medi-Cal, the state’s Medicaid program, than any private provider. 

“This review process offered us a chance to hear directly from people in our communities, and we heard over and over how important services are to the areas we serve,” Dean said. “Our alignment and the consent of the Attorney General’s office will help ensure we can continue providing care for many years to come.” 

RELATED: PwC—Healthcare is still hungry for consolidation, even as deal value dips 

Dignity Health said the system has in the last five years provided $600 million in financial assistance, $552 million through community health programs, and $2.1 billion to subsidize uncompensated care costs for Medi-Cal patients. 

The merger remains on track to close by the end of the year, Dignity said. 

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