Efforts by Eastern Mercy Health System to consolidate its control over Holy Cross Hospital in Fort Lauderdale, Fla., are on hold following a lawsuit filed by irate former trustees of the hospital.
Eastern Mercy is seeking to implement bylaw changes that would remove local authority from the 437-bed hospital. The 23-member Holy Cross board was fired in late July after community trustees refused to cede power to the Radnor, Pa.-based system with which it's affiliated (Aug. 12, p. 8).
Eastern Mercy, which has 15 hospital members, wants clear authority over Holy Cross to make final decisions on such things as supply purchases, debt issues and selection of auditors. The system proposed hospital bylaw amendments that would transfer community authority over those decisions to a holding company controlled by Eastern Mercy's board and management.
Over the past 10 years, multihospital healthcare systems have been slowly moving power from hospital boards to corporate boards. System executives believe such moves save money and boost systems' negotiating authority in discussions involving mergers, network-formation and managed-care contracting.
The former Holy Cross trustees filed the suit Sept. 18. It sought a temporary injunction to prevent the takeover. Several days later, Eastern Mercy agreed to postpone for 120 days its plan to take full fiduciary control of the hospital, a system spokeswoman said.
While the former trustees agreed to the temporary cease-fire, Fred Millsaps, former chairman of Holy Cross, said negotiations with Eastern Mercy over the past month haven't been productive.
"We oppose the merger and are concerned that assets are going to (Eastern Mercy)," Millsaps said. "They agreed to the standstill and will not restructure or merge assets, but we doubt if we can resolve anything during this period."
Meanwhile, Millsaps said lawyers for the former trustees are preparing another lawsuit to seek a ruling in state court in Fort Lauderdale on two issues: Did Eastern Mercy have the authority to fire the local board? And who owns the hospital, the community or Eastern Mercy?
"This community has poured millions of dollars into the hospital, and we have a fiduciary responsibility to protect the community's assets," Millsaps said. "By agreeing to stop their merger plan, Eastern Mercy, in effect, gave us our injunction and time to prepare our case."
The dispute with Holy Cross began in earnest earlier this year when Eastern Mercy began affiliation discussions with several other East Coast-based Catholic systems.
Those systems included eight-hospital Bon Secours Health System, Marriottsville, Md.; four-hospital Allegany Health System, Tampa, Fla.; and two-hospital Sisters of Providence Health System, Springfield, Mass.
As part of the Catholic Health Association's New Covenant initiative, Catholic systems nationwide have been discussing ways to collaborate across state lines.
Earlier this year, Denver-based Catholic Health Initiatives was formed by three powerful Catholic systems. CHI, with 63 hospitals, comprises Sisters of Charity Health Care Systems, Cincinnati; Catholic Health Corp., Omaha, Neb.; and Franciscan Health System, Aston, Pa. (June 17, p. 6).
Meeting each month, representatives from Eastern Mercy, Bon Secours, Allegany and Sisters of Providence have talked about forming a co-sponsored system similar to CHI. The purpose would be to reduce costs, conduct managed-care contracting, and develop joint cash management and insurance programs. The systems also would form regional delivery systems in markets where they operate freestanding hospitals.
But to improve its negotiating position with the Catholic systems, Eastern Mercy sought to fully merge Holy Cross into the system and gain control of all aspects of the hospital.
Unlike Eastern Mercy's other 14 hospitals, Holy Cross' bylaws allows it more autonomy. One of Eastern's most profitable hospitals, Holy Cross was built in 1959 with $1.3 million of community donations and $1.3 million provided by the Archdiocese of Miami, which has been repaid over the years. Sisters of Mercy became sponsors of the hospital in 1964.
In 1994, Holy Cross earned $14.5 million on revenues of $144.8 million, a 10% profit margin, according to HCIA, a Baltimore-based healthcare information company. Eastern Mercy earned $69.3 million on revenues of $1.66 billion in 1995, a 4% operating profit margin, system officials said.