Money and mission clashed last week as Tenet Healthcare Corp.'s controversial acquisition of Saint Louis University Hospital went public.
At a hearing on the proposed sale held by Missouri Attorney General Jay Nixon, impassioned Roman Catholic leaders not involved in the deal urged the state to intervene and keep the 320-bed medical center in Catholic hands. But the clerics who run the hospital apparently were offered a deal too good to pass up.
Testimony introduced at the hearing confirmed earlier press reports that Tenet's $309 million offer for the hospital exceeded a competing bid from a joint venture of two Catholic systems by more than $100 million and is as much as $189 million more than the hospital may be worth.
University officials testified that they were satisfied with Tenet's pledge to maintain the Catholic values of the institution and maintain its level of charity care. The payment from Tenet, the nation's second-largest hospital chain, will allow the university to continue its mission of medical education, they said.
The university officials were among 40 speakers who explained, defended or denounced the sale in testimony at the Dec. 17 hearing in St. Louis.
Nixon held the hearing in the course of carrying out his threefold mandate under Missouri law. He must determine whether the price was fair, whether the decision to sell was made in an unbiased manner and whether the proceeds of the sale are going to be used consistent with the healthcare mission of Saint Louis University, a private institution run by a Catholic Jesuit order.
If he finds that the transaction doesn't meet those criteria, he can ask a court to stop it. The attorney general expects to reach a decision by mid-January.
The university had expected the sale to close by Jan. 1, but that deadline won't be met.
After issuing a request for proposals earlier this year, the university accepted Tenet's offer in October. In so doing, it turned down a competing offer from SSM Health Care and Unity Health, two local Catholic systems.
Meanwhile, the new head of the Catholic Health Association, the Rev. Michael Place, used the hearing to espouse his views on deals between Catholic hospitals and secular operators.
The CHA named Place to replace John Curley Jr. as its president and chief executive officer earlier this month (Dec. 8, p. 2). Place assumes the post in February.
In written testimony submitted at the hearing, Place asked the attorney general to "demonstrate great deference to the Church in settling any dispute over who owns the assets which are proposed to be sold." Place said Tenet's pledge to retain the Catholic character of the hospital was incompatible with the company's obligation to serve its shareholders. Healthcare's primary end should be "a cured patient, a comforted person and a healthier community, not earning a profit or return on capital for shareholders," he said.
Regardless of its promises to continue charity care at the hospital's previous level, a company like Tenet can't be expected to live up to such a calling, Place argued.
Paul Wilson, deputy chief of staff in the attorney general's office, said the key questions for the state are whether the hospital board used a reasonable process to reach its decision, and whether the price was fair. If the deal meets those criteria, the state has no further authority to block Tenet's purchase.
Investment bank Morgan Stanley advised the university through the proceedings. Before the request for proposals went out, it estimated the property's value at $145 million to $295 million.
After the bids came in, Morgan Stanley valued Tenet's proposal at $309 million. The competing bid from the joint venture of SSM and Unity was valued at $188 million to $196 million. Tenet offered all cash at closing. The Catholics' bid was based, in part, on the hospital's future performance.
In the course of preparing a more recent fairness estimate, Morgan Stanley reduced the valuation of the medical center to between $120 million and $258 million.