Vision and mission have come together in a unique way at Good Samaritan Medical Center in Johnstown, Pa.
The Roman Catholic Church permitted two of the hospital's top executives to complete a leveraged buyout that allowed a hospital system to pursue its network goals and a Catholic hospital to keep its identity without being owned by the church.
"These deals are uncommon, but they're coming," said Sister Margaret Mary Modde, a canonical consultant at the Chicago law firm of McDermott, Will and Emery.
As Catholic healthcare systems align on a regional basis and a dwindling clergy becomes hard-pressed to run all of the church's hospitals, more lay people like the management of Good Samaritan are expected to take on new roles.
In January of 1993, Cincinnati-based Mercy Health System decided to sell its Johnstown hospital, 167-bed Mercy Medical Center, to better focus on areas in the country where it had more hospitals, executives said.
With 18 acute-care hospitals, Mercy Health System, which is co-sponsored by the Sisters of Mercy Dallas regional community and the Cincinnati regional community, remains the nation's eighth-largest Catholic healthcare system, according to MODERN HEALTHCARE's 1994 Multi-unit Providers Survey.
The Johnstown hospital, now known as Good Samaritan Medical Center, is a six-hour drive from Cincinnati and a five-hour drive from the nearest Mercy Health System-owned hospital in Pennsylvania.
"We just didn't fit the regionalization that the Sisters of Mercy had in mind," said Timothy Karnes, the current president and chief executive officer of Good Samaritan Medical Center. Mr. Karnes was senior vice president for operations of Mercy Medical Center when it was owned by Mercy Health System.
Separate but Catholic.With their hos-pital's 80-year Catholic history in Johnstown, Mr. Karnes and Michael Douzuk Jr., who was Mercy's chief financial officer, created a bid that eventually led to their leadership of the new Catholic hospital, which is no longer owned by the church, but by a separate company.
Retaining Roman Catholic identity was a key to their bid, so the two formed a company, Infinity Health As-sociates, to buy Good Samaritan.
Infinity had the inside track because the competing bidders weren't Catholic and Infinity agreed to keep the hospital Catholic.
Some 62% of the Johnstown market in Cambria County, population 165,000, claims Catholicism as its religion. The hospital's entire service area has more than 200,000 people.
With three hospitals in Johnstown and more than 60% of the market Catholic, a bid from a Catholic company made sense. The other two bidders were neighboring 352-bed Conemaugh Hospital and American MedTrust, an Atlanta-based company specializing in hospital management.
"They can retain the Catholic name by working these deals," Sister Modde said. "A lot of people want to go to a Catholic hospital."
Obeying directives.The two executives earned approval from the Archdiocese of Altoona/Johnstown. For that, they agreed to comply with Church tenets and the Ethical and Religious Directives for Catholic Health Facilities.
The directives, which are business guidelines for bishops in each diocese, forbid sterilizations, abortions and in vitro fertilizations.
Last revised in 1975 by the National Conference of Catholic Bishops/U.S. Catholic Conference, the directives are being rewritten, with the new version due to be published this fall. The new directives are expected to encourage bishops to be more involved in the healthcare institutions of their individual dioceses.
Local bishops already have a key role in these new forms of ownership because they must approve the listing of any Catholic property on the official Catholic directory, which grants the property tax-exempt status.
The Good Samaritan deal was "similar to a leveraged buyout," Mr. Karnes said. Through Infinity, the executives used Mercy's assets to acquire the hospital.
Infinity has no debt with Mercy- Health System, which was paid an undisclosed amount for the facility. Executives said confidentiality agreements prevented them from disclosing the manner in which they purchased the hospital. "There was a transfer of monies," was all Mr.Karnes would say.
Good Samaritan had assets of $32.3 million in 1993, according to HCIA, a Baltimore-based healthcare information company. The hospital lost $1.3 million on net revenues of $34.6 million, HCIA said.
Diocesan link."We will be maintain-ing our links with the Archdiocese of Altoona/Johnstown, and Good Samaritan will be managed with the same religious philosophies and family-centered healthcare that the people of Johnstown have come to expect from this hospital over the years," said Mr. Douzuk, who is now president and CEO of Infinity.
In January of this year, Good Samaritan executives fleshed out the details of that alliance with Bishop Joseph Adamec, who named Monsignor George Flinn, the vicar general of the Altoona/Johnstown Archdiocese, as a "liaison" between the church and Good Samaritan's 12-member board, which has no representatives from the archdiocese.
"These deals absolutely must have some connection with the Catholic church, and it usually comes through the bishop of the local diocese," said William Cox, vice president of the division of government services at the Catholic Health Association's Wash- ington office.
Each hospital and system arrangement to remain Catholic may take on a different form, analysts of Catholic healthcare said.
An earlier example with a similar result came in Hastings, Minn., where control of 179-bed Regina Medical Center was transferred in 1991 to its board of directors and given permission to remain Catholic.
These deals also must include a "juridic person," which is the canonical entity that "provides for the connectedness with the church," Sister Modde said. "It's synonymous with a corporation." In the case of Regina Medical Center, the juridic person is the Regina Healthcare Board.
In Hastings, a Dutch order of nuns known as Sisters of Charity of Our Lady, Mother of Mercy, which is based in Connecticut, gave the church to the board.
Fewer religious.The Sisters of Charity wanted to divest the hospital from their order because it didn't make sense for them to continue to run it when they had no other U.S. hospitals. And there were fewer nuns available to run the hospital.
"Sisters and priests are declining in numbers," Sister Modde said. "In other cases many religious congregations don't have the training to run healthcare facilities or the ability or desire to do that."
The involvement of nuns in Catholic healthcare has declined rapidly in the last decade, according to the St. Louis-based Catholic Health Association.
Fewer than 20% of the CHA's 570 member hospitals have nuns as CEOs, compared with 1980, when half of all Catholic hospitals had nuns as CEOs, Mr. Cox said.
"We are going to see a small trend in the direction of ownership by lay people in the next 10 years," Mr. Cox said. "There's a continuing decline in the number of `women religious' and therefore a decline in the capacity of some sponsoring organizations in healthcare."
But Mr. Cox believes Catholic identity and mission will remain strong at these hospitals because they will value their identities and want to keep them. "Some of the larger sponsors will remain, but more and more lay people will be taking up the slack," Mr. Cox said.
If efforts like those in Johnstown and Hastings weren't taking place, Catholic identity in healthcare facilities could be in jeopardy.
"If lay people aren't willing to take this on, that would leave a big question," Mr. Cox said. "I think you'll find a lot of support within our church for these models. It's important for the future of Catholic healthcare."