Industry analysts are saying a proposed $4 billion mega-merger of Roman Catholic healthcare systems strengthens religious bonds but lacks power in major metropolitan markets.
With 66 hospitals in 20 states, the proposed consolidation of Catholic Health Corp., Omaha, Neb.; Sisters of Charity Health Care Systems, Cincinnati; and Franciscan Health System, Aston, Pa., appears to be a national powerhouse (April 24, p. 2). But healthcare analysts say it may need more systems to thrive in key healthcare markets.
"From the religious side, you can see some synergies, but this merger isn't adding to any market power," said Terence Mieling, vice president and national director of healthcare at John Nuveen & Co., a Chicago-based investment banking firm.
"There's no one concentrated market coverage," he added.
Catholic Health includes hospitals sponsored by the Franciscan Sisters of Little Falls, Minn. Another 13 of the new system's hospitals are owned and operated by Franciscan Health System, sponsored by the Sisters of St. Francis of Philadelphia. The Sisters of Charity consolidated its ministries in 1987 with the Franciscan Sisters of Colorado Springs, Colo.
In Denver, Sisters of Charity has made strides to compete with Columbia/HCA Healthcare Corp., but "this doesn't shore up anything for them," Mieling said. Earlier this year, Columbia added its third hospital in Denver (Jan. 23, p. 6).
Analysts also see problems with Catholic Health, saying it could be the wild card in the merger because most of its 32 hospitals are technically owned by other religious organizations.
"(Catholic Health) is the most decentralized of the three, so an effort to centralize the whole system will be the biggest hurdle," Mieling said. "A three-way merger is always tough to pull off anyway."
In 1994, the organizations involved in the merger reported $3.5 billion in combined revenues, $4.1 billion in assets and 11,831 beds.
Many in Catholic healthcare circles will be watching how a massive and diverse organization such as this will handle governance and leadership issues, analysts said.
"Any movement that will strengthen Catholic healthcare such as this is important for the future of Catholic healthcare, but how national integration such as this will be able to enhance the need for local flexibility and integration is a remaining challenge," said the Rev. Michael Place, an adviser to Cardinal Joseph Bernardin, archbishop of Chicago and a member of the Catholic Health Association board.
Executives of the three systems said the fact that multiple congregations are involved in the venture will allow other systems to be added. The merger could be completed later this year.
By coming together, the systems have a couple of options for increasing coverage in certain markets. They can either add more systems to their effort or "start swapping" hospitals to gain market strength in certain areas, Mieling said.