After a year of discussions, Dignity Health and Catholic Health Initiatives have signed a definitive agreement to merge, Modern Healthcare reports. The combination will create the nation's largest not-for-profit hospital system by operating revenue, beating out Ascension.

The new health system will establish its corporate headquarters in Chicago and operate under a new name that will be chosen in the second half of 2018. Local facilities will continue operating under their current names.

The organization would trail Kaiser Permanente though, which is an integrated delivery system.

The new health system would have 139 hospitals and a combined revenue of $28.4 billion with more than 159,000 employees, and 25,000 physicians and other advanced practice clinicians. The combined system would have operations in 28 states with no overlap in hospital service areas.

Executives said in a news release that the marriage would allow them to expand outpatient and virtual care settings closer to patients' homes, broaden clinical programs including ones that treat chronic illness, and advance digital technology like stroke robots and Google Glass that will facilitate more personalized and efficient care.

CHI CEO Kevin E. Lofton and Dignity CEO Lloyd Dean will serve as co-CEOs, each with specific and independent responsibilities and decisionmaking authority. Lofton will have authority for mission, advocacy, sponsorship and governance, system partnerships and information technology, while Dean will have authority for all of operations, including clinical, financial and human resources.

"We are joining together to create a new Catholic health system, one that is positioned to accelerate the change from sick-care to well-care across the United States," Lofton said in a statement.

The governing board for the new organization will include six members from each legacy board as well as the two CEOs.

The new organization seeks to become a national platform for innovation and research, positioning it as an attractive partner for other entrepreneurial organizations, according to the news release.

The deal builds on CHI's and Dignity's Precision Medicine Alliance formed in September 2016, which the two systems called the nation's largest community-based precision medicine program.

San Francisco-based Dignity, which has 39 hospitals, saw its operating loss widen to $66.8 million in fiscal 2017, up from $63.4 million last year, thanks to a decline in payer mix as well as delays of the state's provider-fee program payments, which subsidizes hospitals that treat a large share of indigent patients, executives said during the call.

Dignity reported a net surplus of $383.6 million on the year ended June 30, up from a net loss of $237.8 million, and powered by investment income of $555.5 million after a loss of $124 million in fiscal 2016.

Englewood, Colo.-based CHI is amid a turnaround plan that includes selling money-losing hospitals in Louisville, Ky., and exiting the insurance business.

The 100-hospital system saw its operating losses widen to $585.2 million in 2017 from $371.4 million last year.

Non-operating income, including investment income, increased to $713.6 million in 2017 compared with a loss of $204.2 million in 2016. That allowed CHI to post a net surplus of $128.4 million for the year compared with a net loss of $575.6 million last year.

Alex Kacik writes for Crain's sister publication Modern Healthcare.